Starbucks, under fire in UK, seeks US tax

WASHINGTON - Reuters

Starbucks Coffee store on the Embarcadero in San Francisco, is shown. AP photo

Coffee chain Starbucks, which has faced criticism for its low tax rate in Britain, has sought new tax breaks in the United States in comments to a congressional committee.

As U.S. lawmakers move closer to possibly overhauling the tax code for the first time since 1986, scores of companies and interest groups have submitted comments to the tax law-writing Ways and Means Committee in the U.S. House of Representatives.

Ways and Means Chairman Dave Camp, a Republican, has vowed to introduce tax code overhaul legislation this year.

Like other companies with substantial foreign profits, Starbucks wants profits made outside U.S. borders to be spared, in whole or in part, from the U.S. corporate income tax. Starbucks expressed support in its comment letter for a territorial tax system that would permit this.

More particular to Starbucks itself, the company also asked for expanded tax breaks for the royalties it pays to entities that operate many of its stores outside the U.S.

Tax economist Martin Sullivan, a former Treasury Department official who has testified in hearings for Democrats, said the Starbucks proposal would move policy in the wrong direction.

“In a principled territorial system, all royalties would be subject to tax because they are deductible in a foreign jurisdiction,” Sullivan said. “Otherwise that income is not taxed anywhere.”

Tax treatment of royalties for the use of intellectual property, such as the brand, were a part of the controversy in Britain.

Starbucks spokesman Corey du Browa said “We are simply seeking a level playing field and fair treatment of income from royalties for U.S. tax purposes regardless of business structure.”