Reuters has put out another Starbucks tax story.
Their special report out today has the title "Starbucks's European tax bill disappears down $100 million hole". It shows that Starbucks's company accounts in Germany and France employed the same tactics there that Reuters recently showed it has used in the UK: reporting losses to the taxman while boasting healthy cashflows to investors.
Starbucks told investors its European businesses made a $40 million profit in 2011, but accounts filed for its UK, German, and French units, which make up 90 percent of European revenues, showed a loss of $60 million.
Starbucks Chief Financial Officer Troy Alstead said the company simply used a different measure of profit when reporting its performance to investors and when filing its tax returns.
So, who are they telling the truth to, the investors or the tax authorities? Answers, written in the froth of a cappuccino please, would be welcome.
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its normal to talk to investors in terms of EBIT or EBITDA (as this is a measure of the earnings of the company), which as a taxable profit measure is useless so that would potentially explain the difference.
Then let’s tax on the basis of EBITDA….
Since I am personally taxed on my income, why should companies not be taxed on their revenues rather than their profits? Grant an allowance based on the size of the company (maybe average wage multiplied by number of employees) but the remainder is taxed.
Yes, I know, taxing revenues would leave a smaller pot to pay employees from, but I’m not sure that amounts to double taxation.
I think we have to allow for offset of legitimate costs
The problem is deciding what they are
I’m obviously missing something here.
If one of my clients (a small local coffee shop say) was reported in the local paper as was making profits of say £40,000 per year but was submitting tax accounts showing a loss of £60,000 a year I’m pretty certain that HMRC would be investigating the business very quickly. Neither would HMRC be in the mood to accept the business had “simply used a different measure of profit” to calculate its taxable profit.
I am willing to accept that Starbucks haven’t done anything wrong but would Troy Alstead tell us:
1. How he does it;
2. What expenses are included in calculating taxable profits which aren’t taken into account in the “investor’ accounts”; and
3. Why Starbucks funds a loss making European business?
So true Stuart
If you’d like to write this up as a blog – featuring the old problem we used to all know of people telling mortgage companies one thing and the revenue another I’d love to publish it
Just a variation on the above would be good…
Richard