LONDON — UK lawmakers subjected search giant Google to blistering criticism Thursday, accusing the US Internet company of playing games with Britain’s tax rules to avoid paying what it owed.

In his second appearance before Parliament in roughly six months, Google vice president Matt Brittin tried to defend his company’s complex corporate structure to a committee of skeptical UK politicians, many of whom seemed unconvinced by his assertion that Google was being transparent about how it paid its bills.

After two hours of sharp questioning, committee chairwoman Margaret Hodge accused Brittin of ‘‘devious, calculated and, in my view, unethical behavior in deliberately manipulating the reality of your business in order to avoid paying your fair share of tax to the common good.’’

‘‘You are a company that says you do no evil and I think that you do do evil in that you use smoke and mirrors to avoid paying tax.’’

Brittin countered that Google’s employees ‘‘fully comply with the law.’’

Google is one of several major multinationals — including Amazon, Facebook, and Starbucks — whose convoluted corporate structures and disproportionately low tax bills have drawn increased attention in Britain and elsewhere.

Google has attracted particularly close scrutiny. The company has paid less than 0.1 percent of its billions in UK revenue back to the government in taxes. In the first quarter of this year it made $1.3 billion in revenue from the UK, according to a Google release. The company justifies low taxes by saying that the overwhelming majority of sales actually occur at the company’s European head office in Dublin.

The ins and outs of what makes a company’s revenue taxable in Britain are complicated, but much hinges on where the sales take place. At his first hearing back in November, Brittin said that sales didn’t take place in Britain. Staff at Google’s London office promoted the company’s products, he said, but the sales took place in Ireland — which has a 12.5 percent corporate tax rate.

An investigation by the Reuters news agency cast doubt on those assertions, revealing that Google advertised for sales jobs in London, that London-based Google employees advertised themselves as sales people on professional networking profiles, and that many of Google’s clients believed that the London staffers they were dealing with were sales people.

Brittin acknowledged that Google employed ‘‘people with sales skills.’’

‘‘Some of them have sales in their title,’’ he said. ‘‘I’m sure customers will feel they feel sold to by the teams.’’

But they weren’t, he insisted.

‘‘No money changes hands,’’ he said. ‘‘To be clear the transaction is completed with Google Ireland.’’

Lawmakers were unimpressed.

‘‘It doesn’t make sense to your own staff, it doesn’t make sense to this committee, and it doesn’t make sense to your own clients,’’ said Hodge. ‘‘The only one it makes sense to is Google.’’

Article source: http://www.bostonglobe.com/business/2013/05/16/lawmakers-accuse-google-dishonesty-over-taxes/Mrcg6gtQfw0NWpRvFlHmYL/story.html

A Walmart employee gathers pushcarts as police man the front entrance to a Walmart store in Paramount, California on November 23, 2012 as Walmart employees and their supporters protested nearby. (Image credit: AFP/Getty Images via @daylife)

Wal-Mart Stores Wal-Mart Stores, Inc., (Walmart) had mostly good news for Wall Street yesterday when it reported earnings of $3.78 billion, or $1.14 per share, in the first quarter. Those earnings were consistent with Walmart’s expectations of $1.11 to $1.16 per share and just short of analysts’ average forecast of $1.15 per share.

Those earnings were likely a welcome sign for the company who had worried internally this year about slow sales. Those fears were made public when emails were leaked referring to February as “a total disaster.” In the text of those emails, Walmart VP of Finance Jerry Murray reported that Walmart had the worst sales start in seven years.

I had suggested at the time that sluggish sales might be linked to tax season. It turns out that Walmart agrees.

If you don’t think timing and tax policy can be linked directly to the economy, think again. Delayed refund checks due to a late start to the tax season this year and snafus with returns claiming education credits no doubt contributed to slower sales because consumers had less cash in hand. By mid-February, the date that most refunds had been issued in 2012, the Internal Revenue Service was just getting started issuing returns in 2013. Bill Simon, Walmart U.S. president and chief executive officer, acknowledged this week that the delay contributed to slow sales, saying “February sales started slower than planned, due in large part, to the delay in income tax refunds. We began seeing increased tax refund check activity late last week in our stores, resulting in a more normalized weekly sales pattern for this time of the year.”

And there was something else: those disappearing payroll tax cuts. Simon mentioned the cuts not once but twice in his remarks, noting at first that sales have likely slowed because families had grown used to the cuts – and will now have to get used to not having them. He said, “[w]e are confident that our low prices will continue to resonate, as families adjust to a reduced paycheck and increased gas prices.” With respect to sales moving forward, he offered that “[w]e continue to monitor economic conditions that can impact our sales, such as rising fuel prices, changes in inflation and the payroll tax increase.” Despite those delayed tax refunds and payroll tax cuts, it appears that Wal-Mart managed to bounce back.

It wasn’t all bad news on the tax front: the company reported that benefited from a “lower than expected effective tax rate.” The effective tax rate for the retail giant for the year was 31.0%, down nearly two points from last year. Walmart saw its biggest drop in the effective tax rate in fourth quarter, a nearly three point drop to 27.7% as compared to 30.9% last year. The company touted “a number of discrete tax items, including positive impact from fiscal 2013 legislative changes, most notably the American Taxpayer Relief Act of 2012″ for the dip in tax rates.

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Article source: http://www.forbes.com/sites/kellyphillipserb/2013/05/16/walmart-blames-sluggish-sales-on-taxes-enjoys-lower-effective-tax-rate/

Tech firm Apple is the target of a Senate hearing next week investigating offshore tax practices.

Apple CEO Tim Cook is expected to testify at the Senate Permanent Subcommittee on Investigation’s hearing Tuesday, POLITICO has learned.

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Apple has been under fire for its tax practices. The company recently avoided paying as much as $9.2 billion in taxes by buying back stock with debt instead of offshore cash, Bloomberg reported. Apple has a reported $100 billion in offshore funds.

The hearing is part of the panel’s continued examination of how companies shift profits offshore and how that impacts the tax code. Representatives from Microsoft and Hewlett-Packard testified in September 2012 in a hearing on the same topic.

A spokeswoman for Sen. Carl Levin, chairman of the subcommittee, declined to comment.

Representatives from the Treasury Department, IRS and other tax experts are also expected to testify. The committee will make the witness list available Friday, according to its website.

Apple spokesman Steve Dowling told POLITICO that the company has been working with the subcommittee and welcomes any further questions it might have.

“Apple is one of the largest taxpayers in the United States, having paid $6 billion in federal corporate income tax in fiscal 2012,” Dowling said in a statement. “We also help create hundreds of thousands of jobs in the U.S. by keeping our RD in California and creating category-defining products like the iPhone, iPad and the app store, which has generated billions of dollars in sales for software developers.”

This article first appeared on POLITICO Pro at 4:58 p.m. on May 15, 2013.

Article source: http://www.politico.com/story/2013/05/apple-hearing-offshore-tax-91425.html