If may not be illegal, but some find that fact that huge international companies are avoiding paying millions of pounds in tax immoral to say the least. But with little that can be done to force these firms to pay their ‘fair share’, it would seem the procedure known as tax avoidance is set to continue. Here’s a look at three of the biggest companies around and how they go about lowering their tax bill.
The internet giant made over £10 billion in revenue in 2012 but still managed to avoid paying tax on most of that figure. This was achieved by moving 80% of the company’s pre-tax profits to a shell company on the island of Bermuda, which is not subject to corporation tax – a move that meant Google were able to swerve a £1 billion tax bill. The company, which employs 2,000 people in the UK alone, claims that it abides by current tax laws and helps boost European economies by investing across the continent. However, they paid just 3.2% tax on its overseas profits last year, compared to an average of 34% paid by many other multinational brands.
Although the online retailer has paid an average of 44% on its US income over the past five years, they have managed to claw some of that back thanks to a legal loophole in Europe. Setting up a company known as Amazon Europe Technology Holdings in Luxemburg, figures show that they have saved over $700 million in tax payments. This has been achieved by the European arm of the business paying the American side of the organisation $300 million a year, along with the 583 million Euros it receives each year from its European affiliates. Had all of this money been subject to US corporation tax rates the company would have incurred a bill of $700 million. This procedure allowed Amazon’s Luxembourg unit to accrue tax-free assets worth more than $2 billion.
With branches of the global coffee giant on almost every street in Britain, it’s baffling to find out that the Seattle based company actually runs at a loss here in the UK, or does it? Despite being valued at around £1 billion Starbucks Last year posted a loss of £33 million on sales of almost £400 million. This is a common tactic when it comes to tax avoidance and one of several the coffee chain uses. Rather like Amazon and Google, they also move much of their profits around to make the most of international loopholes when it comes to tax rates. Every time you buy a cup of Starbucks coffee, 6 per cent of the price is paid as a royalty to branches of the U.S. parent company, often based in tax havens around the world – and therefore out of the grasp of the UK tax man.