Tax bosses say Starbucks has not been abusing the system

Tim Wallace
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STARBUCKS’ tax arrangements are perfectly legitimate under international tax rules and do not represent abuses of the system, tax heads from HM Revenue and Customs (HMRC) and the Treasury said yesterday.

The coffee chain had come in for criticism for recording no UK profits and so not paying corporation tax in Britain, despite large sales in the country.

But that is the result of the firm abiding by international agreements, not of abusive arrangements according to the Treasury’s corporation tax head.

“The media debate has fundamentally been about taxing rights allocated between countries – something determined in accordance with international principles and not something the general anti-abuse rule (GAAR) could rewrite,” Mike Williams told the House of Lords economic affairs committee.

“Multinationals adopt a range of tax structures and when they are abusive the GAAR will apply to multinationals.”

Meanwhile HMRC’s Judith Knott argued the GAAR will cut down on legal bills by creating a simple smell test for tax schemes, rather than needing expensive advice.