A Labour government would force companies operating in the U.K. to set out clearly how much tax they’re paying on what income, said the opposition party’s leader, Ed Miliband.
Miliband, currently touring Scandinavian capitals to strengthen links with European social democratic parties, said he wants to learn from the Danish and Swedish experience of increasing corporate tax transparency. He cited transfer pricing, under which company units in different countries can set the prices of products and services they buy from each other so as to minimize tax liability, as a particular area of abuse.
Prime Minister David Cameron yesterday likened “aggressive” forms of tax avoidance by companies to illegal tax evasion. His comments come two days after Britain, Germany and France called on other Group of 20 nations to curb tax avoidance by international corporations that shift profits to territories where they can pay the lowest amounts.
“We cannot use that international action as an excuse for going at the pace of the slowest country,” Miliband told reporters traveling with him in Bommersvik, southwest of Stockholm. “There are lots of people whose living standards are being squeezed, finding themselves in real difficulty. What they don’t want is companies not paying their fair share in tax.”
Miliband, whose party leads Cameron’s Conservatives in opinion polls, discussed Denmark’s experience with Prime Minister Helle Thorning-Schmidt in Copenhagen yesterday. He said her country’s requirement that companies produce a consolidated tax return, stating their total profits and tax paid by all their units in Denmark, had reduced avoidance.
“Globalization has happened; the taxman has been left behind,” Miliband said. “You’ve got to look at what action you can take. What is non-negotiable is that companies are transparent and are paying their fair share of tax.”
Amazon.com Inc., Starbucks Inc. and Google Inc. were singled out by U.K. lawmakers last year for not paying enough tax in Britain. Members of Parliament’s Public Accounts Committee criticized them for using complex accounting methods to reduce their U.K. tax liabilities.
Testimony by the retailers at a Nov. 13 hearing at times drew laughter from lawmakers who queried how Amazon made 20 million euros ($27 million) profit on sales of 9.1 billion euros across Europe and questioned why Starbucks remained in Britain as it had recorded losses for most of the 15 years it had operated in the country. Google paid 6 million pounds in company tax in Britain last year.
Starbucks pledged in December to pay a “significant amount” of U.K. corporation tax in 2013 and 2014 “regardless of whether our company is profitable during these years.”
Under proposals published last week in the U.K., companies bidding for contracts starting on April 1 will have to make a declaration about their tax compliance, and departments will for the first time have the power to refuse contracts on the grounds a company has broken anti-avoidance rules.