Starbucks announced pre-emptively Sunday it is reviewing its British tax practices in advance of the release of a report Monday accusing multinational companies, including Starbucks, Google and Amazon, of exploiting tax laws to move profits generated in Britain to offshore domains.
LONDON — Major multinational companies, including Starbucks, Google and Amazon, are guilty of immoral tax avoidance, a committee of British lawmakers said in a report Monday, and Starbucks announced pre-emptively Sunday it is reviewing its British tax practices in a bid to restore public trust.
Parliament’s public-accounts committee said the government should “get a grip” and clamp down on multinationals that exploit tax laws to move profits generated in Britain to offshore domains.
“Global companies with huge operations in the U.K., generating significant amounts of income, are getting away with paying little or no corporation tax here,” said Labour legislator Margaret Hodge, who chairs the all-party committee. “This is outrageous and an insult to British businesses and individuals who pay their fair share.”
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Companies operating in Europe can base themselves in any of the 27 European Union nations, allowing them to take advantage of a particular country’s low tax rates.
Google has picked Ireland and Bermuda as its main bases, while Seattle-based coffee chain Starbucks has its European base in The Netherlands and pays British tax only after transferring large sums in royalties to its Dutch headquarters.
The committee said online retailer Amazon, also based in Seattle, paid 1.8 million pounds ($2.9 million) in British tax in 2011, on turnover of 207 million pounds.
Starbucks paid no income taxes on revenue of 1.2 billion pounds over the past three years by using intra-company transfers and loans to record a loss for its British business, Reuters reported Oct. 15, citing company filings. There is no suggestion the company has broken the law in the U.K., its biggest European market.
The coffee-shop operator eliminated a 5 million-pound corporation tax bill by paying a royalty fee of 4.7 percent of its U.K. revenue to its Dutch division for a license to use its brand, the Sunday Times reported yesterday, without saying where it got the information.
Starbucks Chief Financial Officer Troy Alstead angered lawmakers last month by refusing to publicly disclose details of a low-tax rate granted by the Netherlands at a parliamentary hearing. In the past three years, the company has paid more than 160 million pounds in employee, national insurance and business rates tax, he said.
The testimony last month at times drew laughter from members of the committee who also queried how Amazon made 20 million euros ($25 million) profit on sales of 9.1 billion euros across Europe last year and questioned why Starbucks remained in Britain. Google paid 6 million pounds in company tax last year.
Hodge said executives from the three companies had been “unconvincing and, in some cases, evasive” when they appeared before the committee last month to explain their tax regimes. And she accused Britain’s tax agency of being “way too lenient” in dealing with multinationals.
“All three companies accepted that profits should be taxed in the countries where the economic activity that drives those profits takes place,” the lawmakers’ report said.
“However, we were not convinced that their actions, in using the letter of tax laws both nationally and internationally to immorally minimize their tax obligations, are defensible.”
As the British economy splutters amid Europe’s economic crisis, and the government slashes spending in a bid to curb the deficit, public anger has grown against companies that pay little tax while making large profits.
Britain, France and Germany have called for the world’s largest economies to do more to collaborate to fight tax evasion, particularly in online commerce.
Starbucks on Sunday said it is in talks with the Treasury over its tax affairs and will release details of the discussions this week, the company said in an emailed statement. Starbucks has complied with all U.K. tax laws and is committed to the country for the long term, it said.
“As part of this we are looking at our tax approach in the U.K.,” said the coffee firm, which has more than 700 outlets in Britain. “The company has been in discussions with (Her Majesty’s Revenue and Customs) for some time and is also in talks with the Treasury.”
Starbucks, which has been targeted by the protest group U.K. Uncut, said in a statement that it had “listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more.”