Labour: John McDonnell declares tax war on Amazon and Google in 'fair share' warning

Labour will take on some of the world's best known brands and force the top businesses to pay their "fair share" in taxes if the party gains power at the 2020 general election, John McDonnell has revealed. The shadow chancellor issued the warning as part of his speech at Labour's annual conference in Brighton on 28 September.

McDonnell picked out coffee chain Starbucks, mobile phone operator Vodafone, online retailer Amazon and search giant Google during the address after announcing Labour's plan to balance the books would be "aggressive" if Jeremy Corbyn enters Number 10.

"We will force people like Starbucks, Vodafone, Amazon and Google and all the others to pay their fair share of taxes," he said. "Let me tell you also, there will be cuts to tackle the deficit but our cuts will not be the number of police officers on our streets or nurses in our hospitals or teachers in our classrooms."

The left-winger also said Labour would slash tax breaks to the so-called "corporate welfare system". McDonnell declared: "There will be cuts to subsidies paid to companies that take the money and fail to provide the jobs. "Cuts to the use of taxpayers' money subsidising poverty paying bosses. Cuts to £13bn [$19.7bn] tax breaks given to buy-to-let landlords for repairing their properties, whether they undertake the repairs or not."

The comments come after Starbucks, Vodafone, Amazon and Google have come under fire in the past for the amount of corporation tax they have paid in the UK. George Osborne announced ahead of the general election that the government would introduce measures to discourage big firms from taking their profits overseas.

The legislation, unveiled in the chancellor's March 2015 budget, was nicknamed the "Google Tax" and means businesses with a turnover of more than £10m a year have to pay a 25% levy on profits diverted abroad. The companies have a 30-day window to appeal to HM Revenue & Customs (HMRC) over the tax. "Let the message go out: this country's tolerance for those who will not pay their fair share of taxes has come to an end," Osborne told MPs in the House of Commons on 18 March.

'A radical departure'

McDonnell also announced a Labour government would transform the Department for Business into a so-called "economic development department", which will focus on public investment and infrastructure spending. "This is a radical departure not just from neoliberalism but from the way past administrations tried to run the economy," the shadow chancellor said.

"Well we just don't think the current model can deliver. We don't think that destroying industries and then subsidising a low pay economy through the tax system is a good idea. But our radicalism, it comes with a burden. We need to prove to the British people we can run the economy better than the rich elite that runs it now."

The 64-year-old also officially announced the establishment of his Economic Advisory Committee, which will meet quarterly and include French economist Thomas Piketty and Nobel Prize winner Joseph Stiglitz.

"I give you this undertaking that every policy we propose and every economic instrument we consider for use will be rigorously tested to its extreme before we introduce it in government," he said.

Google and Amazon declined to comment on McDonnell's speech. A spokesperson for Starbucks said: "Starbucks is now profitable in the UK and we are paying corporation tax." Meanwhile, a spokesperson for Vodafone said it was disappointing that the issue had been raised.

"There was no truth in the allegations in the past and there are none now. As we have made clear on numerous occasions, Vodafone has always paid its taxes and for the last financial year (2014/15) we paid around £360m in direct taxes in the UK," the spokesperson said.

"It requires huge investment to build and maintain our network, which is relied upon by businesses and consumers up and down the country and we have invested heavily in the UK over the last few years, spending more than £1bn on our network and services last year.

"As a result of that investment and the very competitive market, we make minimal profits (£41m) in the UK. As the government wants to promote investment in essential infrastructure like ours, the UK tax rules mean that reliefs for our investment are set against the profits we make.

"In addition, the government understands that we have to borrow huge sums of money to be able to invest for the long term, so they allow us to take the interest we pay on those borrowings off our profit too. Corporation tax is then paid on any balance – this is the same rule that applies to all UK companies large and small."