LONDON — The new UK minority government has a big opportunity to bring in more tax revenue without cutting welfare or ditching national infrastructure projects like HS2.
It needs to address tax loopholes that allow flourishing multibillion dollar US tech giants like Google, Amazon, and Facebook to pay very little tax on their insanely low declared UK “profits” instead of UK their much larger UK revenues.
US tech firms have long used offshore offices in countries such as Ireland, Luxembourg, and The Netherlands to process their UK sales, dodging HMRC in the process.
Google paid just £36.4 million in UK taxes this year despite taking over £1.03 billion in UK sales. Elsewhere, a Reuters investigation this week found that Uber is exploiting UK tax laws to avoid paying £40 million in tax every year. Then there’s Apple, the world’s largest tech company, which owes €18 billion (£16 million) in back taxes.
Following the Uber tax revelation this week, Margaret Hodge, the former chairwoman of the Public Accounts Committee, said: “[This is] yet another example of how large companies find loopholes and use the law for a purpose for which it was never intended.
“There is a failure to pay tax that should be due. That reduces the money available for public services and is unfair on Uber’s competitors.”
As US tech giants continue to use clever tax avoidance tactics, small business owners in the UK are facing soaring tax rates, with some of them struggling to survive. It’s worth noting that some companies from the UK and other jurisdictions employ similar tax avoidance tactics, but US tech firms are under particular scrutiny due to the size of the sums involved.
If things continue as they are then London, the UK’s economic powerhouse, could soon become a soulless city full of megacorporations in tall glass buildings that can be accessed by a tiny handful of people. There are concerns that this is already starting to happen in Shoreditch — a neighbourhood that has experienced rapid gentrification in recent years.
If the UK does start asking US tech giants to pay their fair share of tax then there’s a chance they’d look to scale back their business operations in the country. To mitigate the risk of this happening, the next UK government could look to offset taxes against R&D spend — something that would incentivise companies like Google and Facebook to hire more engineers in the UK.