Margaret Hodge the Tax Avenger

More political parading by the Public Accounts Committee

Last week the Public Accounts Committee (PAC) hauled executives from Google UK, Starbucks and Amazon upon before them as part of their investigation into how multinational companies have managed to escape paying so little UK corporation tax.

The three companies in question have recently come under fire for paying little or no corporation tax despite enjoying significant large sales in the UK.

Although Margaret Hodge, chair of the PAC, and her merry band of tax crusaders, on this occasion, managed to appreciate that these companies’ tax arrangements were within the law, she revealed the real reason behind the committee's political posturing when she said, “We're not accusing you of being illegal, we're accusing you of being immoral.”

Andrew Cecil, director of public policy at Amazon, was humiliated by Hodge when she told him he was “not serious” at his admission of being unaware of the company's ownership structure. This after first insisting that the company operates on a “pan-European” basis. Hodge told him, “You've come to us with nothing. I don't know what you take us for, but you can't come her and pretend ignorance.”

Due to Mr Cecil's inability to pacify the PAC, a more senior Amazon executive will be summoned to answer their questions.

Troy Alstead, Starbucks global CFO, told the PAC that during its 15 years of operating in the UK it had only once been profitable, that in 2006, resulting in a corporation tax bill of £8.6 million. Hodge's disbelieving reaction was to remark, “If you have only made one year of profit in 15 years, why are you still here? It doesn't ring true.”

Starbucks European HQ is in the Netherlands where it roasts its coffee and employs around 250 staff and pays a discounted corporate tax rate. Alstead told the PAC that he could not discuss this further due to the terms of the deal with the Dutch tax authorities. Not surprisingly, this did not go down well with Hodge.

Although Alstead said he felt “terrible” that the British coffers were losing out on vital revenue he nevertheless insisted that Starbucks “is not making money in the UK” and that “We are never aggressive in avoiding taxes by any means.”

Google vice-president for northern Europe, Matt Brittin, admitted that his company had utilised a witholding tax avoidance scheme in the Netherlands, which was now redundant.

Whilst Google's European base is in Dublin, this is administered from Bermuda. In 2011 the company's UK revenue was £396 million of which £31 million was profit resulting in £6 million corporation tax.

Brittin's direct answering of the PAC's questions earned him praise for the “helpful” nature of his responses but the PAC made it clear that it was “annoyed UK profits end up in Bermuda”.

So what did this latest round of PAC tax purging achieve? The answer is very little other than to provide a platform for Hodge to strut around flying her moral banner. If the government really finds companies tax arrangements to be distasteful then it is up to them to do something about it and legislate.

6 Comments

  • Brendan OBrien says:

    Drawing attention to the moral problem is the Opposition’s job. Doing something about it is the government’s job. Hodge is not in the government, she is in the Opposition. She’s doing her job. Now the government should do its job.

  • Tony Warner says:

    I don’t believe that Starbucks makes no profits in the UK either. I’m annoyed that I pay corporation tax on what Starbucks takes in one day. If I have to pay French or Dutch income tax when I work there for more than six months, why can’t the big boys be forced to pay UK corporation tax when they are here for more than six months, too. Or are governments just scared of them?

  • Peter says:

    For someone like Hodge it is much easier and more satisfying moralising about the evils of companies instead of actually doing her job and working with the rest of Parliament to change the law if it finds it so distasteful.

    It is also grossly hypocritical for the government to treat tax as a moral issue – it is a legislative issue to fund the government. It is not a moral issue. If the government want it to be a moral issue, they should come clean about the gross waste and inefficeincy in government and ask whether it is moral for them to spend our tax so outrageously badly – it should be the taxpayers telling Hodge that the behaviour of government with our tax is immoral.

  • Steve says:

    [quote name=”Tony Warner”]I don’t believe that Starbucks makes no profits in the UK either. I’m annoyed that I pay corporation tax on what Starbucks takes in one day. If I have to pay French or Dutch income tax when I work there for more than six months, why can’t the big boys be forced to pay UK corporation tax when they are here for more than six months, too. Or are governments just scared of them?[/quote] I agree and believe the governments are nervous.

  • Mark says:

    Perhaps all of this grandstanding by Hodge might carry more weight if she didn’t benefit from similar arrangements regarding her Family shareholding in Stemcor – something about glass houses??
    guyfawk.es/SdNhoP

  • Ian says:

    For Margaret Hodge to stand on a “moral” position is interesting – just Google her name for some interesting reports about her family’s business (reportedly paying 0.25% tax), MP’s expenses etc!!!!!!

    This is why I no longer vote for MPs – they’re all the same.

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