Pressure to end digital ‘tax bonanza’
Seven US technology giants, including Apple and eBay, paid just £54m in UK corporate tax in 2012, the Financial Times has discovered, highlighting the challenge for governments seeking higher tax revenues from multinationals. The amount, which is relatively modest given the scale of their combined sales at $15bn, will add urgency to a planned rethink of global tax rules. A review was launched by world leaders last summer amid mounting frustration over the difficulty of capturing revenue from the internet sector. This prompted both Italy and France to propose new digital taxes last week. The UK tax paid on profits made by Microsoft, eBay, Yahoo, Facebook and Apple fell in 2012, the last year for which figures are available, while those of Amazon and Google rose. The net effect was that their combined tax bill on current-year profits fell from £45m to £37m. However, after adjustments and provisions, including £24m set aside by Google, the total UK corporation tax charge rose to £54m. The new figures will concern David Cameron, prime minister, who promised a year ago to make "damn sure" that foreign companies paid higher taxes in the UK. Margaret Hodge, chair of the parliamentary public affairs select committee, described the figures as depressing. She accused the government of presiding over a "tax bonanza" for global internet companies. The companies did not comment on the FT’s findings but they have repeatedly said they comply with all tax laws. The relatively low tax payments by the technology companies reflect their ability to concentrate overseas economic activity in low tax countries such as Ireland, Switzerland and Luxembourg, leaving a minor role for operations in countries such as the UK. The global tax rates that Apple, Google, Microsoft and eBay paid in 2012 are significantly lower than five years ago at 25 per cent, 19 per cent, 24 per cent and 15 per cent respectively. The tax rates of their foreign operations ranged from just below 10 per cent for Microsoft to 5 per cent or less for the other three. The prevalence of very low tax rates in the high-tech sector has fuelled criticism of the companies but in 2012 the global tax rate was 33 per cent for Yahoo, 89 per cent for Facebook and even higher for Amazon which reported a post-tax loss. The tax rates of Amazon and Facebook were pushed up last year by foreign losses which could not be offset against other profits. International proposals on how to tax the digital economy are due to be published in September but it is proving one of the most difficult issues in a global project to rethink rules launched last summer by the G20. Italy confirmed plans last week to introduce a new tax in July on online advertising, although the measure is widely thought to flout the rules of the EU single market. France has also moved to extend its tax powers over internet groups, with a proposal to extend its cultural support tax to include online companies that produce original content in French.