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News : UK Economy Last Updated: Oct 16, 2012 - 4:16 PM

Starbucks among US multinationals avoiding/ evading taxes in UK
By Finfacts Team
Oct 16, 2012 - 2:12 PM

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Starbucks, the global coffee brand, has been identified as another US multinational that is avoiding/ evading UK corporate taxes or paying very low levels.

Reuters in a special report, says Starbucks has been telling investors that it is profitable in the UK but its accounts in recent years show losses.

The news agency says accounts filed by its UK subsidiary show that since it opened in the UK in 1998 the company has achieved over £3bn  ($4.8bn) in coffee sales, and opened 735 outlets but paid only £8.6m  in taxes, largely due because the taxman disallowed some deductions.

Over the past three years, Starbucks has reported no profit, and paid no corporate tax, on sales of £1.2bn  in the UK. McDonald's, by comparison, had a tax bill of over £80m on £3.6bn  of UK sales. Kentucky Fried Chicken, part of Yum Brands Inc., the no. 3 global restaurant or cafe chain by market capitalisation, incurred taxes of £36m  on £1.1bn  in UK sales, according to the accounts of their UK units.

In its global accounts. Starbucks paid an average tax rate of 13% on overseas , one of the lowest in the US consumer goods sector. Reuters says Starbucks uses inter-company charges for royalties on intellectual property, which is the common mechanism used by  tech companies such as Google and Microsoft, to transfer funds to low tax or no tax jurisdictions.

The Huffington Post reports that Amazon, the UK's most popular shopping site, generated £3.2m in UK profits last year yet managed to pay zero corporation tax as its European headquarters are registered in the tax haven of Luxembourg.

British business generated £2.53bn in revenue for Google last year yet the company paid just £6m in corporation tax.

Figures for 2010 show that Apple, the biggest company in the world, paid £10m on £1.3bn profit, while internet auction site, eBay, paid £3.4m on £180m profit.

Companies claim that they are complying with the law but the rationale for multi-billion dollar charges is not disclosed.

For more background information, see here.

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