The British government has been accused of being too close to international tech giants such as Google and Facebook, and has allowed them to avoid millions in corporation tax.
Earlier this year, British Prime Minister David Cameron appointed the former European director of Facebook Joanna Shields to the House of Lords, despite criticism that the company paid zero corporation tax this year.
Shields also became the prime minister’s digital adviser, and was reportedly influential in developing East London’s “Tech City” – the UK’s answer to ‘Silicon Valley’ in the US.
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Her appointment prompted a divided response from MPs, with Labour MP John Mann saying it showed “two fingers to every taxpaying business and taxpayer in the country, and it’s a green light to tax avoiders.”
Facebook, among other tech giants, have been accused by campaigners of setting up strings of subsidiary companies in low tax countries to avoid having to pay to HM Treasury, with many choosing Ireland as the place to manage their finances.
In October this year, Facebook also underpaid in their tax obligations, after filing £11.6 million in pre-tax losses last year, despite earning £371m in UK revenues between 2013 and 14.
In September, Chancellor George Osborne said he would shut down corporate tax havens, which he said costs the UK “hundreds of millions of pounds each year.”
“Some technology companies go to extraordinary lengths to pay little or no tax here,” Osborne told the Conservative Party Conference in September. The Chancellor did not single out Facebook.
“If you abuse our tax system, you abuse the trust of the British people. And my message to those companies is clear: we will put a stop to it.”
Osborne also said that he would crack down on multinational technology companies that avoid paying their full UK tax obligations, citing Google and Microsoft as examples.
Despite these warnings, sources cited in the Daily Mail claim Conservative Party ministers “enjoy regular access” to Google executives, with some former party employees even taking up jobs with the company.
Rachel Whetstone, Google’s global head of communications, is said to be a close friend of the prime minister, while Naomi Gummer, a former adviser to Health Secretary Jeremy Hunt, is now a public policy analyst at Google.
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While the government has signaled it will punish tech companies who consistently avoided paying their fair share, campaigners have criticized the proposed policies.
“Osborne and Cameron are happy to talk tough on tax, but in reality their plans will only go after the small fry on the fringes whilst giving a green light to multinationals like Amazon, Google and Starbucks to continue avoiding billions in tax,” said War on Want justice campaigner Murray Worthy.
“While the public, MPs and businesses are sending a clear message that tax dodgers must be stopped from exploiting the system, the government would rather cozy up to its multinational friends. If tax avoidance is morally wrong, then failing to clamp down on tax avoidance is morally indefensible.”