How do international corporations avoid paying taxes?

A good example is the methods Starbucks uses to transfer money to different nations. Switzerland is a key money laundering operation. They're willling to pay high interest rates to the banks that launder the money. The same accounting tricks were a reason profitable overseas GM divisions couldn't seem to bail out their US divisions, so taxpayers footed the bill. Many deductions are allowed after lobbyists get to politicians.

"Starbucks pays UK corporation tax for first time since 2009, ...

Starbucks reportedly paid just £8.6m in corporation tax in the UK over 14 years and nothing in the last four years - despite sales of £400m last year.

 

As part of its tax affairs, the firm transferred some money to a Dutch sister company in royalty payments, bought coffee beans from Switzerland and paid high interest rates to borrow from other parts of the business. ...

The Public Accounts Committee of MPs said last year it "found it difficult to believe" Starbucks "was trading with apparent losses for nearly every year of its operation in the UK"

http://www.bbc.co.uk/news/uk-politics-23019514

"If you hear the term "coffee nation" you probably think of Colombia, Brazil or Ethiopia. Remember, Switzerland is not even close to growing coffee beans, the climate is simply not warm enough. Yet, three quarter of worlds trade with coffee beans takes place in Switzerland."

"A 4.7% premium is paid to the Dutch division of Starbucks – the regional headquarters – for rights images and the coffee recipes. The premium, which used to be 6% before Her Majesty's Revenue & Customs (HMRC) asked for it to be lowered, also includes the cost of the roasting process that takes place there.

Where does it buy the coffee beans? From the company's Swiss operation at up to a 20% premium. The Lausanne-based business, which employs 30 people, buys around $1bn of coffee, making around $200m from the mark-up it charges the UK business. It pays a tax rate in Switzerland of around 12%. The company says it pays higher prices because it only buys premium coffee beans.

Why does the UK operation pay a premium? The stores are not franchises, however HMRC allows companies to pay intellectual property fees to overseas parent companies if they are made at "arm's length". Starbucks can charge the premium if it can show that it would have agreed on the terms between the parent company and UK company even if they were not connected.

Do other businesses charge a premium? Yes. McDonald's and Burger King charge premiums of up to 5% of turnover, while Wal-Mart charges UK subsidiary, Asda, 0.6% for services including royalties. However, all three make a profit in the UK and pay subsequent taxes.

...

Starbucks also paid other group companies for unspecified services, including an unknown Swiss-based associate. The Europe, Middle East and Asia division, which oversees the UK operation, also loans cash for investment, which it then charges interest on. This can be written off against tax."

http://www.guardian.co.uk/business/shortcuts/2012/nov/13/starbucks-your-tax-questions-answered

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Comments

  1. williamemills41

    Money laundering used to be simple when only the criminals did it…now we have lawyers and legislators colluding to rob governments of billions per year. Solution? Seize, liquidate and auction for tax evasion, and charge any legislator and lobbyist with conspiracy to defraud if they sponsored or wrote the bills that allowed this to happen.

    June 23, 2013
  2. monkeygirl21

    What I do not understand is why people are not more angry about this. They seem to be very passive and accepting of it, and it is so a vast amount of money we lose. Now talk about “Obama phones” and food stamps, and they start screaming and pouting. I do not get it.

    June 23, 2013
    1. gbakere

      It’s because politicians who wish to eliminate Obama phones and food stamps are working for the power brokers who wish to reduce their own taxes and eliminate regulations which cost them money. Obama phones and food stamps cost money – money that comes from tax dollars. One way to reduce taxes is to eliminate benefits to the needy. Nothing they do has anything to do with what’s right or what’s best for our society. Everything they do has only to do with improving their bottom line. The more we drift toward pure capitalism, the more those at and/or near the top, good intentioned or not, are literally forced into tyrannical behavior in order to maintain their lifestyles. Profit doesn’t come from caring about society with the exception of charitable contributions which are made for the purpose of creating a positive public image. Major corporations often intimidate employees into contributing to the “United Way.” Do they give their employees recognition for that? In most cases, no. “X” corporation receives all the credit for the donations from its employees. It’s all about the bottom line and public image is certainly a huge part of that. It’s ironic that Exxon-Mobil supports candidates who want to reduce or even eliminate funding for education, yet they run commercials which say, “Let’s fix this,” citing that the US has slipped in its quality of education and test scores. On the surface, those commercials make it look like Exxon-Mobil cares about US education. There’s profit in public image. There’s no profit in sentiment. The idea that Exxon-Mobil would care about our educational system is absurd, especially when you consider that Exxon-Mobil and other fossil fuel corporations have manipulated our system so they receive billions in subsidies and tax breaks. People aren’t angry about this because not enough people have connected the dots…yet. We’re seeing some positive signs however.

      June 23, 2013
      1. livelonger

        In addition there’s no incentive for an international corporation like Exxon to fund national efforts when they are involved like the military in 100’s of nations.

        June 23, 2013
    2. williamemills41

      My guess is because they are more upset with the government for wasting billions of tax dollars a year for projects, things and events that no reasonable thinking tax payer would ever be able to justify spending while neglecting the things that the tax proceeds are supposed to be used for. As long as there is no accountability within the government, there will be no anger towards those that can “get over” on the legal loopholes that the crooks in congress passed so they could get rich.

      June 24, 2013
  3. Brn2bfree

    How do international corporations avoid paying taxes?
    ~~~~~~~~~~~~~
    They contribute to the Obama Regime… GE and crony capitalism run a muck with this admistration.

    June 23, 2013
    1. livelonger

      Wow! the best Pinocchio lie of the week.

      June 23, 2013
    2. livelonger
      " His stated purpose in this is the goal of causing audiences to react based on emotion. “80 percent of our life is emotion, and only 20 percent is intellect. I am much more interested in how you feel than how you think.” “If I respond to you quietly, the viewer at home is going to have a different reaction than if I respond to you with emotion and with passion and I wave my arms around. Somebody like this is an intellectual; somebody like this is a freak.”"

      ""the Wall Street Journal wrote that “PolitiFact’s decree is part of a larger journalistic trend that seeks to recast all political debates as matters of lies, misinformation and ‘facts,’ rather than differences of world view or principles.” The editors of PolitiFact announced “We have concluded it is inaccurate to call the plan a government takeover.”
      http://en.wikipedia.org/wiki/Frank_Luntz#2010_.22Lie_of_the_Year.22_award

      June 23, 2013
      1. gbakere

        I am still trying to figure out why anyone (other than someone of like mind or unfamiliar) responds to ol’ freeta. He never made sense and he never will.

        June 24, 2013