Analysis from TaxWatch, a group campaigning for tax transparency, found that the UK missed out on as much as £2bn in tax in 2021 due to large technological corporations shifting their profits abroad.
The group looked at seven large tech firms – Adobe, Alphabet, Amazon, Apple, Cisco, Meta and Microsoft – to calculate the amount of corporate taxes they would have paid if their British subsidiaries declared profits at the same rate as they declared them worldwide.
The analysis did not suggest that the companies had evaded taxes illegally, but rather looked at the impact of their tax strategies.
TaxWatch estimated the seven companies had made £60.5bn in UK revenues over the 2021 tax year. The group then applied global profit margins to estimate that the firms had made £14.8bn in UK profits that year.
Using a UK tax rate (19 per cent), this would mean the seven firms would have been liable to pay £2.8bn. However, by looking at the tax paid by UK subsidiaries, TaxWatch estimated that they only paid £753m in UK corporation tax and digital services tax.
The group stressed that these figures are only estimates, but said they were an important way of highlighting the lack of transparency in tax reporting.
The news also follows reports that Microsoft had agreed to pay £136m in taxes owed for previous years after HMRC examined its profit shifting.
“Our analysis, backed up by the recent example of Microsoft’s settlement of UK corporation tax underdeclared over several years, proves how the complex international tax rules can be abused by multinational corporates to shift profits out of the UK tax net,” said Claire Ralph, director of TaxWatch.
“We call on the government to remedy the lack of publicly available data about UK corporation tax paid on what taxable profits multinational giants make here.”
All of the companies that responded said they complied with relevant tax laws.
A Microsoft spokesperson added that the company supports a global approach to tax rules that does not distort markets and prevents double taxation, while Amazon said the TaxWatch findings were incorrect and based on incorrect assumptions.
