The banks and big business are making monkeys out of the government. Of the Big 4 technology giants, Apple (according to Sunday Times research) is estimated to have dodged £570m tax last year. Analysis of data filed by the company in the US suggests that the UK would normally account for one-tenth of Apple’s global revenue. On that basis the company’s UK turnover last year was about £6.7bn, implying an estimated profit of £2.2bn which should generate £570m in corporation tax at 26%. However, Apple’s latest accounts show UK turnover at slightly over £1bn and a profit of just £81m, i.e. only £14.4m was paid in tax – a mere 2.5% of its true tax liabilities.
A similar pattern emerges for the other companies. Google’s US accounts show that its UK turnover was £2.6bn, implying that it should have paid an estimated £224m in British tax. In fact it paid precisely £6m, just 2.6% of its real tax liabilities. Facebook, the largest social networking site in the world, has estimated UK revenues of £175m a year, indicating a tax liability of £21m, yet it pays precisely £0.2m in tax to the UK Treasury, just 1% of what it should have paid. Amazon should have paid £11m in UK tax, but actually paid only £1.9m. Starbucks (according to research by Reuters) has had a UK turnover since 1998 of £3bn, but has paid just £8m in tax.
How do they get away with such greed and evasion? Apple shuttles its money through a related company in Ireland, where corporation tax is only 12.5%, and then onward to the British Virgin Islands tax haven. Google has a similar offshore strategy, with the money ultimately ending up in Bermuda. That could be blocked by requiring that tax is paid where the company really earns its profits, and that could be achieved by requiring all multi-national companies to make country-by-country reporting for all their profits worldwide. They would then have to publish in their annual audited financial statements a country consolidated profit and loss account, a limited balance sheet, and the cash flow data on the tax paid for every jurisdiction where they have a permanent establishment for tax.
But there are other devices used by these tax avoiders which can and should be stopped. Googla and Facebook, for example, have built up losses on their UK balance sheet by handing shares worth millions of pounds to employees, which are then classed as a taxable expense to be set against liability for corporation tax.
It is a scandal that Osborne is taking another £10bn from some of the very poorest people in Britain when these multi-billion corporates in the FTSE-100 are avoiding tax worth that total and much, much more.