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  • Is Criticism of International Tech Giants’ Tax Records Unfair?

    14 September 2019

    Andy Wood

    Google, Amazon, Blizzard. Are criticisms of the tech giants records… unfair?

    One of the curious by-products of our increasingly digitised world is the degree to which many people seemingly wish to almost bite the hand which feeds – and clothes – them.

    Not content with having a world of online research and commerce available to them around the clock, they appear only too keen to give binary behemoths a thrashing over the vast revenues which such transactions produce.

    The topic has returned to the headlines with the news that Google has reportedly agreed to cough up nearly £900 million to bring a four-year investigation by French tax authorities to a close.

    That staggering sum is said to be made up of a £445 million fine on top of £413 million in extra taxes.

    It relates to allegations that the firm had artificially routed sales through its European headquarters in Dublin, even though they might actually have been generated elsewhere.

    Over the last few years, in particular, such allegations have surfaced with some frequency.

    Phillip Hammond, An Unilateral Approach to Digital Services Tax

    They arguably reached a culmination of sorts in last October’s Budget, when the then Chancellor of the Exchequer, Philip Hammond, announced that the UK would take a unilateral approach to this international problem by announcing a digital services tax (“DST”). The former Chancellor stating that it was…

    “clearly not sustainable or fair that digital platform businesses can generate substantial value in the UK without paying tax here”.

    This itself followed the introduction of the diverted profits tax some years earlier by his predecessor George Osborne.

    In the months since the introduction of the DST, scrutiny of the financial affairs of major digital brands hasn’t abated either. Regular readers of this ‘blog may recall that, only a few weeks ago, I wrote of how HMRC was said to have demanded a multi-million pound payment from the company behind the hugely successful game Candy Crush.

    Critics might say that it should come as no surprise to find that the enormous income accrued by the tech titans has made them massive targets for the tax authorities.

    Nevertheless, is it fair that they have come in for such investigation simply because they’re big businesses?

    And what’s that about Amazon?

    I was most intrigued by the decision of the world’s biggest e-commerce marketplace, Amazon, to launch a robust defence of its UK operations a week or so ago.

    By the end of this year, it explained, it was expecting to directly employ 29,500 people  across the UK. Combined with “indirect employment” throughout the supply chain and partner vendors, Amazon believes the total to be “more than 240,000” men and women.

    As a head-on response to slights from certain sections of the media and parliament, the company pointedly added that its overall tax contribution was £793 million, with in excess of £1 billion more collected by HMRC in VAT from UK-based Amazon partner retailers.

    Of course, Amazon is one of many businesses – both mammoth and not so large – which are able to take advantage of research and development tax credits.

    HMRC & Their Most Recent Figures

    The most recent figures made available by HMRC show how the number of claims for such relief rose by 22 per cent during the 2015/16 financial year, while the total value of credits was £3.7 billion  – up 25 per cent on the previous 12 months.

    Even so, companies had only been able to trigger those payments as a result of £28.9 billion worth of qualifying spend.

    That data underlines how it might make good copy for politicians and media commentators alike to aim low blows at growing enterprises but the Treasury shouldn’t overlook their sizeable contributions.

    If you have any queries about this article then please get in touch.