Capgemini and Accenture pulled into UK tax row

Two of the world’s largest consultancy firms, Accenture and Capgemini, have been dragged into the ongoing UK corporation tax row, after it was revealed that in recent years they have only paid between 1 and 3.5 percent on hundreds of millions of pounds of profit.

For example, Accenture only paid £2.8 million tax on nearly £82 million of profits in Britain last year.

This works out at under 3.5 percent of its profits, when the standard corporation tax rate is 25 percent in the UK. According to the Sunday Times, its accounts also disclose that it paid no UK tax in the previous two years on more than £180 million of profits.

Executives from Amazon and Googlewere also recently grilled by a parliamentary committee on how their UK operations pay tax.

Both internet giants have been criticised in recent months for making substantial sales in the UK, but only paying a small amount of tax to the Treasury – as little as 1.5 percent on hundreds of millions of pounds in some instances.

According to the reports, Accenture is being audited by tax authorities in America over cross-border deals between its various subsidiaries, which can shift profits into tax havens or low tax countries.

Accenture is also a key player in HM Revenue & Customs’£8 billion ‘Aspire’ contract to provide its main computer systems. It also has a £9.6 million contract with the department to provide technical support.

An Accenture spokesman said: "“Accenture pays tax in accordance with the tax legislation of each country in which it operates.”

Capgemini, the lead on the Aspire contract, only paid £308,000 of corporation tax last year on £38 million of profits – less than 1 percent. It told the Times that tax relief on a pension deficit and losses in previous years were the main reasons for the low rate of tax.

Margaret Hodge, chairwoman of the public accounts committee, said she is going to question HMRC officials on the findings. She said: “It is absolutely absurd if HMRC are doing business with companies that are not paying their fair share of tax.”

Martyn Hart, National Outsourcing Association Chairman, has also come out and said that it is time for a change in the law to ensure that companies earning revenues from the taxpayer should pay their fair share in taxes.

“That the largest of companies pay the least tax is a failure in the system, and this loophole needs to rectified. If companies earning from the government paid more tax, maybe there would not be such a great need for budget reductions,” said Hart.

“Attitude to taxes could become a differentiator. Of course, price, technology and service levels will remain crucial aspects of a bid, but maybe the company that pays the most tax could prove to be the most attractive bidder – The NOA would like to see the tax factor built into the public sector RFP evaluation process, to make sure companies with the most honest approach to taxpaying get the most business from government.”

He added: “HMRC would need to facilitate this, providing clear and open information and guidance to government departments needing to check potential suppliers’ taxpaying credentials. A scoring system, a tax attitude health-check is required – something transparent, for fair comparison between companies - so that organisations that are currently operating carefree, paying next to no tax, but perfectly within the law, have a more morally righteous code to operate under.”

Copyright © 2012 IDG Communications, Inc.

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