Amazon, Google accused of tax dodging

UK lawmakers will quiz executives of Google and Amazon about how they have managed to pay only small amounts of tax in Britain while racking up billions of dollars worth of sales.

The Public Accounts Committee (PAC), which is charged with monitoring government financial affairs, has invited the companies to give evidence amid mounting public and political concern about tax avoidance by big international companies.

"It is hard for the ordinary person to believe it's fair," said Margaret Hodge, a member of parliament for the opposition Labour party and chairman of PAC.

"It makes people incredibly angry in the current fiscal climate," she added, in reference to the austerity measures which large budget deficits have forced on the UK, and other countries.

Britain and Germany last week announced plans to push the Group of 20 economic powers to make multinational companies pay their "fair share" of taxes following reports of large firms exploiting loopholes to avoid taxes.

Google's filings show it had $US4 billion ($A3.8bn) of sales in the UK last year, but despite having a group-wide profit margin of 33 percent, its main UK unit had a tax charge of just £3.4 million in 2011.

The company avoids UK tax by channeling non-US sales via an Irish unit, an arrangement that allowed it to pay taxes at a rate of 3.2 percent on non-US profits. Amazon's main UK unit paid less than £1 million in income tax last year. The company had UK sales worth $US5.3-7.2 billion, filings show.

Amazon avoids UK taxes by reporting European sales through a Luxembourg-based unit. This structure allowed it to pay a tax rate of 11 percent on foreign profits last year - less than half the average corporate income tax rate in its major markets.

Google declined to comment. Amazon did not respond to requests for comment.