Monday, November 12, 2012
Amazon and Starbucks insult their customers, not just MPs
The MPs on the House of Commons' Public Accounts Committee were right to be disgusted this afternoon at the answers from representatives of Starbucks and Amazon which one of them described as "pathetic" and another as "one of the most ridiculous answers I've heard in months and months on this committee."
Senior managers of Starbucks, Amazon, and Google were answering questions from MPs about their tax arrangements. Where they managed to answer questions at all - which Andrew Cecil from Amazon mostly spectacularly failed to do - the answers ranged from the unreasonable to the ludicrous.
I am all in favour of low taxes and light regulation. I am not in favour of financial anarchy or of accounting which bears no relation to the real world as a means of avoiding tax.
Any O-level economics student ought to be able to explain in simple language on a page of A4 how multinational companies can adjust the prices which different national divisions of those companies pay each other so as to choose in which country they declare the lions share of their profits. But where those prices and arrangements produce ridiculous results, it is time to call a halt - and if our current tax code does not allow this, we need a tougher one.
Troy Alstead, Starbucks' chief financial officer, alleged that his company had only made a profit once in the 15 years it has been doing business in the UK. To coin a US phrase, "Yeah, Right"
* Is this utterly preposterous?
* If Starbucks were losing money in the UK in the way that they claim, would they not have pulled out of this country long before now?
* Are the accounts which purport to show these UK losses the result of clever accounting devices such as declaring all their coffee as bought in in Switzerland, although it never actually goes there, to take advantage of the more generous Swiss tax regime?
To coin another phrase, "You might think that: I couldn't possibly comment."
Here is an extract from Mr Alstead's evidence and MPs reaction to it:
But Mr Alstead's evidence was a model of clarity, and the response of MPs sympathetic, compared to the answers, and non-answers, given by Andrew Cecil of Amazon, part of which you can watch here.
As someone who believes that capitalism and the market economy do far more good than evil, generating the wealth which has made the vast majority of people in this country far better off than even rich people were for most of human history, it annoys me to see this kind of excess bringing capitalism into disrepute.
These businessmen were not just insulting the intelligence of the MPs who they were speaking to, they insulted the intelligence of the electorate to whom those MPs are responsible - including, of course, their own customers.
I am not usually one of those who are always keen to bash multinational companies - I work for one myself, one which pays hundreds of millions of pounds more tax to the UK exchequer than Amazon or Starbucks does. But there are limits.
There comes a point when creative accounting crosses the line into fraud. The tax authorities need to be vigilant to make sure that multinational companies realise that they are not above the law.