There is a big difference between tax management and tax avoidance. While the former is both legally and morally justified the latter does not meet either criterion. The desire to avoid tax is an offshoot of capitalist mentality and governments around the world must tackle this mentality as soon as possible.
A Committee of MPs in UK has accused senior executives from Amazon, Starbucks and Google of diverting hundreds of millions of pounds in UK profits to secretive tax havens. Public outrage followed after these accusations and it has already starting impacting these companies.
Starbucks has agreed to pay £20mn over the next two years, after coffee sales slumped under the weight of public protest. Similarly, Google fell out of the BrandIndex top10 list after it was accused of avoiding tax in UK. An online protest petition has also been initiated against Amazon for similar reasons.
UK taxpayers are increasingly frustrated by the use of tax havens and creative accounting by large firms trading in Britain. People want to know why companies which benefit from an infrastructure paid for by them and are paying people low wages who receive taxpayer-funded tax credits from the exchequer are not paying their fair share, tells a Committee member.
All three companies have been asked to supply further information to the Committee. Another Amazon executive will be asked to appear before the committee in two weeks to respond to unanswered questions.
Even in India, many multinationals have opened subsidiaries and are twisting and violating Indian laws. Not very late when the online content removal controversy erupted in India and Google, Facebook, Microsoft, Yahoo etc were summoned before Indian Court, Google India took the stand of being a subsidiary of parent company in US.
This is a wrong approach as both legal and moral aspects must be taken care of by multinational companies in India. Otherwise, there is no other option but to lift the “corporate veil” and make the subsidiaries liable for the acts or omissions of their parent companies.
Companies like Google and Facebook must comply with Indian laws and they should not invest much in evasive methods. These companies must also understand the Internet intermediary liability in India that they are presently ignoring. In fact, Google is rightly held liable for defamatory contents by Australian Court recently. It is high time for Indian government to explore the tax avoidance angle as well.