Starbucks may face UK tax probe into sales earnings

LONDON - Reuters

An empty cup is left on a table outside a Starbucks coffee shop in London. UK patrons may boycott Starbucks. REUTERS photo

Starbucks may face an inquiry into its British tax affairs after a senior member of parliament (MP) called for an investigation into how the company could avoid paying tax on 1.2 billion pounds ($1.93 billion) of sales since 2009.

A Reuters report that Starbucks had been telling investors its UK unit was highly profitable while telling the UK authorities that the unit was lossmaking, and thereby not liable for tax, undermined public trust in the tax system, MPs said.

Margaret Hodge, Chair of the Public Accounts Committee (PAC) and an MP for the centre-left opposition Labor party, said Her Majesty’s Revenue and Customs (HMRC), the UK tax authority, should look into Starbucks’ affairs.

‘No evidence of wrong doing’

Hodge, who has the authority to instigate an inquiry, said the head of HMRC would be testifying to the PAC, which is tasked with ensuring value in government financial affairs, next month and that she expected questions about Starbucks to be raised.

There was no evidence that Starbucks had been engaged in any kind of wrongdoing.

HMRC does not comment on individual taxpayers and rejected any challenge to its efficacy.

“We make sure that multinationals pay the right tax to the UK in accordance with UK tax law,” it said in a statement.

Steve Baker, a member of parliament (MP) for the ruling centre-right Conservative party, also called for an inquiry.

“I am a highly free market person but what I want is simple transparent tax law that is actually obeyed ... there are some serious questions to answer here,” he said. Taxpayer confidentiality means HMRC would not be able to confirm a probe even if it does launch one. Baker and Hodge said the government could get around this and reassure the public the matter was not being ignored, by it confirming in parliament that an HMRC probe was taking place.

Changes to tax law

Labor MP Michael Meacher said he planned to table a motion in parliament asking the government to launch its own investigation into Starbucks, and potentially, other big companies which are paying minimal taxes on big UK revenues. The MPs said such investigations should also lead to recommendations on how to change tax law to prevent companies from shifting profits overseas. Starbucks declined to say if it was considering any changes to its accounting practices but said it was “totally committed to the UK”.

“Starbucks pays and will continue to pay our share of taxes in the UK to the letter of the law,” Kris Engskov, Managing Director of Starbucks Coffee UK, said in a blog on the company’s website. He went on to note Starbucks’ contribution to the UK economy as an employer and as a customer for farmers and cake makers. Unions said the Reuters story on Starbucks showed the government needed to do more to close loopholes that allow companies avoid taxes.

“Hardworking families are being forced to pay off the deficit while companies like Starbucks laugh all the way to the bank,” said Unite general secretary, Len McCluskey.

The Northern Ireland Committee of the Irish Congress of Trade Unions called for a boycott of the cafe chain, a call echoed by some MPs.