Monday, November 12, 2012

U.K. MPs to question Google, Amazon and Starbucks about the small amount of taxes they pay

It might come as a surprise to some, but not every country has the same attitude towards corporate taxes as does the U.S. While corporations are lauded here for their ability to avoid paying any tax at all, some nations look down on deadbeat companies. In this regard, the U.S. is a lot like Greece, I suppose.

But the in the U.K. there is growing pressure on U.S. companies who are apparently taking their tax avoidance culture overseas.

Google, Amazon and Starbucks, who do big business in the U.K. will today be asked to answer a few questions by the Public Accounts Committee – one of them being how they get away with paying so little in taxes. Starbucks, for instance, paid only £8.6 million in U.K. tax over the past 13 years, according to reports. Meanwhile it sold £3.1 billion in retail sales. (In the U.S., the standard answer would be that there is a difference between sales and profits, profits being seen as the end result of bad accounting practices.)

"It is hard for the ordinary person to believe it's fair," Margaret Hodge, Labour MP was quoted by Reuters. It makes people incredibly angry in the current fiscal climate."

The U.K. is not the only country where the government is questioning tax avoidance behavior. Other Eurozone countries, feeling a squeeze thanks to debt burdons and newly imposed austerity measures, are seeking new revenue, even while their own tax revenue is declining thanks to the continuing recession (not to mention those self-defeating austerity measures).

Here in the U.S., the focus is almost entirely on the Bush era tax cuts and which of them will be repealed, if any. Not up for discussion is corporate taxes, which both parties feel are out of bounds – unless, of course, the discussion is about how to cut them further.

Corporate America is not the only entities that better watch their backsides. Italy apparently plans to go after the ratings services.

Italian prosecutors are investigating S&P, Moody's and Fitch after both downgraded the nation.

If recent history is any judge, you don't want to go to trial in Italy.