International

U.S. companies to face U.K. lawmakers on tax

Customers leave a Starbucks coffee kiosk in the financial district of the City of London.

LONDON: U.K. lawmakers criticized executives of Starbucks, Google and Amazon Monday for not paying more tax in Britain and Amazon said it had received a $252 million demand for back taxes from France.

Britain’s Public Accounts Committee (PAC), which is charged with monitoring government financial affairs, invited the companies to give evidence amid mounting public and political concern about tax avoidance by big international companies.

Britain and Germany last week announced plans to push the Group of 20 economic powers to make multinational companies pay their “fair share” of taxes following reports of large firms exploiting loopholes to avoid taxes.

Amazon received a $252 million back tax claim from the French tax authority in September, related to its practice of channeling European sales through Luxembourg. The company said it was fighting the claim, referred to by an Amazon official at the hearing.

Members of Parliament (MPs) on the committee quizzed Starbucks Chief Financial Officer Troy Alstead about how the group’s U.K. unit managed to report 13 years of losses.

“You’re either running the business badly, or there’s some fiddle going on,” Austin Mitchell MP said.

Reuters report last month showed that Starbucks had paid no corporation, or income, tax in the U.K. in the past three years and had paid only 8.6 million pounds since 1998.

Over this period it only sold 3.1 billion pounds worth of coffee, prompting criticism from politicians and media commentators.

Alstead denied Starbucks was shifting profits out of the U.K. and blamed high rents for contributing to the company’s troubled record in the U.K.

He said the U.K. business only made a profit once, in 2006, despite him telling analysts on a conference call in 2009 that the U.K. unit was profitable and his predecessor listing the British operation in 2008, when asked about the foreign markets with the best margins.

Alstead also told the committee the company had an agreement with the Dutch authorities that allowed it pay a “very low tax rate” on its operation there.

Starbucks U.K. has an agreement to remit 6 percent of its turnover to the Dutch unit in respect to the use of the Starbucks brand.

Alstead also told the committee that Starbucks’s Swiss coffee trading unit charged group companies a 20 percent markup on coffee beans.

The company does not usually publish how much it spends on raw or green coffee beans but said in 2009 it bought 367 million pounds for an average $1.47 per pound, suggesting a total coffee bill of $539 million and that the Swiss unit, which employs 30 people, enjoyed income of almost $110 million that year.

The company declined to comment on the Reuters calculation. Alstead denied the world’s largest coffee chain channeled profits through tax havens and said it followed the law in every country where it operated.

Members of the committee repeatedly criticized Andrew Cecil, Brussels-based Director of Public Policy for internet retailer Amazon, for failing to answer questions about the operations.

Cecil declined several times to tell the committee the level of Amazon’s sales in the U.K.

Amazon’s annual reports do disclose this figure. The most recent regulatory filing gave U.K. revenues as 11-15 percent of total sales in 2011, an amount equal to $5.3 to $7.2 billion.

 
A version of this article appeared in the print edition of The Daily Star on November 13, 2012, on page 6.

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