PAC to examine tax affairs of IT firms

Firms used several methods to keep taxes low.

New Statesman
The UK's customs and tax department. Credit: Getty Images.

The UK Parliament's public accounts committee (PAC) is considering examining the tax affairs of information technology firms that supply the public sector.

In its investigation of nine public sector suppliers from 2007 to 2011, the Financial Times (FT) found that the firms paid only £527m in corporation tax against their UK sales of £62bn.

The IT firms used several methods to keep taxes low, including recording UK sales in low-tax jurisdictions.

The PAC inquiry would be part of a wider probe into how much tax is paid by Whitehall’s larger contractors.

Danny Alexander, chief secretary of The Treasury, is looking options whether the government can bar companies from securing government contracts in the event if they are paying less tax.

The FT also found that Microsoft and Dell are directing hundreds of millions of pounds worth of UK sales through Ireland to minimise their tax burden. Symantec’s UK arm paid no net corporation tax over the past four years, according to accounts filed at Companies House.

The companies concerned, however, explain that they made only £3.16bn in pre-tax profits, a margin of just 5 per cent, and argue that the methods they used for paying tax are in accordance with UK tax laws.

Conservative MP, Charlie Elphicke, who has raised concerns in parliament, said: “If the margins are anything like that low, then why are they even doing business in the UK, given how much higher their global operating margins are?. To me it is unacceptable, unethical and irresponsible.”

Margaret Hodge, who chairs the PAC, told the Financial Times: “We are definitely going to look at government procurement. While I welcome the PM’s commitment to using the leadership of the G8 to pursue the issue, he can still take short-term action to protect the UK taxpayer. That includes refusing to give business, funded by taxpayers, to people who refuse to contribute properly.”