Bombarded with questions, executives of Google, Amazon and Starbucks cower in their seats
It was a rare sight: top executives of three of America’s most famous multinationals — Google, Amazon and Starbucks — cowering in their seats and at a loss for words as MPs grilled them over allegations of tax avoidance by their companies.
There were angry exchanges during a three-hour fraught session of the House of Commons Public Accounts Committee as the executives struggled to explain their employers’ complicated tax arrangements that allowed them to minimise their liabilities in Britain.
“What’s your job?” asked an angry Margaret Hodge, chairperson of the Committee, after Amazon’s Andrew Cecil repeatedly failed to give answers to basic questions.
“It is just not acceptable ... we want proper answers to proper questions.”
“Deliberately evasive”
Mr. Cecil, who described himself as Amazon’s Director of Public Policy, was accused of being “deliberately evasive” and displaying “outrageous” ignorance when he failed to explain how much profit his company generated in Britain.
“Frankly, we think you manipulate your profits ... You’re not serious here. They have set you up. It’s outrageous,” Ms. Hodge told him.
The MPs said Amazon avoided U.K. taxes by reporting profits in low-tax jurisdictions like Luxembourg and losses in high-tax countries such as Britain even though it made most of its profits in Britain.
Representatives of Google and Starbucks fared no better.
Starbucks’ Tory Alstead was reduced to stuttering as MPs tore into him over allegations that the coffee giant reported losses even while it was making massive profits.
“Respectfully, I can assure you that there is no tax avoidance here,” Mr. Alstead insisted.
“It just doesn’t ring true,” retorted Ms. Hodge.
She then went on to tell him why his claims did not add up.
“In Switzerland, you [made] 20 per cent profits on every coffee bean bought in the U.K., on which you only pay 12 per cent tax; you have not been able to explain the 6 per cent royalty [paid to the Netherlands] ... you charge for loans to your own wholly-owned subsidiaries at least two per cent above the going rate. It seems to us you are exporting profits to minimise your tax,” she said.
Google’s Matt Brittin was forced to admit that his company was involved in a “complicated” tax arrangement but he insisted, “we comply with the law.”
Google’s job, he said, was to “manage costs efficiently to offer fair value to shareholders.” It operated in jurisdictions with low-tax rates such as Ireland and Bermuda.
He was told that his company was guilty of “immoral,” if not illegal, practices.
“We’re not accusing you of being illegal, we are accusing you of being immoral,” Ms. Hodge told him sternly.
Keywords: House of Commons Public Accounts Committee, tax arrangements, tax avoidance, Google, Amazon, Starbucks
No one has a problem with these companies making profit. What the
report suggests is that these companies made profits through their
operations in Britain but cooked up accounts to evade paying taxes
there. No righteous and vigilant law keeper would allow this to
happen.
If the proceedings of Public Accounts Committee gave the author an
impression that the executives "cowered" in their seats, its because
they appeared to have no explanation for the accusations being
levelled, which sort of grants merit to the accusations.
Legal system in no civilized society is designed to deprive private
companies of the opportunities to make profit. And its because of
faith of people in morality of these companies in the critical
business run by them that these companies are profitable.
In fact, a public proceeding of such a nature was perhaps the best
platform where the executives could have effectively countered the
accusations and dispelled any notions of immorality on their part.
I hope someday we might be having such a diligent, hardworking and efficient parliament in India too instead of the losers we have now.
The report is extremely unprofessional. The strapline about company
executives cowering in their seats has departed from almost any
objective standard you would care to offer.
Commercial companies exist to generate profits and earn money by
providing services to clients. They are not charities. The basic idea
of having a capitalist system is to maximize profits. When you have a
financial environment like the one we have presently across the world,
taking advantage of loopholes in the system to generate profits is
part and parcel of any financial activity you undertake.
Therefore what the MP's are reported to have done is extremely wrong.
What is immoral and what isn't is meant to be discussed at public
gatherings and NOT at the formal Public Accounts Committee. If they
have discovered illegal activities they should chastise the companies
and hold them accountable. What has been reported to have occurred
amounts to no more than mud slinging.
I do not know when such a day will come in our country , where we can
question our own leaders for their misdeeds , let alone the Czars of
foreign companies . We should aspire to have such impartial enquiries
such as Lord Leveson enquiry and the current one .
Hats off to British democracy and its functioning. Efficient Tax collection is the life line of any democracy. Business communities too must learn to be truthful in paying taxes and confront the govt. for their lapses. The real problem with democracy is its spending philosophy without proper thought taking all democracies to bankruptcy.
"We are not accusing you of being illegal, we're accusing you of being immoral" said a British MP. It is obvious that the British MPs are clutching at straws in their frustrations. Is there a law in Britain that companies have to be moral beyond their legal obligations? The companies executives are not cowering as the author says, they are just being evasive because they don't believe the British MPs have a moral authority to question the company's morality.
Please Email the Editor