To be horrified by this article about Starbucks?

[PropertyNightmare]

I love Starbucks. I can't wait for the red cups.
Now I am gutted to learn that the corporation has not paid any UK income tax since 2009. Despite making 1.2 billion in that period in the UK. Apparently there is nothing 'illegal' about the tax arrangements which allow them to do this. AIBU to feel let down and a bit of a mug? The NHS and schools would have found sOme extra cash handy....

Starbucks, I am shocked and feel like you have let me down

www.taxresearch.org.uk/Blog/2012/10/15/starbucks-brewing-up-more-than-coffee-when-it-comes-to-tax-avoidance/

how do they get away with it?
We are turning over about 40k & can't get out of corporation tax. a company that's making billions how on earth do they stash the cash!!

I appreciate that Starbucks employ UK employees. So do Costa, McDonalds and KFC who all also pay UK income/corporation tax.

Not a huge amount of VAT on coffee sales (but the property and employment taxes, 3rd party services etc. still produces a lot of value to the UK economy and taxpayer) and of course efficient tax arrangements allow them to keep prices lower than they would otherwise be.

It is not any companies job to do anything but to maximise its own profit and survivability, as that's how they keep the employees in their jobs, doing things inefficiently will just see the employees lose their jobs, and everything be more expensive. It's the job of the government to produce sufficient revenue to pay for its programs through efficient tax law.

I fail to see how differing taxes on profits mean the local shop cannot compete either, if there's sufficient profit that the tax rate on it is relevant, then surely there's just as much profit for the local shop. Unless of course it's those very Starbucks brand and procedures that produce the profit - in which case you cannot argue that Starbucks shouldn't charge for that.

Companies create jobs - they do that by focusing on making themselves as much money as possible, focusing on anything else is inefficient.

They do not stash the cash, they make use of the fact that they are multinational. Most likely complex ownership structures, intercompany transfer payments, royalties, that sort of thing. Ultimately, on the UK books they will show a loss or smaller income, which then minimises their tax liability. They do pay corporation tax in the US, probably also in other countries where tax laws are different from the UK.
This is a question for the UK legislator, which allows these loopholes. The company is just doing a good job by exploiting them.

Read the article, Monkeybignuts.

That's what I said about MPs' expenses, Merinda, blame the system not the individuals. The individuals still got crucified, though, didn't they?

Starbucks could choose not to exploit so many tax loopholes.
Dunno if Costa is any better, mind.

Welcome to Globalisation, guys.

Agree that the UK legislation needs to change. Perhaps Dave and George could get on it when they find a minute away from making cuts to the welfare state

it is effectively stashing cash if you are saying the UK branch never made profits to avoid paying tax.
yes its a loop hole but its an immoral loop hole and Starbucks are making more than enough cash to pay the corporation tax!

Just because a global business is incorporated in one country does not mean they automatically pay tax only on that country.

In principle, the profits of their UK business should be taxed in the UK with the US only taking those profits if their corporate tax rate is higher.

Intercompany charges etc should not work as a way of bringing down UK tax liabilities if the transfer pricing legislation is being applied properly as you can't just artificially extract profits from the UK.

I haven't read about Starbucks in detail but with Amazon the issue is their European ownership is in Luxembourg (I think) and the UK operations are considered to be a fulfilment centre rather than a revenue generating branch.

This isn't possible if you run coffee shops but no doubt they have some similarly complex way of minimising UK profits. I find the whole thing very depressing.

And Starbucks coffee is shit.

Hmm, there seems to be a lack of understanding of how international companies (or any with finacial nous) operate at a maximun tax efficiency level.
Any of you on Vodafone (and there are 19m in the u.k.)move provider after they paid 0 (zero) corporation tax last year?

Starbucks
Amazon
Tesco
Boots
JK Rowling
Jeremy Paxman
Philip Green
Richard Murphy
George Osborne [angry

I find this link interesting www.ukuncut.org.uk/targets

Lol, Gideon taxed me a bracket!

Maybe there should be some rule that says if you trade in multiple countries, you have to switch over to paying a "global" rate of tax which is then used to aid poorer countries.

Not gonna happen But I can dream!

BertieBotts, and all governments will come to a smooth agreement on this point, thereby giving away the biggest portion of their budget :-)

This has put me off Starbucks. Not that I go in very often. Hope people do have a boycott of them. They deserve it.

I expect they also pay low wages which are effectively subsidised by the government via tax credits.

Trouble with that Vivienne is that we'd need to boycott a big list as was posted below. I try to avoid them but struggling with my Amazon habit

Celtic it would make more sense to pay decent wages as its another way to lower profits and decrease corporation tax.
It really annoys me when we are struggling running a business and pay everything we are supposed to yet large corporations get away with what is basically tax avoidance.
Maybe we should have a jersey branch to our business!

Some posters are misinformed about the way multinationals are taxed. They do not just pay tax in the country where they have their headquarters. They should be taxed in the UK on any profits they earn in the UK.

The difficulty with multinationals is what is known as transfer pricing, where a division in one country charges a division of the same business in another country for supply of goods and services. Some multinationals have used artificially high transfer charges in order to move money from high tax countries to low tax countries. In addition the head office may charge subsidiaries a management fee for services they provide centrally. However, they cannot just do whatever they want. The company must show that the transfer prices and management fees are reasonable for the goods and services provided.

The UK has some very bright people in HMRC policing all this to try and prevent abuse of transfer pricing and management fees. This takes time and it has to be recognised that there may not be a single "right" answer as to how much tax a company pays (after all, there is no single "right" answer as to how much profit any business has made, let alone a complex multinational), so it may come down to negotiation between HMRC and the company.

Amazon has been mentioned on this thread. They are a good example. They did not pay any corporation tax in the UK in the last tax year. However, they are being investigated in the USA and may have to pay up to $1.5bn in back taxes. They are also under investigation in a number of other countries including the UK and have set aside $229m to pay tax bills that may arise from this.

I know it's difficult with those boycott's. But I still think it's worth doing. I didn't have a clue that this was happening with Starbucks. I expect there's a lot of unfair things we don't have a clue about. This is shocking though when we're talking about severe benefit cuts. I think I'd have a lot of trouble not using Amazon though. It's the highlight of my life. Very sad.

The difficulty with multinationals is what is known as transfer pricing, where a division in one country charges a division of the same business in another country for supply of goods and services.

Oh, thank goodness someone's posted clearly about this! Cheers, bridge. These threads generally get derailed by pontificators saying multis aren't doing anything wrong, pay their tax, etc. NO THEY DON'T - and this is one of the main techniques used to avoid it.

I'm one of a flood tide of plebs who want rules tightened so that companies pay tax on earnings achieved in a country, to that country. Can't think of a single reason why their accounts should work differently from plebs' accounts. They manipulate differential tax laws to their advantage, so the 'tax agreements for improved trade' arguments don't really hold water.

If I earn even $20 dollars from a US sale, I have to declare it to US revenue. I can't get out of it by saying I designed the thing in a different country and the B&B cost more than $20. Neither should the bigwigs.

Merinda - "I do not think that the tax situation makes much difference to the "level playing field". "

Oh yes it does. It makes a huge difference.

If I set up a coffee shop and have to pay tax on profit at UK corporate tax rates I have less profit to reinvest so I grow a lot slower than the big multinational. I could raise fresh capital on the stockmarket to help me grow quicker but my profits are lower so investors will give me less capital.

The problem is that Starbucks and others depend on stable countries like the UK for the profits they make.They enjoy the benefits of a sophisticated law abiding society in the UK, a good legal system, a financial system, low corruption, good infrastructire - but don't pay for any of it. They enjoy the benefits of trading in the UK but put little or nothing back other than employing people on minimum wage - which a tax paying UK company could also do.

I think the solution to this problem which is widespread among many companies, not just Starbucks, is to impose higher rates of taxes on property (ie business rates) and national insurance on employee wages. In other words impose tax on the things they can't move offshore.

Let me be clear, they are not doing anything illegal and they are entitled to manage their tax affairs efficiently but it is also the duty of HMRC and UK Govt to design a tax regime that cannot be avoided by multinationals and is a level playing field for all firms.

But isn' ta boycott cutting off your nose to spite your face? It's not Starbucks who created this system, it was the government. If you boycott the companies for this reason, you'll just miss out on what they offer. I don't know that the local shops are waiting in the wings to take up the slack. Perhaps with coffee, but not with Amazon. the company will either get out of the UK or not, but it won't change that other companies will do the same thing.

So get the legislation changed, especially if you like the product or service. And what about UK companies who do this to others, should they be boycotted, or do we not care what they do in other countries?

Vivianne, I will not be buying from Starbucks again. I usually pop in about on e a week (in my local shopping centre). I'll be going to M&S cafe from this wek onwards

MoreBeta, not quite. What I said is that it is a typical problem of a small vs. large business. Tax situation in this particular case is secondary.
As a small business you have higher risk rating than a larger business, it will be harder/more costly for you to raise capital as well.
Comparing the two is apples and oranges. There are inherent disadvantages as well as advantages of being a small business.