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Catching a Falling Financial Knife

Starbucks £23 Million Tax Dodge Facts, Offers £10 million Donation per year for 2 years

Politics / Taxes Dec 07, 2012 - 04:53 AM GMT

By: Nadeem_Walayat

Politics

Starbucks is feeling the heat as the general public is seeing through the smoke and mirrors of its publicity machine's assertions that it effectively makes no profits in the UK when the reality is that Starbucks for well over a decade has been transferring its profits abroad to the likes of the Bermuda tax haven and instead reporting losses, giving it an unfair advantage over smaller competing UK coffee houses who do pay an infinitely greater amount of tax on profits.


Starbucks in response to growing public outrage and consumer boycott has just announced that they are choosing to pay £10 million a year for 2 years as a donation to HMRC, which still amounts to a mere pittance of the actual tax they should be paying as the following analysis illustrates.

Starbucks Profits and Tax Facts

Starbucks annual UK turnover £400 million

Corporation tax paid - ZERO - Declared a loss of £32 million instead.

Group profit margin - 19%.

Comparison with UK rival Costa Coffee

Costa annual UK turnover £377 million

Profit £49 million - Profit Margin 13%

Corporation tax paid for 2011 - £15 million

Therefore tax due on the basis of profit margin and the Costa example, Starbucks should pay between a minimum of £16 million and upto as much as £23 million on the basis of a 19% profit margin, that accumulatively estimates to have avoided corporation tax of £200 million over the past 10 years against an actual payment of less than £9 million.

great to be a Starbucks shareholder!

Other Corporate Tax Dodgers

  • Amazon - £3.5 billion UK turnover
  • Google - £2.6 billion UK turnover
  • Apple - £10 billion UK Turnover
  • EADS - £3 billion UK Turnover
  • IBM - £3.8bn UK Turnover

The effect of this disparity in tax rates paid is highly damaging to the British economy, because it results in large multi-nationals having an unfair advantage over small domestic rivals who cannot compete and are eventually put out of business, and thus resulting in job losses and lack of investment as foreign multinationals pull capital out of the UK (un-taxed profits), instead there needs to be a level playing field in terms of tax for all corporations that operate in the UK.

A recent report by the Commons Public Accounts Committee estimated the total tax loss to Britians at as much as £32 billion per year as a consequence of multinationals and most of Britain's wealthiest individuals funneling profits and income off to the likes of the Cayman Islands tax haven and then using front companies to buy property in London without any tax liability.

The other side of the equation is that the government would just waste this tax income on the likes of the NHS black hole and the benefits culture, so having the pain of being in receipt of less revenue prompts governments to deal with the real issue that is out of control government spending.

What is the Answer ?

The real answer to kick start Britain's economy would be to CUT taxes, to cut the corporation tax down to 10%, that would make tax avoidance by multi-nationals less advantageous and allow British businesses to better compete and to expand and employ more workers thus igniting a real economic boom rather than a deficit and debt fuelled unsustainable government spending booms of past. Especially as many of these politicians that spew anti avoidance outrage on both Labour and Conservative benches are expense fiddling tax dodgers themselves!

In the meantime ordinary UK tax payers continue to subsidise the likes of Starbucks and the 1% of Britain's wealthiest.

Source and Comments: http://www.marketoracle.co.uk/Article37922.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2012 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.

Stocks Stealth Bull Market Ebook DownloadThe Interest Rate Mega-Trend Ebook DownloadThe Inflation Mega-Trend Ebook Download

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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Catching a Falling Financial Knife