British government officials blasted Starbucks, Google and Amazon for complicated accounting practices they say the American companies are using to reduce their tax burden in England.
“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,” Labor legislator Margaret Hodge said in an Associated Press story. “This is outrageous and an insult to British businesses and individuals who pay their fair share.”
According to numerous reports, Starbucks has paid only £8.6 million pounds ($13.8 million) in taxes on sales of more than £3 billion ($4.8 billion) since opening stores in the U.K. in 1998. Starbucks, which now has more than 700 shops in the U.K., reportedly has not paid any taxes the past three years, despite sales of £1.2 billion.
The Sunday Telegraph reported that over the past three years, Amazon’s U.K. division has paid only £2.3 million in corporation tax on £7.1 billion of sales. Google paid £6 million in corporation tax on £2.5 billion of U.K. sales last year.
“It is unacceptable for a minority to avoid paying their fair share,” U.K. Chancellor of the Exchequer George Osborne said in a statement. “We are determined to tackle this problem.”
Looking to Generate Revenue
England’s economy, like most of the world, is sputtering. The government has had to slash spending and is looking for new ways to generate revenue so it can effectively deal with a growing deficit.
The British parliament invited the three American giants to a Nov. 13 hearing to explain why they pay little or no taxes on business generated in the United Kingdom. Some of their answers to questions drew laughs from the lawmakers.
Hodge called the responses “unconvincing, and in some cases, evasive.” She said Britain’s tax agency was being “way too lenient” in dealing with the multinational corporations that were taking advantage of loopholes to pay lower tax bills.
“Corporation tax revenues have fallen at a time when securing proper income from taxes is more vital than ever,” Hodge said.
Starbucks and Google operate out of home bases in the Netherlands and Ireland respectively, while Amazon’s European operations are headquartered in Luxembourg. That allows each company to take advantage of those countries’ low tax rates.
U.S. Companies Respond
Amazon issued a statement Monday saying the company “pays all applicable taxes in every jurisdiction that it operates within. Amazon EU serves tens of millions of customers and sellers throughout Europe from multiple consumer websites in a number of languages dispatching products to all 27 countries in the EU.”
Though none of the companies has been accused of doing anything illegal, Starbucks seems to be taking the most flak. Its stores in England have been targeted by protesters, and British citizens sent hundreds of e-mails to the company’s website, protesting what is being called immoral tax avoidance.
According to Reuters, Starbucks used intra-company transfers and loans to record a loss for its British business. The company also eliminated a 5 million pound tax bill by paying a royalty fee to a Dutch division for a license to use the brand.
The Seattle-based coffee brewer originally defended its position, but then retreated due to the negative feedback. The company issued a statement that read: “We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more. As part of this we are looking at our tax approach in the UK.”
Osborne said that the British government will hire more investigators in an attempt to collect £2 billion more in tax revenue from multinational companies.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at email@example.com.
- McCaffrey, D. (2012, December 1). Tax: Starbucks, Google And Amazon ‘Immoral.’ Sky News. Retrieved from http://news.sky.com/story/1019683/tax-starbucks-google-and-amazon-immoral
- Lawless, J. (2012, December 3) Britain To Clamp down on Corporate Tax Avoidance. Associated Press.
- Vina, G. and Crowley, K. (2012, December 3). Osborne Pledges U.K. Tax Clampdown as Starbucks to Pay More. Bloomberg News. Retrieved from: http://www.bloomberg.com/news/2012-12-03/osborne-pledges-u-k-tax-clampdown-as-starbucks-to-pay-more.html
- Starbucks Tax Backlash: Firm Pledges Action. (2012, December 2). Sky News. Retrieved from http://news.sky.com/story/1019511/starbucks-tax-backlash-firm-pledges-action