Spilling the beans: Starbucks sales tax evasion scandal report

Written on:October 19, 2012
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Corporations are under the spotlight

In the recent past, BBC, GlaxoSmithkline, Northern & Shell have been other companies to have indulged in tax evasion practices. BBC recently came under fire when it was discovered that huge remunerations to its staff enabled them to offer considerably less income tax. Pharmaceutical giant GlaxoSmithkline set up a subsidiary which lent £6.34 billion to a GSK company in the UK in 2010. In return, GSK paid £124 million as interest back to the Luxembourg subsidiary by effectively deleting that money from the UK company’s profits. The move enabled GSK to dodge 28% corporation tax.

In case of Northern & Shell, before 2009, the company’s subsidiaries in the UK had been lending money to each other to the tune of £804 million to evade taxes. Northern & Shell, then went onto establish a subsidiary in Luxembourg and transferred its loans to that company. Interest payments on those loans left the UK, leaving lower profits available for taxation by HM Revenue & Customs (HMRC). Instead of paying a £6 million towards corporation tax, Northern & Shell paid only 1% corporation tax.

What this means to Starbucks

All the tax evasion cases, latest being Starbucks sales tax evasion, point towards the weak taxation laws, burdened by heavy loopholes, that are being easily manipulated by the big players in the market. It is common man who is bearing the brunt of being an honest taxpayer, while the big companies which claim to have high ethical values clinically loot the nation with manipulative schemes.

     

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