Vince Cable has acknowledged public outrage over large companies which avoid paying UK tax and said there would be further Government investigations to make sure they pay their fair share.
Speaking to Andrew Marr on the BBC this morning, the business secretary said: “It’s certainly difficult, because we need inward investment, but while they’re here if they make a profit they should pay tax.”
Last week Amazon, Google (NasdaqGS: GOOG - news) and Starbucks (NasdaqGS: SBUX - news) were accused of being “immoral” and “manipulative" when called to appear in front of the Public Accounts Committee to explain their tax affairs. The attack was led by committee chairman Margaret Hodge, who said that all three companies stood accused of siphoning profits away from Britain by using a complex web of accounting strategies.
“We are not accusing you of being illegal,” said Mrs Hodge, “we are accusing you of being immoral.”
In the UK, Starbucks has paid £8.6m of tax in the last 14 years thanks to reporting losses on it audited accounts in all but one of those years. But Starbucks UK also pays a long list of fees for royalties, intellectual property rights and interest on loans to other Starbucks divisions in Amsterdam, Switzerland and to the parent company in the US.
“Our own tax authorities have got to be very tough on things like royalty payments," said Mr Cable this morning. "There is nothing more galling to small and medium sized companies than [discovering] they are paying their tax to the British Government and we find these people dodging it.
"It’s completely unacceptable where there’s systematic abuse taking place. You would need some pretty intensive investigation by the Inland (LSE: INL.L - news) Revenue to find what’s going on. You've got to have a combination of action at an international level, which the Chancellor is pursuing with other governments that are just as angry as we are.”
The business secretary also admitted that so-called "zombie companies", which manage to meet interest payments for their debt but not repay any of the capital, were a "worry".
Once the economy recovers the Government would have to revert to "normality", which would inevitably mean higher interest rates and that "some companies will struggle", he admitted.
"This isn't a temporary attack of flu, we've had the economic equivalent of a heart attack. its going to be very difficult getting out of it."