British PM promises action on tax avoidance

DAVOS, Switzerland Thu Jan 24, 2013 8:37am EST

Britain's Prime Minister David Cameron speaks during the annual meeting of the World Economic Forum (WEF) in Davos January 24, 2013. REUTERS/Pascal Lauener

Britain's Prime Minister David Cameron speaks during the annual meeting of the World Economic Forum (WEF) in Davos January 24, 2013.

Credit: Reuters/Pascal Lauener

DAVOS, Switzerland (Reuters) - Prime Minister David Cameron turned up the pressure on Thursday on multinational corporations who seek to lower their tax bills aggressively, promising action to limit tax avoidance strategies after a public backlash in Britain.

The issue of tax avoidance by big companies has turned toxic as millions of Britons struggle against meager wage growth and austerity measures to reduce a budget deficit. Firms that are viewed as paying too little tax have been targeted by demonstrators and boycotts.

"I am a low-tax Conservative but I'm not a companies-should-pay-no-tax Conservative," Cameron told business leaders and investors in a speech at the World Economic Forum in Davos.

"Individuals and businesses must pay their fair share," he said, adding that he would use his presidency of the Group of Eight industrialized nations to push the point.

Cameron did not mention any companies by name. At the height of the uproar last year, British lawmakers singled out Google GOOG.L, Amazon (AMZN.O) and Starbucks (SBUX.O) as companies that pay very little tax in Britain on profit from sales there. Executives from the three were summoned to testify before parliament and explain their operations.

The firms say they comply with British tax law, but under a tide of public outrage and in-store demonstrations, Starbucks last year said it would pay around 20 million pounds ($32 million) in corporation tax in Britain over the next two years.

"Any businesses who think that they can carry on dodging that fair share or that they can keep on selling to the UK and setting up ever-more complex tax arrangements abroad to squeeze their tax bill right down - well, they need to wake up and smell the coffee," Cameron said.

"The public who buy from them have had enough."

Much of the anger has come from smaller local retailers who are unable to take advantage of international tax arrangements while they struggle against the cost of high rents and low consumer spending.

With politicians ramping up the pressure, Goldman Sachs (GS.N) also came in for criticism when announced plans, since scrapped, to delay paying bonuses to its bankers in Britain to exploit an income tax cut for top earners that is due in April.

The bank changed its plans after being publicly rebuked by the Bank of England Governor Mervyn King.

"David Cameron has been quick to highlight the problem of tax avoidance but slow to actually do anything about it," the TaxPayers' Alliance (TPA), a lobby group that campaigns for lower tax rates, said in response to the speech.

"Families are left feeling short-changed and let down by their politicians because international corporations can take advantage of loopholes and reliefs not open to them," it added.

It was a view that struck a chord on the streets of a cold London on Thursday. "It's disgusting ... We pay tax, we haven't got a choice," said Clive Read, a 54-year-old printer. "They should pay their taxes, just like other companies."

The Trades Union Congress - Britain's labor union federation - also said Cameron's government needed to make the British tax system far more transparent.

Reducing tax bills for companies may have got a little bit harder after the country's Supreme Court ruled that advice by accountants could not be kept secret in the same way that legal counsel is confidential.

"It's time to call for more responsibility and for governments to act accordingly," Cameron said. ($1 = 0.6313 British pounds)

(Reporting by Kate Holton and Costas Pitas in London; Writing by Kate Holton; Editing by Peter Graff)

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