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"
"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."