The Public Accounts Committee (PAC) has said that it fully expects HM Revenue & Customs (HMRC) to prosecute multinational companies who do not pay the correct level of corporation tax in the UK, after a number of firms, including large technology companies, were criticised for questionable tactics.
The likes of Google, Amazon and eBay have been found to be paying the Treasury as little as 1.5 percent on hundreds of millions of pounds of revenue, when the standard tax rate for companies is 25 percent.
The PAC has said that HMRC is ‘too lenient’ and believes the Tax Gap – the difference between tax collected and that which should be collected – to be as much as £32 billion. It believes that HMRC is ‘unconvincingly positive’ about the situation and should set ambitious targets as soon as possible.
Rt Hon Margaret Hodge MP, chair of PAC, said that the findings were ‘outrageous’ and that it was an insult to British businesses and individuals who pay their fair share.
“There is little credible information about what is going on. The evidence we took from large corporations was unconvincing and, in some cases, evasive. HMRC also lacked clarity when trying to explain its approach to enforcing the corporation tax regime,” said Hodge.
Executives from Amazon and Google recently gave evidence to MPs about their tax procedures.
Hodge continued: “The inescapable conclusion is that multinationals are using structures and exploiting current tax legislation to move offshore profits that are 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. Policing the tax system must be at the heart of what HMRC does.”
Hodge believes that in order to make the companies in question pay more changes to legislation may be required, as well as increased international cooperation.
“The multinationals should be required to report their tax practices transparently. Prosecutions should be mounted where necessary and offenders should be publically named and shamed,” said Hodge.
“Confidence in our tax system can only be maintained if every company and every individual is seen to be paying their fair share. That requires HMRC to act firmly now.”
She added: “We consider that paying an appropriate amount of tax in the country in which profits are made is not only a matter of basic economics. It is also a matter of morality. The UK should be taking the lead in making this point."