Not Paying a Bean. the Tax Affairs of the Companies Behind Some of Our Most Famous and Best-Loved Brands Have Come under the Spotlight Recently, with Coffee Giant Starbucks the Latest Firm to Be Criticised for Dodging Paying Its Fair Share. KATE PROCTOR Investigates Google Facebook
Byline: KATE PROCTOR
THEIR flat-whites are available on every high street and their profits run into billions. They also played a major part in the globalisation of the coffee industry, yet American coffee chain Starbucks has reportedly not paid a penny of tax to the UK in three years.
Loopholes in UK tax law have allowed the firm to pay just PS8.6m in corporation tax in 14 years of trading in Britain and nothing since 2009.
This is despite the Seattle-based company being worth PS25bn and generating more than PS3bn in sales since it arrived in the UK. Mega-brands Google, Facebook and Vodafone have also come under fire for making a poor contribution to HM Revenue & Customs (HMRC) in the last few months.
Whatever nominal contribution these companies make though, their tax affairs remain legal and unchallengeable.
According to financial experts in the region, though, just because it's possible to avoid tax bills, it doesn't necessarily make it right.
A four-month investigation by news agency Reuters found that Starbucks is able to cut income tax by paying fees to other parts of its global business, such as royalty payments for use of the brand. This means Starbucks UK is effectively making a loss and therefore doesn't have to pay any corporation tax. As a result, it has not broken any law.
But Labour MP and tax campaigner Michael Meacher said Starbucks' practice is 'profoundly against the interests of the countries where they operate and is extremely unfair'.
He said: "They are trying to play the taxman. It is disgraceful." Continued " Catherine McKinnell, MP for Newcastle North and Shadow Excheque Secretary to the Treasury, is also calling for legal tax loopholes to be stamped out. "We need to see less talk and more action to clamp down on legal tax loopholes to ensure that every individual and business pays their fair share." The most recent results, posted for 2011, show Starbucks UK recorded a loss of PS33m. But it is understood that Starbucks has told investors the business is profitable. It also paid PS26m in royalties and licence fees to let the UK coffee houses use its labelling. It does this by registering the intellectual property rights to another division of the company. Starbucks' nearest UK rival, Costa, owned by Whitbread, recorded PS377m sales last year, compared to Starbucks' PS398m, but its tax bill came to PS15m or 31% of its profits. The company, which has more than 700 outlets in the UK, also said it has paid its 'fair share of taxes' in full compliance with UK law and no authority had suggested otherwise.
Former HMRC employee and director of tax at North East firm Straughans Chartered Accountants, Mike Fleming, believes stronger international regulation on transfer pricing - the means by which Starbucks has managed to pay so little - would bring about positive change. He said: "The ability of Starbucks worldwide to strip out profits from subsidiary companies and send them to an area where they are paying little or no tax, essentially income shifting, should be governed by transfer pricing. "If it's possible to side-step transfer prices it's because the legislation is a minefield. It would be sensible to have transfer pricing rules made internationally. …