Storm in a Coffee Cup Over Corporate Tax Loopholes

LONDON - A campaign to boycott big multinationals accused of dodging British taxes is posing some tough ethical dilemmas for the country's fair-minded consumers.

A Facebook friend reports that he is prepared to forgo his daily skinny latte from Starbucks, which is reported to have paid no tax in Britain since 2009. But he is reluctant to give up his account with the social media giant, whose local unit, Facebook UK, is said to have paid the equivalent of just $383,000 last year after earning $282 million.

A range of household name multinationals, which also includes the Internet giants Google, Amazon, Apple and eBay, has been sucked into a growing controversy that has led to accusations from members of Parliament that big business is gaming the taxman at a time when ordinary people are being forced to tighten their belts.

As two parliamentary committees prepared to question tax officials about the case of the Seattle-based Starbucks, Prime Minister David Cameron said this week he was unhappy about the level of tax avoidance among big corporations operating in Britain.

“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,” he told the House of Commons.

The companies named in a series of media investigations have responded that they are doing nothing more than utilizing ingenious and quite legal tax avoidance methods to reduce their fiscal bills.

The unwelcome publicity has nevertheless spurred activists such as the grassroots UK Uncut that have targeted alleged corporate greed in a time of austerity and budget cuts.

The pressure group has said companies such as Starbucks were in its sights for future protests.

“UK Uncut's previous sit-ins and occupations in the branches of tax dodgers have proved very effective in highlighting the unjust practices of big business,” Anna Walker, a spokesperson for the group, told the Guardian.

The companies named have come out fighting. Troy Alstead, Starbucks' chief financial officer, expressed his anger about misrepresentation of the company's tax situation.

He told the Financial Times this week that a quarter of the company's 600 British-owned stores were running at a loss and said its low corporate tax payments reflected mistakes of overexpansion. “I look forward to the day when we pay a lot more tax,” he said.

Mr. Alstead acknowledged that royalty payments to Starbucks regional headquarters in the Netherlands reduced the British unit's taxable income but the practice was comparable to other multinational retailers with overseas headquarters.

EBay, the online auction site, meanwhile reacted to reports that it paid the equivalent of $1.2 million to the taxman in 2010 when its British sales were worth $1.3 billion by telling the BBC: “EBay in Europe works with tax authorities and complies fully with all applicable tax laws and regimes.”

Mr. Cameron noted this week that tax avoidance by multinationals was a global problem.

But, as the Daily Telegraph's Damian Reece argued, it was one that had become more complex in the age of the Internet.

“In the age of cloud computing, things get even more complicated as corporation tax is applied using the principle of where a company's decision makers are based,” he wrote.

“It's hard to tax things happening in cyberspace.”