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Global IT Firms Face Tax Grilling By MPs

(c) Sky News 2013

MPs are preparing to question the tax affairs of major American computer companies, as the crackdown on tax avoidance intensifies.

The Public Accounts Committee (PAC) is considering calling in some of the biggest IT companies over their tax schemes, according to a report in the Financial Times.

Approached by Sky News, the PAC declined to confirm the report.

But according to the paper, the investigation is expected to highlight how the firms use a range of methods of tax avoidance to keep taxes low, including recording UK sales in low-tax jurisdictions.

It said that Microsoft (NasdaqGS: MSFT - news) and Dell (NasdaqGS: DELL - news) are directing hundreds of millions of pounds worth of UK sales through Ireland (OTC BB: IRLD - news) to minimise the tax burden.

And added that security firm Symantec allegedly counts online sales through Ireland, since its website is run out of Ireland.

A study of the UK accounts of the nine suppliers for the five years to 2011 showed that the IT companies had made UK sales totalling £62bn but paid only £527m in corporation tax.

The PAC inquiry is expected to be part of a wider investigation into how much is being paid by Whitehall's larger contractors.

Treasury chief secretary, Danny Alexander, has allegedly looked into whether the Government can stop firms from winning lucrative state contracts if it is found that they do not pay enough tax in the UK.

He is expected to announce plans which would see companies which are bidding for UK contracts having to disclose information about their tax compliance history and use of avoidance mechanisms.

The companies concerned have all stressed that these methods are entirely legitimate in accordance with UK tax laws.

The news about the grilling comes after the tax row which put international firms such as Starbucks, Google (NasdaqGS: GOOG - news) and Amazon under the spotlight.

Starbucks faced criticism after it emerged that since its arrival in Britain in 1998, it has paid £8.5m in corporation tax, despite total sales of £3bn.

In December, Chancellor George Osborne announced extra investment to help clamp down on multinational companies who avoid paying tax in Britain.

However, he warned that Britain must also be cautious and make sure big companies did not avoid Britain, because of high taxes.

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