Committee calls on taxman to be tougher on multinationals

THE TAXMAN must ensure big businesses do not get away with drastically reducing their UK corporation tax payments through the use of complex tax avoidance arrangements, the Public Accounts Committee has said in its latest HM Revenue & Customs annual report and accounts.

The report was based on evidence given to the committee by HMRC – throughout the year – and by Amazon, Google and Starbucks. It analysed the department's performance and criticised it for "not taking sufficiently aggressive action to assess and collect the appropriate amount of corporation tax from these multinationals".

Evidence provided to the committee by representatives of Starbucks, Amazon and Google was described as "unconvincing, and in some cases evasive". The trio, along with others including eBay and Facebook, had been at the centre of controversy after it emerged they were paying greatly reduced corporation tax in the UK, and, in some cases, nothing at all.

It also questioned whether HMRC has "the necessary resources or [is] devoting the time and effort to collecting the appropriate level of tax", before delivering a curt assessment of the Revenue's work to narrow the shortfall between tax due and tax collected.

The gap currently stands at £32.2bn, of which 25% is down to large business, according to HMRC, although that takes in other business taxes on top of corporation tax.

A "pervasive acceptance of the status quo" exists among the "top officials in HMRC", the report said, adding the committee expects HMRC to "prosecute multinational companies who do not pay the tax due in the UK".

Committee chairwoman and Labour MP Margaret Hodge was particularly scathing, accusing HMRC of "lacking clarity" in its approach to enforcing the corporation tax regime.

She said: "Corporation tax revenues have fallen at a time when securing proper income from taxes is more vital than ever. 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.

"It must be more aggressive and assertive in confronting corporate tax avoidance. This is essential for the credibility of both the department and the tax system."

She added the drive to ensure the public purse was appropriately recompensed by large corporations would be conducted on "a number of fronts".

"These include possible legislative change within the UK and efforts to increase international cooperation. The multinationals should be required to report their tax practices transparently. Prosecutions should be mounted where necessary and offenders should be publicly named and shamed," she said.