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Google, Amazon executives grilled over UK tax

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Google and Amazon faced a tough grilling from MPs yesterday (November 12) for not paying more tax in the UK, while retailer Amazon revealed that it has received a big back-taxes bill from France.

The Commons Public Accounts Committee (PAC) asked executives from the tech giants, along with coffee chain Starbucks, to give evidence after revelations that their companies paid virtually no UK tax despite earning millions in this country.

Amazon's Brussels-based director of public policy Andrew Cecil endured a torrid time at the session, and was repeatedly barracked by the MPs over his answers, or lack of them.

Cecil declined on several occasions to inform the committee about the level of Amazon's sales in the UK.

"We have not disclosed those figures ever publicly," he told the committee chaired by Labour's Margaret Hodge.

Amazon's most recent regulatory filing put UK revenues at 11 to 15% of total sales in 2011, an amount equal to $5.3 billion to $7.2 billion (£3.33bn to £4.5bn).

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But Cecil's evasiveness on Amazon's UK sales and corporate structure led Hodge to say: "It's just not acceptable... It's outrageous."

Amazon's main UK operation paid just £1m in income tax last year. This is because the retailer channels all European sales through a unit in tax-friendly Luxembourg.

This allowed the firm to pay a tax rate of 11% on foreign profits, less than half the average corporate income tax rate in its biggest markets.

Such a tax avoidance practice is not illegal, but is viewed by some as morally suspect.

In a tempestuous evidence session, Hodge told Cecil the PAC believes Amazon 'manipulates' its profits to reduce its tax bill.

The Amazon executives did not admit much at the session, apart from that the firm had received a $252m (£159m) back-tax claim from the French tax authority in September, related to its Luxembourg channelling operation.

Amazon is fighting the claim.

> Apple paid only 2% corporation tax outside the US

Also appearing in front of the MPs was Matt Brittin, Google's vice president for sales and operations in Northern and Central Europe.

Brittin was more assured under questioning than Cecil, but still acknowledged that Google cut its tax bill by funnelling European profits through a Bermuda operation. But he noted that this is perfectly legal.

Google's own filings show the search firm had $4bn in UK sales last year, but had a tax charge of just £3.4m.

The company reports its European sales via a unit in Ireland, where the corporate tax rate is much lower than the UK's.

Brittin insisted that Google pays all the tax that it owes wherever relevant, but Hodge countered that it "depends where you do business".

Google is also under investigation by French tax authorities regarding its structure in Europe, but Brittin denied that it had received a bill last month for 1bn euros in back taxes.

Last week, Britain and Germany announced that they would lobby the G20's most economically powerful nations to force multinational corporations to pay their "fair share" of taxes following reports of easily exploitable loop holes.

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