Is government too scared of Google, Amazon and Starbucks?

3 December 2012 Last updated at 15:22 GMT

Starbucks, along with Google and Amazon, are under fire over their tax arrangements

If the uk had an industrial strategy over the past 30 years, it could perhaps have been characterised as "foreigners more than welcome".

To a greater extent than any developed economy, British governments have been almost wholly lacking in concerns when overseas companies set up shop in the UK or bought businesses here - because of the conviction that these overseas companies would bring decent management, useful competition and investment capital to this country. Against this government policy backdrop, Google, Starbucks and Amazon seem to be examples of huge American companies doing as well or better in the UK than anywhere apart - perhaps - from their home market in the US.

That, at least, would be the case if success is measured in terms of revenues or market share.Now, it should be said that if you talk to their British competitors, it is moot how much benefit their presence in Britain has actually delivered.Media companies - television, radio and newspapers - have complained for years that Google takes colossal and growing amounts of net advertising revenues, while investing relatively little in the gathering of news or the making of television and radio.Owners of small independent coffee shops are not exactly huge fans of Starbucks.And there is no kind of British retailer, big or small, which isn't terrified of Amazon's growing presence in every area of consumer sales.

These are businesses that are transforming entire industries. Many of the consumers who use them would probably say for the better. Struggling competitors and their employees, inter alia, would say for worse.

Here are the questions posed by their growing presence in the UK:

• is British cultural life richer or poorer for the migration of advertising revenues to Google?

• does Amazon cause or merely accelerate the dereliction of swathes of the High Street?

• is Starbucks a force driving down prices and improving service, or a lumbering quasi-monopolist crushing everything in its path?

And although they employ many thousands of people in Britain, it is unclear whether collectively they are net creators or destroyers of employment - and, in particular, whether they are net creators of what might be thought of as rich and fulfilling employment.

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Is it remotely plausible that they would suddenly emigrate and stop trying to sell as much as possible to British consumers if they suddenly faced [bigger] tax bills?”

This is not to take sides in what is an important debate, with passions that run high on both sides, merely to point out that their huge presence in the UK can't be assumed to be a net good thing.Which is why today's report by the Public Accounts Committee (PAC), which points out that as huge and clever multinationals they exploit legal devices to minimise their liability to corporation tax in the UK, is of moment.The thing about Google, Starbucks and Amazon is that they declare surprisingly little profit in the UK on the back of their massive market shares."Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK, but in 2006 it made a small profit" - in spite of a reported market share of almost a third.

As for Amazon, it had sales in the UK of £3.35bn in 2011, reported turnover in its UK operation of £207m and a "tax expense" of just £1.8m. And for Google, its reported British revenues last year were £396m, on which it paid corporation tax of £6m.

Now for the avoidance of doubt, these three multinational companies are by no means unique in minimising their UK tax liability. Like all public companies, they have a duty to their shareholders to minimise their costs of doing business.As it happens, the finance director of a huge British multinational, Vodafone, recently wrote a letter to journalists explaining why it paid no UK corporation tax in 2011-12.If you are a shareholder in any multinational - and you will be, if you are saving for a pension - then it is in your interest that many use accounting techniques to channel their revenues to regimes, like Ireland, the Caymans and Bermuda, where tax rates are negligible to non-existent. But none of us are just shareholders. We are also citizens. And we have an interest in making sure that companies that benefit from an educated workforce, a free health service, a solid and reliable legal system and an efficient transport network, make their proper contribution to an infrastructure whose absence would be devastating to them. Which is why MPs on the PAC want Her Majesty's Revenue and Customs to be more aggressive in challenging the nugatory UK profits and minimal tax liabilities declared in the UK by the likes of Google, Starbucks and Amazon.

Here is an interesting question. Now that all three of them are so huge in the UK, is it remotely plausible that they would suddenly emigrate and stop trying to sell as much as possible to British consumers if they suddenly faced tax bills comparable to those paid by less internationally mobile UK companies? Arguably their great success in the UK has shifted the balance of power towards the British tax authorities and the government. Google, Amazon and Starbucks would have a huge amount to lose if they reduced their commitment to Britain.

Starbucks is planning to change the way it allocates its costs for tax purposes in a way that should see it paying corporation tax in the UK for almost the first time, I have learnt. Responding to criticism that, despite its share of almost a third of the UK coffee-shop market, it has paid corporation tax only once in 15 years, Starbucks is considering changing the way it accounts for all or some of the 4.7% of revenues it makes as a payment "for intellectual property" to a Netherlands-based company.

As I understand it, Starbucks in the UK would still make this payment, but it would no longer claim it as a taxable expense. If Starbucks goes ahead with the accounting change, the announcement is likely to come before the chancellor's Autumn Statement on Wednesday. This would then increase pressure on other multinationals which pay little or no corporation tax on huge sales in the UK - and especially Google and Amazon - to similarly increase their liability to UK corporate taxation. MPs on the public accounts committee today said of Starbucks: "We find it difficult to believe that a commercial company with a 31% market share by turnover, with a responsibility to its shareholders and investors to make a decent return, was trading with apparent losses for nearly every year of its operation in the UK."

A source close to Starbucks said that the Seattle-based multinational had been stung by the criticism and was changing its ways.

Delta Looks to Buy Stake in Virgin Airways

By Soyoung Kim and Charmian Kok

Published December 02, 2012

Singapore Airlines is in talks to sell its 49% stake in British carrier Virgin Atlantic, with sources saying Delta Air Lines (DAL) is among the suitors keen to access Virgin's lucrative slots at London's Heathrow airport.

Richard Branson's Virgin Group wants to keep its 51 percent stake in Virgin Atlantic and work with Delta if the U.S. carrier pulls off a deal, a source familiar with Branson's thinking added on Monday.

Singapore Airlines said in a brief statement it was in talks with interested parties but did not name them. It also cautioned the discussions might not result in a deal.

Airlines like Delta have long hoped to break into London's capacity-constrained Heathrow airport, a lucrative hub for corporate passengers where landing slots are generally hard to acquire. Virgin Atlantic is the second-largest carrier at Heathrow after IAG's British Airways.

Delta has been considering ways to partner with Air France-KLM, which could also take a stake in Virgin Atlantic, one person familiar with the matter said.

The European Union requires that EU carriers be under European control, meaning Delta would need an EU airline as a partner if it wanted majority control of Virgin Atlantic.

If Air France-KLM were to buy a small percentage of Branson's stake, then Virgin Atlantic could continue to be European controlled. However, the source close to Branson signaled the British entrepreneur was not looking to sell.

"As far as he (Branson) is concerned, it is just Singapore Airlines' 49 percent stake that is up for sale - he is keen to maintain control of Virgin Atlantic and form a stronger airline," the source said, adding Branson supported a deal with Delta because it would make Virgin Atlantic stronger on routes between Britain and the United States.

Delta, the second-largest U.S. airline by revenue after United Continental  (UAL), has been looking to acquire a stake in Virgin Atlantic for more than two years but previous talks broke down over price and other issues, and there is no guarantee that its recent discussions would result in a pact, two people familiar with the matter said.

"London obviously is the premier market and Heathrow is by and large the market leader. It's the lynchpin transatlantic market in terms of size and revenue, particularly premium traffic revenue," said George Hamlin, an aviation consultant in Fairfax, Virginia.

A deal with Delta would also give Virgin Atlantic access to hundreds of markets on a one-stop connecting basis in the United States, he added.

Delta and Air France-KLM declined to comment.

"We are always talking to many airlines on a number of different matters but we never comment on the details of these discussions," a Virgin Atlantic spokeswoman said.

If Delta succeeds with its bid, Virgin Atlantic, which is not a member of a global airline alliance, would almost certainly join Delta and Air France's SkyTeam, the source close to Branson said. SkyTeam trails its oneworld and Star Alliance counterparts in slot access at Heathrow.

"Delta now finds itself going up against the combination of American Airlines and British Airways," said Hamlin, referring to the two anchor members of the oneworld global alliance.

"British Airways brings along a feed from other destinations - both Europe and intercontinental - at Heathrow. Delta is basically a dead-end at this point."