Is government too scared of Google, Amazon and Starbucks?


Multinational companies such as Starbucks, Amazon and Google were singled out by MPs as paying surprisingly little tax

If the UK had an industrial strategy over the past 30 years, it could perhaps have been characterised as "foreigners more than welcome".

To a greater extent than any developed economy, British governments have been almost wholly lacking in concerns when overseas companies set up shop in the UK or bought businesses here - because of the conviction that these overseas companies would bring decent management, useful competition and investment capital to this country.

Against this government policy backdrop, Google, Starbucks and Amazon seem to be examples of huge American companies doing as well or better in the UK than anywhere apart - perhaps - from their home market in the US.

That, at least, would be the case if success is measured in terms of revenues or market share.

Now, it should be said that if you talk to their British competitors, it is moot how much benefit their presence in Britain has actually delivered.

Media companies - television, radio and newspapers - have complained for years that Google takes colossal and growing amounts of net advertising revenues, while investing relatively little in the gathering of news or the making of television and radio.

Owners of small independent coffee shops are not exactly huge fans of Starbucks.

And there is no kind of British retailer, big or small, which isn't terrified of Amazon's growing presence in every area of consumer sales.

These are businesses that are transforming entire industries. Many of the consumers who use them would probably say for the better. Struggling competitors and their employees, inter alia, would say for worse.

Here are the questions posed by their growing presence in the UK:

  • is British cultural life richer or poorer for the migration of advertising revenues to Google?
  • does Amazon cause or merely accelerate the dereliction of swathes of the High Street?
  • is Starbucks a force driving down prices and improving service, or a lumbering quasi-monopolist crushing everything in its path?

And although they employ many thousands of people in Britain, it is unclear whether collectively they are net creators or destroyers of employment - and, in particular, whether they are net creators of what might be thought of as rich and fulfilling employment.

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Is it remotely plausible that they would suddenly emigrate and stop trying to sell as much as possible to British consumers if they suddenly faced [bigger] tax bills?”

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This is not to take sides in what is an important debate, with passions that run high on both sides, merely to point out that their huge presence in the UK can't be assumed to be a net good thing.

Which is why today's report by the Public Accounts Committee (PAC), which points out that as huge and clever multinationals they exploit legal devices to minimise their liability to corporation tax in the UK, is of moment.

The thing about Google, Starbucks and Amazon is that they declare surprisingly little profit in the UK on the back of their massive market shares.

"Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK, but in 2006 it made a small profit" - in spite of a reported market share of almost a third.

As for Amazon, it had sales in the UK of £3.35bn in 2011, reported turnover in its UK operation of £207m and a "tax expense" of just £1.8m.

And for Google, its reported British revenues last year were £396m, on which it paid corporation tax of £6m.

Now for the avoidance of doubt, these three multinational companies are by no means unique in minimising their UK tax liability. Like all public companies, they have a duty to their shareholders to minimise their costs of doing business.

As it happens, the finance director of a huge British multinational, Vodafone, recently wrote a letter to journalists explaining why it paid no UK corporation tax in 2011-12.

If you are a shareholder in any multinational - and you will be, if you are saving for a pension - then it is in your interest that many use accounting techniques to channel their revenues to regimes, like Ireland, the Caymans and Bermuda, where tax rates are negligible to non-existent.

But none of us are just shareholders. We are also citizens. And we have an interest in making sure that companies that benefit from an educated workforce, a free health service, a solid and reliable legal system and an efficient transport network, make their proper contribution to an infrastructure whose absence would be devastating to them.

Which is why MPs on the PAC want Her Majesty's Revenue and Customs to be more aggressive in challenging the nugatory UK profits and minimal tax liabilities declared in the UK by the likes of Google, Starbucks and Amazon.

Here is an interesting question. Now that all three of them are so huge in the UK, is it remotely plausible that they would suddenly emigrate and stop trying to sell as much as possible to British consumers if they suddenly faced tax bills comparable to those paid by less internationally mobile UK companies?

Arguably their great success in the UK has shifted the balance of power towards the British tax authorities and the government. Google, Amazon and Starbucks would have a huge amount to lose if they reduced their commitment to Britain.


Starbucks is planning to change the way it allocates its costs for tax purposes in a way that should see it paying corporation tax in the UK for almost the first time, I have learnt.

Responding to criticism that, despite its share of almost a third of the UK coffee-shop market, it has paid corporation tax only once in 15 years, Starbucks is considering changing the way it accounts for all or some of the 4.7% of revenues it makes as a payment "for intellectual property" to a Netherlands-based company.

As I understand it, Starbucks in the UK would still make this payment, but it would no longer claim it as a taxable expense.

If Starbucks goes ahead with the accounting change, the announcement is likely to come before the chancellor's Autumn Statement on Wednesday.

This would then increase pressure on other multinationals which pay little or no corporation tax on huge sales in the UK - and especially Google and Amazon - to similarly increase their liability to UK corporate taxation.

MPs on the public accounts committee today said of Starbucks: "We find it difficult to believe that a commercial company with a 31% market share by turnover, with a responsibility to its shareholders and investors to make a decent return, was trading with apparent losses for nearly every year of its operation in the UK."

A source close to Starbucks said that the Seattle-based multinational had been stung by the criticism and was changing its ways.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 48.

    We don't need any of the mentioned businesses in the UK.

    Starbucks, for instance, not only avoid many of the UK taxes, they employ very few British – the vast majority of its substantial workforce are foreign students on casual labour who also pay no UK taxes – and the coffee is yucky.

    Starbucks is, for the UK, a badly performing biz. Let's replace Starbucks with a British alternative.

  • rate this

    Comment number 47.

    We need a ruling (legal or HMRC) that if you sell something in the UK, the transaction takes place here and must be fully accounted here. A book from a warehouse here shoud be accounted here for the sale price. Bogus license fees should be rejected. By all means pay your profits to another country, after you have been taxed on them, not before.

  • rate this

    Comment number 46.

    Do you know how Amazon started? Its founders realised that this new-fangled internet thing would be good for selling stuff, and picked books because of the large inventory available. Pure commercialism, and that is after all what any company does... it is the government's job to meet a duty of care to its citizens, not that of any company. It is our government which has failed us, not any company.

  • rate this

    Comment number 45.

    We need to make sure these companies cough up. We should also make them pay a tax that applies to foreign companies that have set up business in the UK to protect our own business. Finally, we should legislate against foreign companies from swooping in and buying some of our most prized assets.

    We don't do or make anything anymore, we're a nation of desk jockeys. Slipping away into irrelevance.

  • rate this

    Comment number 44.


  • rate this

    Comment number 43.

    UK companies paying UK taxes cannot compete with these multinationals playing by existing tax rules. Would the HMVs, Woolworths, independent bookseller chains etc have struggled/gone if they weren't on the scene?

    The government should try for international action but if it's not quickly forthcoming they should change our tax rules unilaterally.

  • rate this

    Comment number 42.

    The Politicians, Treasury and HMRC have been aware of this possibility for years.
    One Question to the above.
    Why have you not done anything about it until now?

  • rate this

    Comment number 41.

    Seeking corporation taxes would be beneficial for the public purse and for showing the Government being tough on tax evasion. However, how much would it damage Britain's 'business friendliness'?

    Look at the difficulties the French government caused itself by trying to be tough on a ArcelorMittal, which was not putting the French people ahead of the company's bottom line.

  • rate this

    Comment number 40.

    Pinch of Salt,

    Thanks for clarification of my post

    However, I can't agree that these firms make up for lost Corp Tax through income tax contributions etc. These businesses are not wealth creators / manufacturers. They are distribution business and if they were replaced by organisations paying UK taxes, the employees of those organisations would pay the same Income tax.

  • rate this

    Comment number 39.

    The government are very willing to take 60% tax off us for driving our cars around. The British public are an easy target because we never do anything about it.

    Mr Osborne has lowered the corporation tax so big companies and very rich people can get richer while paying the bear minimum to its employees (£6.25) ph. The British and Europeans have become the new legalised slaves of the world.

  • rate this

    Comment number 38.

    In the UK big companies say 'hop' to the government who then perform a double backward somersault through a hoop. Companies bribe by political donations,threaten via media exposure,schmooze the guys at the top with lavish hospitality and now make cozy deals with HMRC to avoid tax. Enough is enough.

  • rate this

    Comment number 37.

    @1 "If these corporations pay no tax, it is because the law says they need pay no tax. Blame parliament"

    I agree, the loopholes that allow tax avoidance are clear and present and are rarely tackled.... WHY? Because people within govt stand to make a lot of personal money by keeping things just the way they are.

  • rate this

    Comment number 36.

    Okay, do people want a reason to stay in the EU and also see the UK grow a backbone in the EU?

    Mr Cameron can stop all this nonsense with tax from large companies by telling the EU that the referendum will go ahead unless the EU agrees that these companies must pay full tax in the nations they operate in or those companies will be barred from EU trade.

    Those companies cannot risk leaving EU!!!!

  • rate this

    Comment number 35.

    We are controlled by the multinationals They ordain what we can see, what we eat and what we wear
    They control how we are educated and to what level. How we are housed and how we move about

    Their influence is all pervasive. We like to think we are free but we are not They have influence over government whether the government admits it or not We are only free for one day every 5 years to vote

  • rate this

    Comment number 34.

    I've said it before..........and I'll say it again - bring in the Tobin Tax, so that those who made the mess, pay for the mess.

  • rate this

    Comment number 33.

    WE need to support our OWN companies to keep taxes in the UK.

    The Book Depository was a competitive online British bookshop, but they sold out to Amazon. WH Smiths or Waterstones need to offer the same prices.

    Support your local coffee shop.

    Don't click on the "paid" adverts at the top of each Google page, as that just sends more revenue to the US.

    Use the Friday Ad rather than ebay

  • rate this

    Comment number 32.

    Much ado about nothing. The government has no muscle to force the companies to pay taxes. These loopholes have existed for years, and they will continue to do so.
    The end game will result 'story' dying a natural death, as most of us will carry on regardless after a bit of a moan.
    The general public should boycott their products. I have done this for years. Costa, Foyles and Start page are great!

  • rate this

    Comment number 31.

    Further to 13.

    Or, Have a tax rate based on the amount of divided paid.
    Companies that reinvest profit in R+D or Expansion have less to pay in dividend, therefore pay less tax.
    Companies who do not make a profit pay no divided therefore no tax.
    Companies that make a loss AND borrow to pay a divided should borrow to pay their tax bill.

  • rate this

    Comment number 30.

    Why don't we just tax companies' income instead of their profits? It works for individuals, and the infrastructure is already in place (VAT).

  • rate this

    Comment number 29.

    Seems amusing that we are posting our thoughts on tax avoidance on a BBC site. BBC is part of the problem, many top earners at BBC use similar strategies to pay little tax, and all with aunty beebs blessing/facilitation.


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