Big Tech’s profit shifting cost UK £2bn in 2021, campaigners allege
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TaxWatch analysis reveals that seven major tech companies’ UK subsidiaries paid £750 million in corporate taxes instead of a possible £2.8 billion.
According to an estimate from a transparency advocacy group, the UK may have missed out on around £2 billion in tax revenue in 2021 due to major tech corporations shifting their profits abroad. Seven notable American tech companies, including Apple, Microsoft, and Alphabet (Google’s parent company), are believed to have paid £750 million in UK corporate tax and digital sales tax, significantly less than the estimated £2.8 billion owed if profits had not been redirected. This analysis is from TaxWatch, a campaign organization.
Multinational corporations often employ complex corporate structures with subsidiaries globally, making it challenging to determine the exact taxes paid in the UK relative to business activity. TaxWatch estimated potential UK tax liabilities by assuming British subsidiaries reported profits at the same rate as their global operations. No suggestion of illegal tax evasion is made.
Apple and Microsoft, the top two publicly traded companies globally by market value, along with Alphabet, Amazon, Meta, Cisco, and Adobe were included in the TaxWatch analysis. These seven companies reportedly generated £60.5 billion in UK revenues in the 2021 tax year, with an estimated £14.8 billion in UK profits.
Considering the UK’s 19% tax rate, the expected amount owed would be £2.8 billion. However, TaxWatch’s estimate, based on tax payments made by UK subsidiaries, suggests they only paid £753 million in UK corporation tax and digital services tax—roughly £2 billion less than anticipated.
The group acknowledges the figures are rough approximations due to limited public corporate data but emphasizes the need for transparency, advocating for country-by-country tax reporting. Amazon disputes TaxWatch’s claim, citing flawed assumptions, while all responding companies assert compliance with tax laws.
Microsoft’s UK subsidiary settled £136 million in back taxes in April after an assessment by HM Revenue and Customs on profit-shifting practices. TaxWatch’s analysis, coupled with Microsoft’s settlement, highlights how multinational corporations exploit international tax regulations, according to Claire Ralph, TaxWatch’s Director. She calls for increased government transparency regarding UK corporation tax payments by multinational companies.
Tech firms’ taxation has seen changes globally, including the introduction of a UK digital sales tax in 2020 and OECD’s expected 15% minimum tax on corporate profits from next year. Microsoft and Meta express support for global tax regulations, while Adobe affirms adherence to tax laws. Amazon challenges TaxWatch’s findings, Apple refrains from commenting, and Alphabet and Cisco did not respond to requests for comments.
