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Is government too scared of Google, Amazon and Starbucks? Is government too scared of Google, Amazon and Starbucks?
(35 minutes later)
Article written by Robert Peston Business editor   Article written by Robert Peston Business editor  
If the UK had an industrial strategy over the past 30 years, it could perhaps have been characterised as "foreigners more than welcome".If the UK had an industrial strategy over the past 30 years, it could perhaps have been characterised as "foreigners more than welcome".
To a greater extent than any developed economy, British governments have been almost wholly lacking in concerns when overseas companies set up shop in the UK or bought businesses here - because of the conviction that these overseas companies would bring decent management, useful competition and investment capital to this country.To a greater extent than any developed economy, British governments have been almost wholly lacking in concerns when overseas companies set up shop in the UK or bought businesses here - because of the conviction that these overseas companies would bring decent management, useful competition and investment capital to this country.
Against this government policy backdrop, Google, Starbucks and Amazon seem to be examples of huge American companies doing as well or better in the UK than anywhere apart - perhaps - from their home market in the US.Against this government policy backdrop, Google, Starbucks and Amazon seem to be examples of huge American companies doing as well or better in the UK than anywhere apart - perhaps - from their home market in the US.
That, at least, would be the case if success is measured in terms of revenues or market share.That, at least, would be the case if success is measured in terms of revenues or market share.
Now, it should be said that if you talk to their British competitors, it is moot how much benefit their presence in Britain has actually delivered.Now, it should be said that if you talk to their British competitors, it is moot how much benefit their presence in Britain has actually delivered.
Media companies - television, radio and newspapers - have complained for years that Google takes colossal and growing amounts of net advertising revenues, while investing relatively little in the gathering of news or the making of television and radio.Media companies - television, radio and newspapers - have complained for years that Google takes colossal and growing amounts of net advertising revenues, while investing relatively little in the gathering of news or the making of television and radio.
Owners of small independent coffee shops are not exactly huge fans of Starbucks.Owners of small independent coffee shops are not exactly huge fans of Starbucks.
And there is no kind of British retailer, big or small, which isn't terrified of Amazon's growing presence in every area of consumer sales.And there is no kind of British retailer, big or small, which isn't terrified of Amazon's growing presence in every area of consumer sales.
These are businesses that are transforming entire industries. Many of the consumers who use them would probably say for the better. Struggling competitors and their employees, inter alia, would say for worse.These are businesses that are transforming entire industries. Many of the consumers who use them would probably say for the better. Struggling competitors and their employees, inter alia, would say for worse.
Here are the questions posed by their growing presence in the UK:Here are the questions posed by their growing presence in the UK:
  • is British cultural life richer or poorer for the migration of advertising revenues to Google?
  • does Amazon cause or merely accelerate the dereliction of swathes of the High Street?
  • is Amazon a force driving down prices and improving service, or a lumbering quasi-monopolist crushing everything in its path?
  • is British cultural life richer or poorer for the migration of advertising revenues to Google?
  • does Amazon cause or merely accelerate the dereliction of swathes of the High Street?
  • is Starbucks a force driving down prices and improving service, or a lumbering quasi-monopolist crushing everything in its path?
And although they employ many thousands of people in Britain, it is unclear whether collectively they are net creators or destroyers of employment - and, in particular, whether they are net creators of what might be thought of as rich and fulfilling employment.And although they employ many thousands of people in Britain, it is unclear whether collectively they are net creators or destroyers of employment - and, in particular, whether they are net creators of what might be thought of as rich and fulfilling employment.
This is not to take sides in what is an important debate, with passions that run high on both sides, merely to point out that their huge presence in the UK can't be assumed to be a net good thing.This is not to take sides in what is an important debate, with passions that run high on both sides, merely to point out that their huge presence in the UK can't be assumed to be a net good thing.
Which is why today's report by the Public Accounts Committee (PAC), which points out that as huge and clever multinationals they exploit legal devices to minimise their liability to corporation tax in the UK, is of moment.Which is why today's report by the Public Accounts Committee (PAC), which points out that as huge and clever multinationals they exploit legal devices to minimise their liability to corporation tax in the UK, is of moment.
The thing about Google, Starbucks and Amazon is that they declare surprisingly little profit in the UK on the back of their massive market shares.The thing about Google, Starbucks and Amazon is that they declare surprisingly little profit in the UK on the back of their massive market shares.
"Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK, but in 2006 it made a small profit" - in spite of a reported market share of almost a third."Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK, but in 2006 it made a small profit" - in spite of a reported market share of almost a third.
As for Amazon, it had sales in the UK of £3.35bn in 2011, reported turnover in its UK operation of £207m and a "tax expense" of just £1.8m.As for Amazon, it had sales in the UK of £3.35bn in 2011, reported turnover in its UK operation of £207m and a "tax expense" of just £1.8m.
And for Google, its reported British revenues last year were £396m, on which it paid corporation tax of £6m.And for Google, its reported British revenues last year were £396m, on which it paid corporation tax of £6m.
Now for the avoidance of doubt, these three multinational companies are by no means unique in minimising their UK tax liability. Like all public companies, they have a duty to their shareholders to minimise their costs of doing business.Now for the avoidance of doubt, these three multinational companies are by no means unique in minimising their UK tax liability. Like all public companies, they have a duty to their shareholders to minimise their costs of doing business.
As it happens, the finance director of a huge British multinational, Vodafone, recently wrote a letter to journalists explaining why it paid no UK corporation tax in 2011-12.As it happens, the finance director of a huge British multinational, Vodafone, recently wrote a letter to journalists explaining why it paid no UK corporation tax in 2011-12.
If you are a shareholder in any multinational - and you will be, if you are saving for a pension - then it is in your interest that many use accounting techniques to channel their revenues to regimes, like Ireland, the Caymans and Bermuda, where tax rates are negligible to non-existent.If you are a shareholder in any multinational - and you will be, if you are saving for a pension - then it is in your interest that many use accounting techniques to channel their revenues to regimes, like Ireland, the Caymans and Bermuda, where tax rates are negligible to non-existent.
But none of us are just shareholders. We are also citizens. And we have an interest in making sure that companies that benefit from an educated workforce, a free health service, a solid and reliable legal system and an efficient transport network, make their proper contribution to an infrastructure whose absence would be devastating to them.But none of us are just shareholders. We are also citizens. And we have an interest in making sure that companies that benefit from an educated workforce, a free health service, a solid and reliable legal system and an efficient transport network, make their proper contribution to an infrastructure whose absence would be devastating to them.
Which is why MPs on the PAC want Her Majesty's Revenue and Customs to be more aggressive in challenging the nugatory UK profits and minimal tax liabilities declared in the UK by the likes of Google, Starbucks and Amazon.Which is why MPs on the PAC want Her Majesty's Revenue and Customs to be more aggressive in challenging the nugatory UK profits and minimal tax liabilities declared in the UK by the likes of Google, Starbucks and Amazon.
Here is an interesting question. Now that all three of them are so huge in the UK, is it remotely plausible that they would suddenly emigrate and stop trying to sell as much as possible to British consumers if they suddenly faced tax bills comparable to those paid by less internationally mobile UK companies?Here is an interesting question. Now that all three of them are so huge in the UK, is it remotely plausible that they would suddenly emigrate and stop trying to sell as much as possible to British consumers if they suddenly faced tax bills comparable to those paid by less internationally mobile UK companies?
Arguably their great success in the UK has shifted the balance of power towards the British tax authorities and the government. Google, Amazon and Starbucks would have a huge amount to lose if they reduced their commitment to Britain.Arguably their great success in the UK has shifted the balance of power towards the British tax authorities and the government. Google, Amazon and Starbucks would have a huge amount to lose if they reduced their commitment to Britain.