As the US considers higher tax rates for the wealthy to deal with a budget crunch, a similar debate is going on across the pond. But in the UK, it's not the individually wealthy who are being eyed: It's those multinational corporations who, despite turning over hundreds of millions of pounds in revenue, routinely pay little to no tax on their local profits.
Protesters against corporate tax-dodging are set to occupy Starbucks coffee shops across the UK tomorrow, just days after the company and other multinationals like Google and Amazon were heavily criticized by an influential Parliamentary committee.
Starbucks has about 720 shops in the UK that last year generated sales of £400 million ($640 million). But in 2011 the company didn't pay a dime in UK corporate tax, despite saying in its 2011 annual report that "in particular, our Canada, Japan, UK, and China (business units) account for a significant portion of the net revenue and earnings of our international operations."
In fact, the company only paid corporate tax once in the past 15 years. though Starbucks argues the company paid £160 million ($256 million) over the last three years in other business and employee-related taxes.
Members of the direct action group UK Uncut said they plan to turn outlets into day cares and women’s shelters to highlight the company’s low tax bill, despite a company pledge yesterday to pay more.
“Until Saturday we won’t know how many shops our supporters will target," Uncut spokesman Tim Street says, "but we’re confident that it will make an impact. We have been campaigning against tax avoidance for the last two years since the Government’s comprehensive spending review. There is widespread public anger against corporate tax dodging which has become systematic and endemic," he says. “The country is really suffering under the austerity cuts, so to see big companies not paying their fair share adds to people’s anger. There’s no money yet, and hollow promises on press releases don’t fund women’s refuges or child benefits.”
Earlier this week, Parliament's Public Accounts Committee criticized global firms such as Starbucks, Google, and Amazon for paying little to no corporate tax in the UK despite turning over hundreds of millions of pounds in revenue. All deny aggressive tax avoidance.
Committee members said the corporations' practice of being based in lower-taxed countries, thereby preventing their profits from being taxed additionally in the UK, was an "insult" to British business.
Repeating her call to "name and shame" companies, committee chairwoman Margaret Hodge told the BBC that “the inescapable conclusion is that multinationals are using structures and exploiting current tax legislation to move offshore profits that are clearly generated from economic activity in the UK. HMRC [Her Majesty’s Revenue and Customs, the British government's tax department,] should be challenging this, but its response so far to these big businesses and their aggressive tax planning has lacked determination and looks way too lenient.”
She had previously supported a boycott of Starbucks.
George Osborne, the British chancellor of the exchequer (equivalent to the US secretary of the treasury), responded by giving HMRC an extra £154 million over the next two years to crack down on tax avoidance.
Starbucks didn't return calls for comment to the Monitor about the protests or the MPs’ criticism, but Thursday the company said it would now pay an extra £20 million ($32 million) over the next two years. In a statement the managing director of Starbucks' British arm, Kris Engskov, said: “Today, we’re taking action to pay corporation tax in the United Kingdom - above what is currently required by tax law. We know we are not perfect. But we have listened over the past few months and are committed to the UK for the long term. We hope that over time, through our actions and our contribution, you will give us an opportunity to build on your trust and custom.”
Becky Jarvis, campaigns manager at the one-million strong online pressure group 38 Degrees, said companies had underestimated public opinion. “We have been campaigning on this for the last couple of years, but it seems it’s only now the government has been prepared to listen," she says. “This is something they need to deal with now especially as the chancellor of exchequer announces a new round of cuts in his autumn statement. We will be looking at answers through research next year by tax experts and we think there are ways round international law.”