UK targets tech giants over tax avoidance and VAT fraud

Britain announced measures on Wednesday to tackle tax avoidance by tech giants and to hold online marketplaces like eBay and Amazon.com accountable for tax evasion via their platforms.

Chancellor Philip Hammond said some multinationals were avoiding tax on profits generated from selling to UK customers by using inter-group royalty payments to shift those profits into affiliates in low-tax jurisdictions.

Britain would impose a withholding tax on such payments that could raise around 200 million pounds a year, he said.

Hammond said he was targeting “digital businesses” but the description of the measure in his budget statement suggested they could cover all companies.

A 2012 Reuters investigation showed how inter-group royalties had helped fast food groups including McDonalds and Burger King reduce their tax bills.

McDonalds (MCD.N) and Burger King, an arm of Canada-listed Restaurant Brands International Inc (QSR.TO) did not immediately respond to requests for comment on whether they would be affected.

Hammond also said he would hold online marketplaces responsible for paying value-added-tax - a form of sales tax - when sellers on the platforms do not collect and pay the tax.

Up to 1 billion pounds may be lost each year due to such tax evasion by sellers on eBay and Amazon alone, according to an April report by the National Audit Office.

Dominic Stuttaford, European head of tax for law firm, Norton Rose Fulbright, said the law needed to be updated to tackle such problems but that the actual impact would be unclear until more details were published.

The new VAT measure is expected to raise around 30 million pounds a year.

Amazon did not respond to a request for comment and eBay declined comment.