UK Lost Over £2 Billion in Tax Revenue from Tech Giants’ Profit-Shifting: Calls for Greater Transparency

Tax transparency campaigners, TaxWatch, have revealed an estimated £2 billion loss in tax revenue for the UK in 2021 due to large tech companies, including Apple, Microsoft, and Alphabet, shifting profits abroad. According to TaxWatch, these companies paid only £750 million in UK corporation tax and digital services tax, significantly less than the expected £2.8 billion if profits had not been routed elsewhere.

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Multinational corporations often employ complex global structures, making it challenging to assess their actual tax contributions in the UK. TaxWatch attempted to calculate the UK tax these corporations would have paid if their British subsidiaries declared profits at the same rate as their global average. While not illegal, this profit-shifting practice raises concerns about tax fairness and prompts calls for enhanced transparency through country-by-country tax reporting.

TaxWatch’s estimates suggest that the seven major tech companies generated £60.5 billion in UK revenues in 2021, resulting in an expected tax payment of £2.8 billion at the UK’s 19% tax rate. However, based on the tax paid by UK subsidiaries, these companies only contributed £753 million in UK corporation tax and digital services tax, indicating a substantial tax shortfall.

While the lack of publicly available data complicates accurate assessments, TaxWatch emphasizes the urgent need for greater transparency in UK corporation tax. The organization’s findings underline the necessity for country-by-country tax reporting, allowing for a more realistic evaluation of profits earned in the UK. The group calls on the government to address this lack of transparency and ensure a fairer tax system for multinational giants operating in the country.

TaxWatch, founded in 2018 by Julian Richer, the founder of Richer Sounds, has been advocating for tax system reforms since its inception. While some changes have been made, including the introduction of a digital services tax in the UK, the issue of profit-shifting and tax fairness remains a pressing concern for tax authorities worldwide.

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