Source: Mateusz Boksa¸ PKF Malta¸ July 2013

 

According to Reuters’ Tax Avoidance Report¸ Western governments are struggling with a massive problem caused by Global tech giants.  They are set to target a range of tax loopholes used by technology giants including Apple¸ Amazon as part of an international drive to tackle corporate tax avoidance.

Corporate tax avoidance has become a hot political issue following public outrage over revelations in the past year that companies such as Apple and Google had used structures U.S. and European politicians said were designed to minimise the amount of taxes paid.

Analysis of company accounts¸ regulatory filings and figures from HM Revenue and Customs reveals the shocking extent of the scandal. Every British taxpayer is being cheated out of £183 a year as global giants including Google and Amazon avoid paying annual taxes of as such as £5.5billion. A massive £1.4billion of the shortfall¸ based on an estimated 30 per cent profit¸ comes from just eight companies which netted £18.2billion in UK sales¸ but only paid £33million in tax. Various legal methods are used by big businesses to cut their corporation tax bills¸ and – unfortunately for governments – they do it effectively:

– Latest figures indicate that Google avoided as much as £224million by paying just £7.3million in corporation tax on £3billion of UK revenue.

– Accounts for Amazon for 2012 this week disclosed its tax bill amounted to £2.4million and is controversially offset by Government and EU grants of £2.5million.

– According to the Guardian (on the 26.06.13)¸ Starbucks¸ one of the companies exhorted by the prime minister to “wake up and smell the coffee” over tax¸ has handed over £5m to HM Revenue and Customs – its first payment in five years.

– Meanwhile eBay paid less than £1million in tax on sales of £800million.

– Analysis of the corporate records of ­Apple reveals it may have saved as much as £550million in corporation tax on sales of £6.7billion.

So what is to be done with these situations? The Organisation for Economic Co-operation and Development (OECD)¸ is now due to present an “action plan” highlighting broad areas where changes will be discussed to a G20 meeting later in July.  As governments struggle with large deficits following the financial crisis¸ lawmakers have said enough is enough.

“Domestic and international tax rules should be modified in order to more closely align the allocation of income with the economic activity that generates that income¸” the draft seen by Reuters said¸ echoing comments from politicians in the United States and Europe in the past year.

The draft plan aims for OECD members and non-OECD G20 members to agree on specific changes to international tax rules in one to two years — fast by the standards of international tax diplomacy. Among the areas the draft said the OECD would seek to address are situations where companies avoid creating a taxable re