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Best of luck getting any corporation tax out of Starbucks

The new chief executive of Starbucks says there’s no way the company will pay even a penny of UK corporation tax over the next three years or so.

In a move that will surely ignite the ire of contractors and freelancers everywhere that have been having to make up for corporation tax shortfalls through their own self-assessment tax payments, Mark Fox says that UK corporation tax simply won’t be applicable to the multinational until it starts turning a profit. Apparently – and this is news to me – the purveyor of overpriced coffee isn’t making any money from its British shops. How this is possible is anyone’s guess, but Fox says he’s got the answers apparently.

The chief executive did say that Starbucks had been rocked by bad publicity after it was revealed two years ago that the multinational had been engaging in tax avoidance. Starbucks was paying an annual six per cent payment to its Amsterdam offices, something it called a ‘royalty’ payment, in order to keep revenues down; it also ships coffee beans from one division of the company to the other through a ‘sale’ process that incorporates a hefty mark-up. In other words, Starbucks UK has to pay for its own coffee beans it purchases from its own company – and that it gets overcharged for these beans, again from its own company. If that’s not completely barmy I don’t know what is.

Meanwhile, do you know how much corporation tax Starbucks has actually paid since 1998 when it first started up in the UK? £8.6 million. That’s it. £8.6 million is practically nothing.

Meanwhile, Fox dismissed the idea that Starbucks paying royalties to itself and buying beans from itself isn’t the height of absolute lunacy. That’s because it’s not – it’s a specific strategy designed to eat up ‘profits’ to a point where there’s no profit to subject to tax. Meanwhile, the core firm is still raking in all that cash – untaxed cash, mind you – whilst giving the UK tax authority the old two-finger salute.

Apparently this is just how multinationals do things, thanks to legal loopholes that allow it to happen. It absolutely drives me around the bed to think of it but there’s literally nothing I can do about it, short of simply not buying overpriced drinks from that blasted company.

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