12 November 2012 Last updated at 02:58 ET
Executives from some of the world’s most-recognised companies are due to give evidence before Parliament on Monday on the issue of tax avoidance.
The head of Google UK, as well as top managers from Starbucks and Amazon, will speak before the Public Accounts Committee on taxing multinationals.
All have been accused of paying little or no tax on their UK earnings.
Many global firms create corporate entities in low-tax jurisdictions for the purposes of paying tax.
For example, a firm may design a product or an app for a smartphone in the US, have it made in Asia and sell it in the UK. But the company – or a regional unit – may be legally incorporated in a fourth place with less onerous tax laws.
The question is then which country’s tax authorities should get the tax receipts and over what share of the sales.
Taxed in the UK
Matt Brittin, the chief executive of Google UK, as well as Starbucks chief financial officer Troy Alstead and Amazon’s director of public policy Andrew Cecil, will speak before the committee, which is headed by Margaret Hodge.
In recent months, many multinationals have been subjected to bad publicity over their tax arrangements:
Corporation tax for [multinationals] operating in the UK is close to being a voluntary payment”
End Quote Lord Myners
Most of the firms have said that they meet all their legal obligations on tax in the UK and around the world.
The Organisation for Economic Co-Operation and Development (OECD) is holding a public consultation in Paris this week on international tax systems and has received 1,400 pages of comments on the subject.
Marlies de Ruitter, tax expert at the OECD, says there is a problem: “We have seen countries creating tax incentives to attract investment.
“We have also seen that countries are hesitant to introduce strict anti-avoidance rules, because if they are stricter than others, businesses will leave. An international, co-ordinated effort is needed.”
The former City minister, Lord Myners, said the current system did not work. “Corporation tax for [multinationals] operating in the UK is close to being a voluntary payment,” he said.
“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.”
Lord Myners recommended considering some form of sales tax.
BBC News – Business
Firms to speak on tax avoidance
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