Did Starbucks report losses to taxman but boast of profits to - Firstpost

London: Starbucks told investors its European businesses made a $40 million profit in 2011, but accounts filed for its UK, German, and French units, which make up 90 percent of European revenues, showed a loss of $60 million.

Did the coffee giant lose $100 million in the year between advising investors and filing its returns to European tax men?

Far from it. An examination of Starbucks?s company accounts in Germany and France shows the firm employed the same tactics there that Reuters recently showed it has used in the UK: reporting losses to the taxman while boasting healthy cashflows to investors.

Starbucks Chief Financial Officer Troy Alstead said the company simply used a different measure of profit when reporting its performance to investors and when filing its tax returns.

If the chain had reported its Europe, Middle East and Africa (EMEA) region profit of $40 million in the UK, France, Germany or the Netherlands, where its EMEA headquarters is based, it would have faced a tax liability of around $11 million, according to Reuters calculations.

Did the coffee giant lose $100 million in the year between advising investors and filing its returns to European tax men? Reuters

Instead, accounts for its European units show it paid around $1.2 million in Dutch taxes and racked up millions of dollars worth of accounting losses it can use to reduce future German, French or British tax bills.

There is no evidence the firm has broken tax rules in any of the countries where it operates, and investors naturally expect companies to manage their tax bills.

?If you?re not finding ways to mitigate your tax responsibilities to the best of your ability, that?s something that will impact shareholders,? said RJ Hottovy, an analyst who covers Starbucks for Morningstar.

Alstead said that while Starbucks tried to optimise its tax bill, the company followed the rules and was not an aggressive tax avoider.

?Our intent is to be absolutely fair taxpayers everywhere,? he said.

But muscular tax planning also brings risks. A YouGov survey conducted days after Reuters reported earlier this month that Starbucks had paid just 8.6 million pounds ($13.9 million) in British corporation tax on 3.1 billion pounds of sales over the past 13 years, showed that Britons now take a much more negative view of the firm.

The story prompted a wave of media criticism and British members of parliament called for an inquiry by the tax department. Prime Minster David Cameron, asked in parliament about the tax paid by Starbucks and other companies, said: ?I am not happy with the current situation. I think the HMRC (UK tax authority) needs to look at it very carefully. We do need to make sure we are encouraging these businesses to invest in our country, as they are, but they should be paying fair taxes as well.?

?TOTALLY COMMITTED?

In France and Germany, where Starbucks has not paid income tax in a decade of operations, some politicians now say their tax men should also investigate the coffee chain?s affairs.

Tax structures that allow corporations to shift money around to minimise taxes ?is a form of corporate welfare?, said Sven Giegold, Member of the European Parliament for the German Green Party. He said he would raise the issue of Starbucks tax record with tax authorities in Bavaria, where Starbucks?s German unit is based.

A spokesman for Germany?s left-of-centre Die Linke party said it would ask the finance ministry to investigate whether Starbucks had complied with German tax rules.

The finance ministry said it did not comment on individual taxpayers. French and German tax authorities also declined to comment, citing taxpayer confidentiality.

Starbucks said in a statement it was ?totally committed? to the UK, France and Germany. The company said that though it paid no corporation tax in what it called ?three of our largest and most important markets? in 2011, it had paid value added taxes, social security costs and business rates.

Alstead said the primary reason the French and German units didn?t pay corporation tax was because high rental rates and labour costs made it hard to turn a profit. The CFO said German tax authorities had expressed concern about the large accumulated tax losses Starbucks Coffee Deutschland had built up and was pressing the firm to agree not to use them to offset any future taxable income.

Starbucks said its overall tax rate, which includes deferred taxes that may or may not be payable in the future, was 31 percent in 2011. This compares with an average US corporate income tax rate of 26 percent from 1987 to 2008, according to the Congressional Budget Office.

Source: http://www.firstpost.com/business/did-starbucks-report-losses-to-taxman-but-boast-of-profits-to-investors-511242.html

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