High street stalwart Marks and Spencer (M&S) has been criticised over its online tax practices after it emerged that the company had set up an Irish arm to distribute UK goods to reduce its corporation tax payments.
As the retailer expands its online presence with a view to becoming a leading international multichannel operation, it has launched marksandspencer.eu to service the European market, though critics suggest hat M&S‘ practices are similar to those of e-tail giant Amazon.
M&S has set up an Irish company to distribute goods from the UK which are shipped to the country and charged to Marks and Spencer (Ireland) Ltd, according to The Guardian.
A wholesale price for the goods, which is subject to UK corporation tax, is then paid by M&S‘ UK branch in a process known as transfer fixing. While this is legal, Ireland has the lowest corporation tax rate in Europe at 12.5 per cent and critics have argued that the practice is unfair.
But the retailer only operates in this way for sales outside the UK and that the move was understandable given that Ireland is its biggest international market.
A spokesperson told the newspaper: “M&S is a major UK taxpayer, contributing over £800m to the UK exchequer in 2011/12.
“We pay UK corporation tax on all profits generated by UK sales and comply with the tax laws of all jurisdictions in which we operate.
“We conduct our tax affairs in a transparent and legally compliant manner that is consistent with our longstanding values and complies with the tax laws of all jurisdictions in which we operate.
“Our European websites are owned by M&S Ireland. This is made clear to all customers shopping on our European websites.
“Ireland is our largest international online market, taking over 50 per cent of our online European sales, which is why we structure our other European websites around it.
“It would not make good business sense for us to set up anew in every market we enter.
“These are not UK sales, these sites do not serve UK customers and there are no sales made in sterling. All tax is legally and fairly paid both in the UK and in Ireland.”
But campaigners are angered by what they see as the latest tax dodge from a global company following news last week that Amazon received more in Government grants last year than it paid in corporation tax.
Suzy Blackwell, a campaigner at UK Uncut, called on the Government to fix loopholes which allow global companies to avoid tax.
“Given that Marks and Spencer portrays itself as a British institution, it is disgraceful that it is choosing to avoid paying tax in this country,” she said.
“The Government must stop letting companies like Marks and Spencer dodge tax which could go towards funding vital public services.
“It‘s an outrage that the Government is allowing this behaviour to continue while making devastating cuts across the country.”