A government inquiry has slammed the ‘cosy relationship’ between UK tax authorities and big companies, a situation which has seen many technology firms take full advantage.
A select committee report laid out a “damning indictment” of the way HMRC deals with big business, leading to a leniency that has left the tax payer out of pocket by millions of pounds, with a £25 billion still owed.
HMRC was seemingly unwilling to cooperate with the inquiry, as it tried to cover the backs of its big business pals. A statement released today by the Public Accounts Committee read:
“The Department's working practices must be seen by the taxpaying public to be absolutely impartial.
"The impression being given at the moment is quite the opposite, of far too cosy a relationship between HMRC and large companies.”
Of course, tax avoidance strategies are nothing new and various well known tech firms have allegedly been up to no good.
Vodafone is a prominent case, with the telecoms firm let off from a reported £8 billion tax bill by the UK’s lenient authorities.
In fact, such is the perceived leniency that Google boss Eric Schmidt made a mockery of UK tax laws, publicly claiming he would be willing to pay more corporate tax if existing rules didn’t prevent him from doing so. Google is in fact one of the companies which has drawn attention of its tax avoidance strategies, sometimes based around profits being diverted through subsidiary companies in Ireland.
This has led to concerns that tech firms routinely make use of tax loopholes and unfairly negotiate deals, with the government desperate for the businees of large technology multinationals.
John Christensen at the Tax Justice Network believes that, with HMRC seemingly in the pocket of big business, tech firms are often those which can be seen flouting rules.
“Vodafone really drew attention to the issue and led to much unrest and protests, and that was a clear example of a ‘cosy relationship’ between tax authorities and a company,” Christensen told TechEye.
“In fact many technology firms use these tax avoidance methods. Another way is to set up a subsidiary in Dublin which is the tax avoidance method Microsoft and Google have been accused of in the past. There is great concern around the ‘Double Irish’ method.”
Christensen said the British government is "exceptionally lenient about letting firms do this and shows a weakness in policy framework."
“There are other companies too which use the 'Double Irish' strategy, though it is not possible to name them," he said. "It does seem to be a pretty standard practice in the tech industry, though it is one of many ways to avoid tax.”
In terms of a cosy relationship between government and big business as highlighted by MPs, Christensen says that it is “absolutely” the case with the tech sector.
“The two issues of a cosy relationship and loop holes as a result of successive government failings to put in place stronger laws are very much related.”