Starbucks roasted by British lawmakers over tax stance
British lawmakers grilled global coffee giant Starbucks over its tax policies on Monday, arguing that claims that its British division was unprofitable “just doesn’t ring true”.
The Public Accounts Committee – a panel of British lawmakers – also put top managers from US online retailer Amazon and Internet search giant Google under the spotlight over the amounts of tax paid in Britain.
Troy Alstead, Starbucks global chief financial officer, told lawmakers that the chain was “an extremely high tax payer” globally and denied tax avoidance.
Starbucks has already confirmed it has not paid any corporation taxes in Britain for the past three years owing to fees paid to its businesses in the Netherlands and Switzerland, including royalties for brand usage.
Margaret Hodge, a Labour party deputy who chairs the committee, asked Alstead why a previous finance chief said Starbucks UK had an operating profit rate of 15 per cent in 2007 – when it also posted a loss.
“It is hard for the ordinary person to believe it’s fair,” Hodge told the Starbucks executive.
“It makes people incredibly angry in the current fiscal climate. You have run the business for 15 years and are losing money and you are carrying on investing here. It just doesn’t ring true.”
However, Alstead maintained that the group’s British operations made a loss in 2007 and had only made an annual profit once in the past 15 years of trading.
He told the committee: “Respectfully, I can assure you there is no tax avoidance here. We have a global tax rate of 33 per cent around the world. Our tax rate outside the US is 21 per cent.
“That is higher than most multinationals’ global rate. We are an extremely high tax payer. We are not aggressively looking to avoid tax.”
Alstead added that the royalty payments are transferred to Starbucks’ European headquarters in Amsterdam, where the group receives a favourable taxation rate from Dutch authorities.
Starbucks buys all its coffee via Switzerland, which also offers lower taxation rates.
Alstead admitted that he was not happy with its operations in Britain, where the group faces fierce competition and high property rental costs.
The committee also quizzed Amazon’s public policy chief Andrew Cecil and Matt Brittin, Vice President for Sales and Operations, Northern and Central Europe at Google.
Amazon and Google confirmed that the companies both use favourable tax jurisdictions -- Luxembourg and Ireland respectively -- due to their low taxation levels.
Lawmakers turned their fire on Amazon after its Cecil failed to answer basic questions about the company or make basic information like revenues available.
Cecil was unable to explain the corporate structure of the group and admitted not knowing who owned Amazon’s Luxembourg-based holding company.
Conservative lawmaker Stephen Barclay suggested he asked one of his advisers to “ring head office” so he could give them a proper answer.
Hodge told the director that he was not a “serious person” to appear before the committee and said they would seek another Amazon executive to answer their questions.