New push on foreign firms’ tax

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Political pressure to change the way foreign firms are taxed in Britain increased this weekend after the head of the Public Accounts Committee and a former City minister said the option of a “revenue tax” should be seriously considered.

Lord Myners, the former City minister, and Margaret Hodge, the chairman of the PAC which is carrying out its own inquiry into the issue said the Government should look into a sales tax as a way of raising extra tax revenue from global companies.

Tomorrow the issue will again be in the public spotlight when Starbucks (NasdaqGS: SBUX - news) , Google (NasdaqGS: GOOG - news) and Amazon all give evidence on the issue to the PAC.

The comments come in the wake of a string of disclosures surrounding the small amount of tax paid by large international companies.

The UK business of Starbucks, the coffee chain, reported sales of £398m and paid nothing in tax because it made a £32.9m loss. The online retailer Amazon paid no tax in the UK in 2010 despite generating sales of more than £3.3bn.

Lord Myners told The Sunday Telegraph that the current system for collecting corporation tax from multi-national companies (MNCs) is flawed.

“Corporation (BSE: CORPBANK.BO - news) tax for an MNC operating in the UK is close to being a voluntary payment,” he said. “The problem is that the tax environment many MNCs are interested in is a zero tax environment.”

Lord Myners said that the Government’s reductions in corporation tax which will fall to 22pc by 2014 would not work.

“You either shrug your shoulders and say you get benefits from secondary effects though employment taxes, VAT, the multiplier effect, and so on. Or alternatively you look for some other form of taxation.”

“If that were to be the case, some form of sales tax has attractions.”

Lord Myners said that he had discussed the issue with senior Labour party leaders recently and during his time in government in Gordon Brown’s administration.

Mrs Hodge, who will lead the PAC hearing, said of a tax on sales: “That should be explored anything that gives you a model of taxation which enables you to fairly tax economic activity in the UK.”

The Sunday Telegraph understands that Starbucks (HKSE: 4337.HK - news) will tomorrow hint it expects to pay more UK tax after being criticised for contributing £8.6m over the past 14 years. It is understood that Troy Alstead, its chief financial officer, will indicate that as a result of its investments in the UK, it will be more profitable in the future, and thus pay more corporation tax.

He will be questioned by members of the PAC at the same time as Matt Brittin, Google’s vice-president of northern Europe (Chicago Options: ^REURUSD - news) , and Andrew Cecil, director of European public policy for Amazon.

In the past three years, Starbucks, Google, Amazon and Facebook have generated around £3.1bn of revenues in the UK and paid around £30m of tax between them. They all insist they are transparent on tax matters and abide by the law, but point out that they are not UK companies.

According to HMRC the “corporate tax gap” the difference between what companies have paid and what HMRC thinks it is owed was £4.1bn in 2012. There is a further £25bn of corporation tax that HMRC is investigating in connection with 783 of Britain’s largest companies 44pc of which are foreign.

It is thought that despite the pleas from Lord Myners and Mrs Hodge the Government is not considering a sales tax.