Tag Archives: HMRC

Tax avoidance: Starbucks caught out by shareholder briefings

Historic claims made by Starbucks executives in little-scrutinised briefings to analysts and shareholders laid the way for the company to be slammed in a report by MPs today. The multinational is accused by the Public Accounts Committee of conniving to avoid corporation tax by pretending to be unprofitable in the UK – ‘exporting’ the real profits to jurisdictions with lower tax rates:

“Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK, but in 2006 it made a small profit.”

Starbucks claimed to the committee that “it has been difficult for us to make a profit in the UK”. Indeed, 2007 was ninth year in ten that the company filed losses in the UK. Strange, then, given that annual reports singled out the UK as one of the company’s cash cows:

“In particular, our Canada, Japan, UK, and China MBUs account for a significant portion of the net revenue and earnings” — Annual Report 2011

“Revenues from countries other than the US consist primarily of revenues from Canada and the UK, which together account for approximately 66% of net revenues” — Annual report 2009

But it was phonecall briefings to analysts from this period in which Starbucks really screwed themselves over:

  • On the release of quarterly earnings figures in 2007, then Chief Operating Officer Martin Coles told analysts that the profits from the UK were being used to pay for expansion in foreign markets
  • CEO Howard Schultz claimed that Starbucks’ UK arm was so successful that he would adapt lessons learned here for the American market
  • Again in 2007, then-Chief Financial Officer Peter Bocian claimed Starbucks UK had pulled in profits margins of nearly 15 percent — almost £50m

Despite that impressive roster of duplicitous statements, it would take something to top claims made in respect of 2011, where Starbucks’ accounts department would have us believe the UK business made losses of £33m. At the time, executive John Culver told investors:

“We are very pleased with the performance in the UK.”

But CFO Troy Alstead told the select committee:

“We are not at all pleased about our financial performance [in the UK].”

Errr … so which is it?

Vodafone executive quits amid $2.6bn tax avoidance scandal

Vodafone’s top lawyer in India has quit after being tangled up in a four-year long tax avoidance scandal. The row has seen the Indian government bullied by its biggest foreign corporate investor — but officials are not giving up on extracting $2.6bn from the company.

Executive Andre Jerome led Vodafone’s defence against the Indian government, which imposed a $2.6bn tax bill on them for the takeover of Indian mobile interests from Hong-Kong based Hutchison Whampoa in 2007. Having lost a case in the Supreme Court, officials are looking to introduce retroactive legislation to recoup the cash.

The dogged determination of Indian authorities stands in marked contrast to Britain’s HMRC, who let Vodafone off tax bills of up to £7bn after senior civil servants — such as permanent secretary Dave Hartnett — were lunched to within an inch of their lives.

On tax enforcement, Britain could learn a lot from its former colony.

Civil servants required to fill in forms before buying tea and coffee

HMRC have introduced rules which require office staff to fill in a forms and keep records before they can club together to buy tea, coffee and milk, Scrapbook can reveal. Workers at the National Insurance Contributions and Employer Office (NIC&EO) must obtain written permission from a staff officer (SO) before forming that age-old office institution: a tea and coffee club.

1.7.2 Tea clubs or similar

Written permission must be obtained from an SO using form Appendix NIC&EO 1 before a tea club is set up. When running a tea club a collector must be appointed and issued with form Appendix NIC&EO 3. The contributor must sign to confirm amount paid. All forms must be kept for 3 years

A receipt must be obtained for any products purchased and attached to the collection sheet as a record.

All goods and consumables, for example bulk buys of tea and coffee, etc., must be locked away when not in use and only accessible by members of the club. If the tea club has either 5 members or more and the club has more than £20.00 carried forward then the guidance for setting up and running a club must be followed.

This is simply beyond satire.

UPDATE: It seems the mad bureaucracy above, taken from the “Collecting money in the workplace guidance” of HMRC’s office in Longbenton, Newcastle, is not the work of a lone, over-zealous pen pusher. Here is the tea club policy of HMRC’s Special Investigations Unit in Manchester!

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