Vince Cable, the business secretary, has said the government needs to "beef up" its ability to deal with what he described as "appalling abuse of company taxation" in the UK.
He claimed there was systematic abuse taking place in the multinational sector, where companies can use internal accounting strategies to cut their domestic tax liability, and that the tax authorities needed to be "very tough".
Speaking on the BBC's Andrew Marr show on Sunday, Cable cast doubt on the claim made by the coffee chain Starbucks that it had only made an annual profit once in15 years of operating in the UK. "I don't know whether they are [making a profit] or not," Cable said. "But you would need some pretty intensive investigation by [HM Revenue & Customs] to establish what exactly is going on, whether their transfer prices and their royalties are being fiddled or not."
Starbucks gave evidence to the Commons public accounts committee last Monday alongside Amazon and Google in a session in which MPs expressed anger at the way all three multinationals had managed to minimise their tax payments within the UK. Cable said this was "completely unacceptable" at a time when the country was in the grip of austerity.
"We want to make this an attractive place [to multinational companies] but while they're here, if they make profits, then they should pay tax on their profits," he said. "There's nothing more galling to small and medium-sized companies that they're paying their profit tax to the British government, and we find these people dodging it."
Cable said one solution was more international co-operation. He said George Osborne, the chancellor, had recently launched an initiative with Germany to agree a common approach to global tax havens.
But Cable also said Revenue & Customs needed to adopt a tough approach to issues such as royalty payments, which are used by companies including Starbucks to take profits out of the UK on the grounds that they are being used to make legitimate royalty payments to another part of the firm overseas.
"We've got to beef up our own capacity to crack down on tax abuse here," Cable said. "Our own tax authorities have got to be very tough on things like royalty payments, which is where a lot of the subterfuge takes place."
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