Starbucks, Google and Amazon to Face Legislators' Probe Over Tax Avoidance

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By Jerin Mathew | November 12, 2012 5:23 PM EST

Starbucks has paid just £8.6m in taxes on £3bn sales in the UK since 1998.

Amid mounting concerns about multinational companies' tax avoidance in the country, Starbucks, Google and Amazon are facing a probe from the UK lawmakers over their payment of smaller amount of taxes, despite generating billions of dollars in sales.

The Public Accounts Committee (PAC), which monitors government financial affairs, has invited the companies to give evidence regarding the matter.

Earlier, Reuters reported that coffee chain Starbucks has paid just £8.6m in taxes on £3bn sales in the UK since 1998, and it has paid no corporation, or income, tax in the country in the past three years.

Following the report, direct action group UK Uncut was planning to target dozens of Starbucks branches and to turn them into crèches, refuges and homeless shelters. The group previously led protests against telecom major Vodafone and pharmacist Boots over their tax practices.

"It makes people incredibly angry in the current fiscal climate," Reuters quoted Margaret Hodge, a member of parliament for the opposition Labour party and chairman of PAC, as saying.

Starbucks earlier dismissed the accusations, claiming that it followed the tax rules in every country where it operates.

"Over the last three years alone, our company has paid more than 160 million pounds in various taxes, including National Insurance contributions, VAT and business rates," Starbucks CEO Howard Schultz said in a blog.

Despite reporting $4bn (£2.51bn) UK sales and a group-wide profit margin of 33 percent in 2011, Google had just £3.4m as its tax charge for the year. Amazon's main UK unit paid less than £1m in income tax in 2011, while its UK sales totalled between $5.3- 7.2bn (£3.33-£4.53bn).

While Google channels its non-US sales via an Irish unit to pay taxes at a rate of 3.2 percent on non-US profits, Amazon reports European sales through a Luxembourg-based unit to reduce tax rates on foreign profits to 11 percent. On average, corporate income tax rate in major markets amounts to about 30 percent.

The PAC will question Starbucks CFO Tory Alstead, Google UK CEO Matt Brittin, and Andrew Cecil, Brussels-based Director of Public Policy for Amazon.

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