The Tax Policy of Starbucks Will Probably Change

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.


HMRC vs. the Public Accounts Committee – Round 1

HMRC needs to think about new, tougher measures for businesses, which fail to pay tax in the UK. They are called upon to do it by MPs from the Public Accounts Committee. The current line raised some concerns, due to the recent tax avoidance schemes applied by major multinational companies, such as Amazon and Google, which have paid small tax to the UK, regardless of the huge turn over they have made.

As we have already announced, tax avoidance schemes seem to be very common among multinational companies. A great example is Starbucks for example. According to the researches they have made over #400m in the UK, however as they pay royalties to a sister branch in the Netherlands, for using the brand, they paid no corporation fee in the UK, despite the huge turnover.

After revealing the schemes, a number of other big companies have come under heavy fines. HMRC was criticised for failing to manage the case and ensure the companies pay what they are required to pay in the UK.

“These global companies are making money in the UK,” said Margaret Hodge, chairwoman of the Public Accounts Committee. “All we are saying is that if you have economic activities in the UK you are making profits and tax is payable on that.”

She says that the HMRC should be more “aggressive and assertive”, when it comes to fighting tax avoidance schemes, which might hurt the UK economics.

On the other hand, the HMRC replied back that all multinational companies with UK branches, pay the tax with accordance to the current laws.

Despite this, however, Chancellor George Osborne is set to announce details of a £154m fund intended to assist in dealing with tax issues relating to the affairs of large corporations and wealthier people.