Starbucks accused of UK tax evasion
Tue, 13 Nov 2012 7:52a.m.
By David Stringer
Multinational companies are paying little or no tax on their earnings in Britain, angry lawmakers charged at an unusual hearing involving Starbucks, Google and Amazon.
Legislators were sceptical, for example, about the coffee chain Starbucks' claim that it is not making profits in Britain.
In sometimes bitter exchanges, legislators said they could not accept that Starbucks had reported losses for all but one of the 15 years it has operated in the UK, suspecting the firm was attempting to minimise the taxes it pays in Britain.
"You have run the business for 15 years and are losing money and you are carrying on investing here. It just doesn't ring true," said Margaret Hodge, head of Parliament's Public Accounts Committee.
Troy Alstead, Starbucks global chief financial officer, acknowledged to the panel that its taxable profits in the UK are calculated after royalties paid to its European headquarters in the Netherlands have been deducted. Alstead acknowledged that it has a special tax arrangement with the Dutch government covering its headquarters.
Companies operating in Europe can base themselves in any of the 27 EU nations, allowing them to take advantage of a particular country's low tax rates.
Alstead insisted that Starbucks was not seeking to mislead investors or tax authorities about its performance in Britain.
"We are not at all pleased about our financial performance here. It is fundamentally true everything we are saying and everything we have said historically," he told the committee.
Last week, Britain and Germany called for the world's largest economies to do more to collaborate to fight tax evasion, particularly in online commerce.
Legislators were also questioning executives from Google and Amazon about their tax affairs in Europe.
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13/11/2012 1:48:26 p.m.
There will always be loop-holes that business people and business's will find and take advantage of to reduce tax if they can and N.Z would not be excempt from this. Tax rates are still to high in England and New Zealand and probably a few other countries given the economic climate and the way politicians can just still just waste money without actually creating growth and oppurtunity doesn't encourage you to pay tax if it's just gonna be wasted.
13/11/2012 8:37:30 a.m.
One can shuffle profit around.In Starbucks case they are moving profit from 'Starbucks UK' to the 'Investors' and the investors are paying tax on the income. This gives the investors the higher returns as starbucks has told investors, and it keeps the starbucks profit down around 0.Starbucks is still paying income tax on wages paid to employees and its still paying VAT. What is a few billion of taxes paid by Starbucks in the UK? Oh, a few billion in tax paid dont count?The simple solution is for the EU to clean up its takes. They need to set an EU tax rate. Tax is still being paid on the investors profits, legally under EU rules. The problem is the EU rules, not Starbucks. Is the profit paid to the dutch less than would be paid to the british? Probably, hence they need to balance the rates more, and its not evasion when taxes are being paid legally. If the EU made a business tax rate of say 28% and a cross-border financial tax to move money about of say 0.5-2%, then we would see Starbucks UK chose to leave the profits in the UK as it would be a lower tax rate vs move the profits to the dutch.
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