UK committees to examine Starbucks tax strategies

LONDON Wed Oct 17, 2012 11:24pm BST

Branded coffee mugs are displayed on a shelf in Starbucks' Mayfair Vigo Street branch in central London September 12, 2012. Picture taken September 12, 2012. REUTERS/Andrew Winning

Branded coffee mugs are displayed on a shelf in Starbucks' Mayfair Vigo Street branch in central London September 12, 2012. Picture taken September 12, 2012.

Credit: Reuters/Andrew Winning

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LONDON (Reuters) - Two British parliamentary committees are due to quiz tax officials about how Starbucks was able to avoid paying tax on 1.2 billion pounds of sales since 2009.

MPs said a Reuters report that showed Starbucks had been telling investors its British unit was highly profitable while telling authorities the unit was loss-making, and thereby not liable for tax, undermined public trust in the tax system.

The Seattle-based group, with a market capitalisation of $40 billion, is the second-largest restaurant or cafe chain globally after McDonald's.

Margaret Hodge, chair of the Public Accounts Committee and a MP for Labour party, is among several MPs who said they wanted Her Majesty's Revenue and Customs (HMRC), the tax authority, to launch an investigation into the company's tax affairs.

Hodge said the head of HMRC and other officials would be testifying to the committee, whose duty it is to see the government gets value for money in its financial affairs, next month and that HMRC had "questions to answer" about the practices of Starbucks.

None of the MPs suggested Starbucks had been engaged in any kind of wrongdoing and the company said it paid its tax in Britain to the letter of the law.

The Treasury Subcommittee, which oversees HMRC, is also due to question HMRC officials and its chairman, lawmaker George Mudie, said he planned to question them about Starbucks.

He said he also hoped the committee could hear from executives from the company, although he noted he would need broader committee support to call them to testify.

Labour MP John Mann, who sits on the subcommittee, said he would like it to hold an investigation focusing on Starbucks but Mudie said this was unlikely.

HMRC does not comment on individual taxpayers and rejected any challenge to its efficacy.

"We make sure that multinationals pay the right tax to the UK in accordance with UK tax law," it said in a statement.

Steve Baker, a MP for the Conservative party that rules in coalition, also called for an inquiry.

"I am a highly free-market person but what I want is simple transparent tax law that is actually obeyed ... there are some serious questions to answer here," he said.

"LETTER OF THE LAW"

Taxpayer confidentiality means HMRC would not be able to confirm a probe if it launched one.

Baker and Hodge said the government could get around this, and reassure the public the matter was not being ignored, by confirming in parliament that an HMRC probe was taking place.

Labour MP Michael Meacher said he planned to table a motion asking the government to launch its own investigation into Starbucks and potentially other big companies that are paying minimal taxes on big British revenues.

The legislators said such investigations should also lead to recommendations on how to change tax law to prevent companies from shifting profits overseas.

Kris Engskov, managing director of Starbucks Coffee UK, told Sky News television that HMRC had not contacted the company to say it was under investigation. He added that Starbucks had no plans to change its UK accounting practices.

In a blog on the company's website, he said: "Starbucks pays and will continue to pay our share of taxes in the UK to the letter of the law."

He went on to note the contribution Starbucks makes to the British economy as an employer and as a customer for farmers and cake makers.

Unions said the Reuters story on Starbucks showed the government needed to do more to close loopholes that allowed companies to avoid taxes.

"Hardworking families are being forced to pay off the deficit while companies like Starbucks laugh all the way to the bank," Len McCluskey, General-Secretary of Unite, Britain's largest union, said.

The Northern Ireland Committee of the Irish Congress of Trade Unions called for a boycott of the cafe chain, a call echoed by some MPs.

"Support local cafes and bars, and send Starbucks and other tax dodgers a clear message - Unless you contribute to society, this society has no cash for your coffee," ICTU Assistant General-Secretary Peter Bunting said.

($1 = 0.6211 British pounds)

(Additional reporting by Alessandra Rizzo; Editing by Michael Roddy)

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Comments (11)
ritchard wrote:
Come on everybody. This is not just Starbucks. This little Pandora’s box has got an atomic bomb in it. Open it and you will have to look at the accounting of every multinational company in the country, notwithstanding many other medium sized companies.

Oct 17, 2012 11:26am BST  --  Report as abuse
MrMeener wrote:
The principle here is a simple one. If foreign multinationals are taking vast amounts of money out of the UK economy and from the pockets of UK individuals and companies, then they should be putting something back into the economy by paying their fair share in taxes.

The likes of Google, Apple, Starbucks and many others are laughing all the way to their overseas banks, whilst UK companies and individuals are being hammered all the time.

Come on George, be bold and simplify the UK tax system, but make it apply to all.

Oct 17, 2012 12:18pm BST  --  Report as abuse
finchley wrote:
All sorts of ad hoc fees, all just about legitimate through use of logos, advice fees, insurance premiums, consultancy fees, management charges etc etc etc. You really do not have to overcharge for materials etc but you can probably add an extra 1 or 2% for shipping charges. Bingo the charges all finish up in Panama or Cayman Islands tax free. The cash accumulates and can be used to buy more assets outside USA and incidentally wiping out non-US companies who might be competition. The problem is that the US companies cannot bring the cash back to USA because the US Revenue will tax the cash coming back.

It really is a scandal.

Oct 17, 2012 4:26pm BST  --  Report as abuse
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