Unite the Union says the use of a legal loophole that it claims allows large multinationals such as Diageo to reduce tax payments on UK profits 'simply isn’t acceptable'.
In an article on Diageo published in its ‘Tax Gap’ article series in February 2009, The Guardian noted that the giant UK plc. paid £43m/year ($65m) over the previous decade in UK corporation tax.
The paper said the 10-year tax bill would be nearer £144m/year if it reflected Diageo’s actual physical UK presence, but that the firm only paid taxing on profits said to arise in the country.
Diageo has also, quite legally, cut its UK tax bill by transferring legal ownership of brands such as Johnnie Walker (in 2000) and J&B (2006) to Dutch subsidiary Diageo Brands BV, the paper noted.
This Monday Unite national officer for food and drink, Jenny Formby attacked what she claimed was Diageo’s exploitation of a tax loophole.
“Diageo is extremely successful, and last year profits jumped by 32% to a colossal £3.1bn, yet the company prefers to pay its tax via Amsterdam, to avoid paying what is due in this country,” she said.
Age of huge public cutbacks
Formby told BeverageDaily.com today that Unite’s concern over this kind of tax loophole, such practices are glossed in a recent comment piece in The Guardian , was “well-rehearsed, and as can be seen from the recent campaign against Starbucks, widely supported by the public”.
Formby added:“We're not suggesting it isn't legal, simply that it isn't acceptable that hugely profitable multinationals can avoid paying tax on profits made in the UK, clearly part of a broader political debate in an age of huge cutbacks in public spending on vital services.”
Diageo moved a number of its brands to The Netherlands in 1998, establishing a new marketing center there, and transferred other brands there later to ensure closeness to senior marketing staff.
A Diageo spokeswoman told BeverageDaily.com that the drinks giant’s significant commercial operations in The Netherlands encompassed management, marketing and supply of key brands.
“Our Amsterdam operations have been fully disclosed to and reviewed by Her Majesty’s Revenue & Customs (HMRC) and we have paid the tax deemed appropriate. This was endorsed by a National Audit Office (NAO) review in 2012,” she said.
200 staff worked at the global marketing centre of excellence, the spokeswoman added, while a number of Diageo’s acquired brands were based in Amsterdam, “in order to also benefit from this centre of excellence”.
Diageo’s Dutch logistical hub
She said: “The Netherlands also represents an important logistical centre for Diageo. The bulk of our product is shipped around the world from Rotterdam.”
Discussing Unite’s concerns regarding Diageo’s Monday announcement that it plans to overhaul its global supply and procurement operations – with job losses likely – Formby said her union planned to seek assurances on jobs at a local level across all UK sites.
“We're always concerned about possible impacts on jobs when this kind of restructuring is carried out,” Formby said, “as workers inevitably pay the price with their jobs, although of course we very much hope there will be no impact in the UK”.
Diageo did not respond to Formby’s demand that it conduct itself in a “more responsible way” and provide UK workers with assurances on jobs, and simply said discussions with Unite were ongoing.