As the legal avoidance of corporate tax is a very popular topic now, The Legal Stop have learnt there is a chance that Starbucks might change the way it operates in order to stop paying corporation tax in the UK at all..
Regardless of the fact that Starbucks has almost one-third of the UK coffee shop market, researches show that it has paid corporation tax only once in 15 years.All foreign countries have to pay corporation tax on profits made in the UK and UK-based companies pay it on their taxable profits no matter where they were made.
The Public Accounts Committee chairperson Margaret Hodge shared her opinion about the work of HMRC in a report published on Monday. In her statement, she said that HMRC needed to be “more aggressive” because now the level of tax taken from multinational firms with large UK operations was “outrageous and an insult to British businesses and individuals who pay their fair share”.
The best example for this is Starbucks. It sold goods for nearly £400m in the UK last year, but in fact avoided paying corporation tax, due to the fact that they did things like transferring some of their money to a sister company in the Netherlands in the form of royalty payments, buying coffee beans from Switzerland and paying high interest rates to borrow money from other parts of the business.
This sister company in theNetherlandsis currently paid 4.7% of Starbucks’ sales but this will not help reducing the tax liability anymore. HMRC promised that in the future all international companies would pay the tax due “in accordance with UK tax law”.
Starbucks will give their opinion over the changes on Wednesday ahead of Chancellor George Osborne’s Autumn Statement. Amazon and Google were also criticized by the Public Accounts Committee’s report because they also did not pay enough corporation tax.
HMRC is promised to get £77m of new money in order to cope with wealthy people and big companies who try to avoid paying taxes.The expected result after these changes is equal to £22bn a year.