Saturday, 27 April 2013

Sodding corporation tax again

Looks like the Public Accounts Committee, chaired by the dreadful Margaret Hodge, isn't going to stop throwing rocks at the Great Satan anytime soon:
Technology companies that hold lucrative government contracts but avoid tax could be grilled by MPs later this year.

Accounts show that nine of the largest government IT suppliers made £62billion in sales in the UK over the past five years – but paid just £527million to the Exchequer in corporation tax over that period.

The likes of Microsoft, IBM and Dell could now be probed by the influential Public Accounts Committee, which last year explored the tax affairs of Google, Starbucks and Amazon.

Committee chairman Margaret Hodge confirmed that the PAC was planning to investigate government contractors in the autumn.
And the reason for this is:
Microsoft is one of the biggest government contractors, accounting for almost 2 per cent of the entire IT budget. 
In 2011 the software giant made £1.8billion in UK sales, including £700million from government contracts.
However, its corporation tax bill was a miserly £19million for the year, because the majority of its sales are made from Ireland or Luxembourg. It also funnels money to a subsidiary based in the tax haven of Bermuda*. 
Its rival Dell sells PCs, printers and vast amounts of other equipment to government arms. 
In the past five years it racked up £1billion in sales – but contributed only £6million in corporation tax.
It says it only made a profit of £12million, but the largest part of its income comes from commission – which is paid in Ireland.
Right, so it's the European Single Market in action again working exactly as intended; where a company can have it's HQ in one member country and trade with all other members through it.

In terms of what can be done, well there's no way that government procurement rules could exclude those multinationals with their European operations based outside of the UK from contracts such as these as it would be against EU law. So what will ultimately happen is a whole load of hot air and grandstanding from Hodge, and a load of companies left wondering if they should bother investing in the UK and creating jobs if all they get in return is a public shit-kicking for obeying the law.

* On Bermuda, if Microsoft ever want to pay any of that money out to shareholders, then they have to transfer it to the US where they will end up with a tax liability. To avoid tax otherwise, they can either invest it back in the company or leave it sitting there.

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