United Kingdom lawmakers tore into the chief of the tax authority for allowing coffee chain Starbucks to pay almost no corporation tax despite selling coffee and snacks worth billions of pounds to British customers.
Members of parliament on the Public Accounts Committee, which is tasked with ensuring value in government financial affairs, said Starbucks's low tax payments had undermined public trust in the tax system. The low tax payments from Starbucks have become a political issue in Britain since they were revealed in a Reuters investigation last month.
"It just smells and it doesn't smell of coffee. It smells bad," Richard Bacon, member of parliament with the governing Conservative party, told Lin Homer, chief executive of the tax authority, Her Majesty's Revenue and Customs (HMRC).
Reuters reported last month Starbucks had paid no corporation tax or income tax in the past three years and had paid only 8.6 million pounds in total over 13 years during which it recorded sales of 3.1 billion pounds. The company avoided U.K. taxes by reporting losses to HMRC, even as it told investors its U.K. operation was profitable.
One of the ways that Starbucks minimizes its British profits and therefore its UK tax liability is by having the U.K. unit pay large royalties to its subsidiaries in other countries for use of its brand. Starbucks pays a larger share of British sales as royalties to subsidiaries outside Britain than rivals such as McDonald's.
