Starting a new thread here as this issue got included in a separate thread
Coffee chain Starbucks was left on the back foot yesterday – after a growing internet campaign called on consumers to boycott the company over its tax dealings in the UK.
The company hit the headlines after it was revealed it had paid just £8.6m in tax in the 13 years it has been in the UK.
Now, an MP has called for an inquiry into the situation – despite Starbucks having done nothing illegal.http://www.bakeryinfo.co.uk/news/ful...continues.htmlMeanwhile, Starbucks said: “We make sure that multinationals pay the right tax to the UK in accordance with UK tax law.” It declined to say if it was considering any changes to its accounting practices but said it was “totally committed to the UK”.
Suggestions that Starbucks is avoiding tax changes that. We do have homegrown coffee shops in the UK. A lot of them. And they have to pay their taxes in full here in the UK. They can't make payments to offshore entities for the use of their logos or advice on how to add hot water to coffee just to avoid tax: they have to pay in full on what they earn in this country. What Starbucks is doing may be legal, but what it also shows is that business does not operate on a level playing field in the UK.
Reuters is suggesting that Starbucks use offshore licensing, transfer pricing that routes profits to Switzerland and intra-group funding to reduce their UK profits. The result is that despite Starbucks apparently being a highly successful operation – something they do not just acknowledge, but make a point of saying – they haven't paid tax here for the last three years.http://www.guardian.co.uk/commentisf...itish-businessAnd let's straight away dismiss the "but their employees pay income tax and NIC and their customers pay VAT" argument: that's equally true of their UK-based competitors who must also pay corporation tax.
What's clear from what's happening is something that's been glaringly obvious to a few for a long time, but for which there hasn't been a clear example, and that is that multinational companies and the rules by which they can trade very obviously provide a clear, unfair and wholly unjustifiable competitive advantage to such corporations over smaller, locally owned and nationally based businesses.
This makes no economic sense. First, even the most pro-market person will say that tax should not distort markets. On this occasion I agree with them: there is no reason at all why the UK tax system should favour one company over another in this country when they are in direct competition one with another.
More than that though, if there is to be any such competition it should be the smaller, homegrown business that should very clearly get the support of the tax system. But it isn't: the exact reverse is happening.
http://www.guardian.co.uk/technology...edium=linkedinFacebook has been accused of taking the British taxpayer for a ride after experts suggested the company had depressed sales figures and that the website's average UK employee earned more last year than the whole social media network paid the exchequer.
The British arm paid its 90 UK-based staff an average of £275,000 each in 2011 while contributing just £195,890 to the Treasury's coffers, according to the firm's latest accounts filed at Companies House.
The website also reported UK revenues of £20.4m, a fraction of the £175m that media analysts estimate the firm made in the UK in 2011.
Most of the sales are believed to have been booked in the firm's international headquarters in Dublin, where they will attract lower corporation taxes.
Richard Murphy, of Tax Research UK, said: "The UK is being taken for a ride. Facebook is taking standard practice for these IT companies to a new high, or low, depending on how you look at it. The UK is giving the tax break and the Irish get benefit of all the tax on the sales."
The chartered accountant added that the arrangement between Facebook UK and its Dublin office suggests that only around 11% of total sales made into the UK are declared in this country – a standard industry mechanism whereby a UK-based company is paid a commission for the sales it generates by a sister company located in a lower tax jurisdiction.
Furthermore, Facebook UK's latest figures show that the company charged £15.4m to its 2011 accounts – which can be used to reduce future tax bills – as a cost of awarding its UK staff share options. Murphy said: "That appears to be £15.4m to reward £20.4m in sales. That makes no sense. The options must, of course, be based on the value of sales recorded in Ireland but the UK is bearing the cost of the tax relief on paying these options."
When asked if Facebook had chosen to set up its international headquarters in Dublin in order to lower its tax bill, a company spokeswoman responded: "We have our international headquarters in Ireland that employs hundreds and a series of smaller local offices providing support services all over Europe. Dublin was selected as the best location to hire staff with the right skills to run a multilingual hi-tech operation serving the whole of Europe."