Multinationals continue to earn big and leave tax obligations behind, according to a group aimed at reducing international tax evasion.
TaxWatch is a non-profit organization and UK think tank with a focus on research on tax laws and compliance. The group provides analysis to improve public understanding of often complicated global tax landscapes.
The organization recently published an analysis that tracked seven U.S. multinational tech companies and their strategies around tax avoidance. Overall, the group of seven is estimated to have earned approximately £15bn from selling products and services to UK consumers. By moving profit into tax jurisdictions with preferential tax rates, these companies each paid far less than their actual estimated tax liability in the UK in 2019. In plain English, the UK lost a sizeable amount of tax revenue to the continued practice of tech multinationals using special tax regimes and offshore tax havens.
Here are the stats on each of these tech companies:
- eBay: With a 19 percent tax rate in the UK, eBay had an estimated tax liability in 2019 of £38.4m. In actuality, the company had a tax charge of £5,260,000 the same year. Based on these figures, TaxWatch calculates eBay avoided approximately £33m in taxes that year in the UK alone.
- Amazon: Again, using the UK’s 19 percent tax rate, Amazon owed about £130m in taxes in the UK. It paid £14,582,000, avoiding about £115m in taxes.
- Adobe: Adobe had an estimated tax liability in the UK of £39m and paid £2,040,000 in taxes in 2019. Accordingly, Adobe avoided approximately £37m in taxes that year.
- Alphabet: Google’s parent company had an estimated tax liability in the UK of £511m in 2019. The company took a charge of £58,987,000 in taxes and avoided £452m in UK taxes that year.
- Cisco: With the UK tax rate of 19 percent, Cisco would have had a tax liability of £117m in 2019. Cisco International and another Cisco subsidiary had a tax charge of £58,919,131—dropping about £68m in tax liability.
- Facebook: TaxWatch estimates Facebook earned approximately £2.9bn in the UK in 2019, for an estimated tax liability of £194m. Facebook's 2019 tax charge was £40,049,000, allowing Facebook to avoid £154m in taxes in the UK that year.
- Microsoft: With UK revenues of £3.4bn in 2019, Microsoft should have paid a tax bill of approximately £2225m that year. Microsoft took a tax charge of £34,194,000, avoiding about £191m in taxes.
- Apple: Apple had an estimated tax bill of £610m in the UK in 2019 on revenues of £12.7bn. The company actually paid a £92,839,000 tax charge and avoided £517m in taxes in the UK alone.
These figures provide a quick lesson in the advantages to multinationals using preferential tax jurisdictions to wash away tax liabilities earned in higher tax regions, such as the UK. Money earned in countries where taxes are not paid results in underpayment of taxes to that region—causing measurable impact on these economies.
A global minimum tax rate could address some of these issues, but with infighting over the rate and its adoption, it seems clear these companies and others have nothing to worry about for some years to come.
Talk with our tax lawyers today with questions about tax compliance, foreign bank accounts, or an upcoming IRS audit
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