(Adds legal reaction, background)
By Kate Holton
Jan 24 Prime Minister David Cameron on Thursday
attacked multinational corporations that avoid paying their fair
share of tax, promising action against such aggressive
strategies after a public backlash in Britain.
The issue of tax avoidance by big business has turned toxic
in recent years as millions of Britons struggle with low pay
rises and austerity measures introduced to reduce the budget
Companies that are viewed as paying too little tax, such as
coffee chain Starbucks, 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 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 press the point.
Cameron did not mention any companies by name. At the height
of the uproar last year, British lawmakers singled out Google
, Amazon and Starbucks as companies that pay
very little tax in Britain on profit from sales there.
The businesses say they comply with British tax law, but
under a tide of public outrage and demonstrations at its stores,
Starbucks last year said it would pay around 20 million pounds
($32 million) in corporation tax in Britain over the next two
"Any businesses who think that they can carry on dodging
that fair share ... need to wake up and smell the coffee,"
Cameron said, adding that he was not anti-business but wanted to
keep tax rates low for everyone else.
Cameron's Conservative party has long been criticized for
being close to big business, but the prime minister's speech
indicated a change of tone toward companies avoiding tax.
"The public who buy from them have had enough," he said.
Much of the anger in Britain has come from smaller local
retailers who are unable to take advantage of international tax
arrangements while they struggle with high rents and low
With politicians ramping up the pressure, Goldman Sachs
also came in for criticism over 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.
Despite growing public anger it will be difficult to change
"Cameron's statements on the taxation of multinational
companies will no doubt receive strong support," said Ben Jones,
a tax expert at law firm Eversheds. "But he will have to work
hard to ... avoid the issue becoming mired by the bureaucracy of
international tax policy.
"Central to many of the tax structures put in place by
multinational companies are the international rules on transfer
pricing. Changing these rules requires broad international
agreement, which typically takes a long time to obtain."
The Trades Union Congress - Britain's labor union federation
- said Cameron's government needed to start by making the
British tax system far more transparent.
That process may be helped by a Supreme Court ruling on
Wednesday which said that advice by accountants could not be
kept secret in the same way that legal counsel is confidential.
"David Cameron has been quick to highlight the problem of
tax avoidance but slow to actually do anything about it," the
TaxPayers' Alliance, which 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 said.
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."
($1 = 0.6313 British pounds)
(Reporting by Kate Holton and Costas Pitas in London; Writing
by Kate Holton; Editing by Peter Graff and Giles Elgood)