After listening to calls for reform from MPs of all parties during a Commons debate, he conceded there were shortcomings in international tax guidelines – specifically in what constitutes a business taxable in the UK under so-called "permanent establishment" rules.
Google and Amazon take billions in sales from the UK, but route this business through Ireland and Luxembourg respectively, meaning profits cannot be taxed in the UK. Both firms insist that staff at offices in Britain are not closing sales, instead they support the UK sales efforts of their respective Irish and Luxembourg sister companies.
Gauke told MPs – unanimous in their condemnation of such tax engineering – that HMRC was constrained by international tax rules. "We are leading the way in encouraging the OECD to look at what needs to be done to ensure that the tax rules are brought up to date for the internet world," he said.
He dismissed claims that HMRC was not doing enough to challenge internet firms booking UK sales overseas. "They can only collect the tax due under the law," he said. All large, high-risk firms were "man-marked" by HMRC, with all activities appropriately scrutinised. Gauke pointed to £8.8bn of additional tax revenue brought in by such HMRC efforts.
His words appeared to hint at possible reforms likely to appear in an OECD action plan, to be presented to a G20 meeting of finance ministers this month. The debate had been called by Chris White, Conservative MP for Warwick and Leamington, whose constituents include bookshop owners Frances and Keith Smith who have campaigned against Amazon tax avoidance, attracting almost 170,000 signatures to their online petition.
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