Global giants must be 'named and shamed' over tax avoidance

MPs calls for end to 'sweetheart deals' and insist multinationals should be prosecuted for not paying enough tax

"Immoral" multinational companies that avoid paying their fair share of tax in Britain should be named and shamed by the Government and face prosecution rather than being offered sweetheart deals, an influential committee of MPs will recommend today.

The Chancellor, George Osborne, will announce an extra £150m of funding for Her Majesty's Revenue and Customs (HMRC) this week to help crack down on avoidance by global companies with British operations, which the Treasury predicts will raise up to £2bn within two years.

The coffee chain Starbucks, one of the multinational companies accused of tax avoidance, will also announce a deal with the Treasury to pay more on its UK earnings.

But in a hard-hitting report to be released today, the cross-party Public Accounts Committee (PAC) calls for the Government to take an even tougher line. It says legislative change is needed to ensure that multinationals report their tax practices transparently, and with prosecutions rather than deals for companies found to be avoiding tax. Offenders, it says, should be publicly named and shamed.

The PAC said it had been unhappy with the "unconvincing, and in some cases evasive" evidence it had received from representatives of Starbucks, Google and Amazon who were called in front of the committee last month to defend their tax affairs.

It said there was currently "a complete lack of transparency" about why multinationals paid so little UK corporation tax. Their operations were structured in ways that were impenetrable to the public, while HMRC disclosed very little about its approach to collecting tax from them.

The PAC report concludes: "HMRC needs a change in mindset in the way it approaches collecting tax from multinationals.

"At the moment there is a pervasive acceptance of the status quo by the top officials in HMRC and we have seen little evidence of a desire to be more assertive. We expect HMRC to prosecute multinational companies who do not pay the tax due in the UK."

Margaret Hodge, the committee's chair, said the inescapable conclusion from the inquiry was that multinationals were using structures and exploiting current tax legislation to move profits offshore that were clearly generated from economic activity in the UK.

"HMRC should be challenging this but its response so far to these big businesses and their aggressive tax planning has lacked determination and looks way too lenient," she said.

"The drive to make these companies live up to their obligations will have to be conducted on a number of fronts. These include possible legislative change within the UK and efforts to increase international co-operation."

In an attempt to show that the Government is taking the concerns seriously, Mr Osborne will shortly announce extra investment to crack down on tax avoidance by global companies.

The Chancellor plans to bolster the HMRC team that deals with multinationals as well as working with other governments in an attempt to arrive at an international deal that prevents companies moving their profits into low-tax offshore domains.

He told the BBC: "I think you can do two things. One is you can enforce the taxes we have got and I am going to be announcing tomorrow extra investment in the part of the Inland Revenue that tackles tax avoidance by multinational companies.

"Second, you make sure internationally we have the right rules, and it is actually Britain who has been working with Germany and France to get those rules on the international table. It will be a big priority for the G7, G8, which we host next year.

Meanwhile in a sign that public pressure maybe having some effect on the multinationals, Starbucks confirmed that it was in talks with the Government about paying more in UK taxes.

"We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more," a spokeswoman said.

"As part of this we are looking at our tax approach in the UK. The company has been in discussions with HMRC for some time and is also in talks with the Treasury. We will release more details later in the week."

Numbers up: What they claimed, and what the committee found

Amazon reported turnover of £207m in 2011 for its UK operation, on which it paid tax of £1.8m. However, Amazon provided the PAC with information showing that for 2011, £3.35bn of its sales were from the UK, 25 per cent of all sales outside the United States.

Starbucks told the PAC it had made a loss for 14 of the 15 years it has been operating in the UK. But it also briefed shareholders that its UK business was successful and it was making 15 per cent of its global profits in the UK. Its estimated pre-tax profit for the year was £59.6m, on which it paid £0 in tax

In the UK, Google recorded revenues of £396m in 2011 and paid corporation tax of only £6m. However it is estimated that Google actually had £2.75bn of revenue from its operations in the UK with an estimated pre-tax profit of £836m.