Matt Brittin, chief executive officer of Google UK, Troy Alstead, Starbucks global chief financial officer, and Andrew Cecil, Amazon’s director of public policy have been questioned by MPs on why they pay so little corporation tax in the UK. For background, see our news story:
18:04: Hodge says British prime minister not happy, business secretary has branded all three companies a disgrace and wants their response.
18:03: All three company executives believe OECD guidelines on how a branch of a multinational on the internet should be reviewed.
17:59: MP says the British consumer feels misled. They are left feeling “this is a bit smelly”. Alstead says he is “very sorry about that”.
17:54: Ethics. MPs want to know if the three companies discuss internally how consumer power and value of their brand is influenced by ethical behaviour of their companies. No one really answering the question straight – vague stuff about supporting freedom of speech on web.
17:50: Onto general questions. Hodge’s question is straight and simple: Why do you manipulate your accounts to get away with not paying corporation tax in the UK? She now sounds like she’s talking to naughty children hiding sweets and not telling the truth about it.
17:45: Brittin asked about foreign income in Google’s SEC filings and he says, again, he doesn’t have the figures to hand. Another sigh from the panel.
17:41: MPs trying to argue advertising revenue of Google is paid in different countries. Brittin says much more complicated and tries to, sort of, explain. MPs aren’t listening to his answer anyway.
17:32: Brittin plugs the amount of investment it has made in start-ups in the UK which it says is one of the leading markets in the world in terms of ecommerce.
17:29: MP asks: is your tagline “Do no evil”?
17:23: Finally, the bombshell question is asked: if Google has to pay a higher rate of tax on its profits, will it leave the UK, and where will it go? Brittin just says Google is “multinational” – not exactly an answer.
17:20: Some MPs on the panel now looking very bored, biting their nails and picking lint off their clothes
Phrase of the day: “I am not a tax expert”
17:16: Hodge says odd that Brittin doesn’t know anything about tax when the hearing is about tax.
17:13: For readers – here is Amazon’s UK sales from annual report:
Net sales earned in Germany, Japan, and United Kingdom each represented 11% to 15% of net sales in 2011 and 2010. Net sales $48bn
17:12: Hodge: “We aren’t accusing you of being illegal, we are accusing you of being immoral”
17:09: Brittin so far is giving the most direct, clear answers of the three – Hodge acknowledges this.
17:03: Finally up is Matt Brittin, chief excecutive officer of Google who introduces himself as “vice-president of the wetter countries of Europe.”
17:00:Cecil will not answer whether Amazon being investigated in China or US. Hodge is asking same question over and over. Cecil won’t answer.
16:57: Now MPs want to know what VAT they pay when they buy an electrical item. Is this a pre-Christmas shopping panel or a hearing?
16:53: Bizarre that Cecil claims not to know UK revenues.
16:50: Hodge accuses Cecil of not having any answers to the questions and says she has to order someone to come who can give proper answers, to proper questions. Says Cecil is pretending not to know the answers. Laughter erupts.
16:45: Cecil says he needs a calculator to work out what tax Amazon pays in Luxembourg. That doesn’t inspire a lot of confidence in how the bookseller works out its tax. Cecil also can’t answer question about who owns the Luxembourg holding company. MPs outraged that Cecil doesn’t know structure of his own company.
1640: Hodge accuses Amazon and Starbucks of paying people minimum wage… and has a mini-outburst. MP mentions Fifty Shades of Grey – it had to feature today somehow!
16:38: Hodge again saying entire economic activity is in the UK and yet it pays no tax. “That really riles us. It riles us.”
16:34: Cecil looks completely bewildered by the question: “Does Amazon own the book in Luxembourg or the UK?” He doesn’t know how to answer and just stares at the MPs.
16:33: Amazon using that word again: “pan-european business”…
16:30: Cecil stuttering a bit to explain to MPs why Amazon has a co.uk address but doesn’t pay tax here. They just will not give up.
16:21: Andrew Cecil says there are more than 500 people working in Amazon’s European HQ in Luxembourg and there are 15,000 employees in the UK with plans to hire 10,000 more.
16:19: Hodge saying she has to pay UK Royal Mail postage, which must mean the company is in the UK. She is a regular purchaser and her packages all have a UK stamp on them, so how can it not be UK? “When did any book I purchased get to Luxembourg” she asks Andrew Cecil of Amazon.
Next up is Amazon. Hodge laughing about how Amazon.co.uk writes to her with offers almost everyday. She is trying to show it is a UK company she is buying books from.
16:16: Alstead says: “We are never aggressive in avoiding tax.” Hodge is very cross that Alstead hasn’t answered any questions and is exporting “our” tax.
This is one for the archive: MP says:
“We in Britain are very concerned about fair play and we have embraced Starbucks because of its fair trade and ethics.”
16:12: Alstead says a cup of coffee costs 20 per cent more in the US than in the UK. That explains a lot.
16:09: An economics lesson from Alstead – MP asks if he can charge whatever he wants for coffee. “No, customers wouldn’t have it that way,” Alstead answers.
16:05: Alstead looks in desperate need of a macchiato
16:02: Alstead says Starbucks went too fast a few years ago expanding in the UK, and those are now the stores being closed.
15:53: Why did Starbucks move £50m from cash to equity? Alstead says there was an inter-company loan from Starbucks US injected into the UK division at a 4.49 per cent interest rate – higher than anyone else. Hodge says the only explanation can be to get money out of the UK and avoid paying tax.
15:52: Alstead says 25o people work in the Netherlands, including the “roaster”.
15:51: The MPs seem to be asking the same question over and over and can’t think of a new one to ask. Alstead answering, almost bored.
15:47: Alstead refutes suggestion that Starbucks charges excessively for roasting the coffee in Amsterdam.
15:45: Strong words from MPs: “You’re either running the business very badly or there is some fiddle going on.”
15:45: Alstead extols the “Starbucks System” but says the company hasn’t been successful in a handful of countries.
15:42: Alsted asked if the value created by Starbucks in Switzerland or the Netherlands and not the UK.
15:37: Alstead calmly answering Hodge, even though she is getting very excited about the questioning.
15:35: Hodge accuses him of manipulating profits out of the UK into tax havens. The first charge, is that Starbucks charges for intellectual property. Hodge says she is a coffee addict but can’t tell the difference between a Starbucks or Caffe Nero coffee – but she can tell the difference between MacDonalds and KFC. So what’s the great intellectual property?
Alstead says investors are skeptical about Starbucks ability to turn stores around immediately, but they are “very clear on the losses”.
15:25: Margaret Hodge, chair of the PAC starts with Starbucks’ global chief financial officer asking about the losses it filed in the UK. Asks how Starbucks reconciles profits.
15:28: Hodge exasperated with Starbucks and asks if it is lying to shareholders.
15:29: Hodge still insisting “odd” that Starbucks files losses in the UK and promotes person in charge.
Alstead says not at all pleased about financial performance. Hodge won’t let up on fact that Starbucks losing money in the UK.