Rising British wrath has led to a two-month-old national boycott of Starbucks for allegedly diverting profits to lower its taxable income, with the call to avoid the company’s coffee shops promoted even by leading lawmakers and top government officials. Under intense pressure, Starbucks — though it denies dodging taxes — announced a major deal with the British government Thursday to overhaul its tax policy here, forgoing legal loopholes and agreeing to pay millions more in corporate taxes over the next two years.
The debate here could propel the issue of how and where corporate taxes are paid toward the top of the international agenda. Along with the Germans, the Conservative-led British government — which takes over the presidency of the Group of Eight leading world economies next year — launched a push last month for far tougher tax standards on global companies, with the first draft of an action plan set to be presented at a meeting of the world’s 20 leading economies in February.
In the United States, corporate taxes have been heatedly discussed amid the looming fiscal cliff and a more sweeping overall of U.S. tax codes planned for next year. With U.S. multinationals holding an estimated $1.7 trillion in earnings abroad to avoid the relatively high U.S. corporate tax rate of 35 percent, calls are growing to effectively mirror at least some of what Britain has set out to do: lower legal rates, while cracking down on ploys used by companies to avoid paying corporate tax.
On Wednesday, the British government announced a $123 million boost in funding for Her Majesty’s Revenue & Customs service that would, among other things, mean more personnel scouring corporate tax filings in search of fudges and fraud. Even as the government is moving to slash the corporate tax rate to encourage honest reporting, calls are growing to “name and shame” foreign companies seen as tax code manipulators.
“We want these large multinational companies to pay proper taxes here in the U.K.,” Prime Minister David Cameron said Wednesday on the floor of Parliament. He added that “some companies have been pursuing rather strange practices to pretend that their revenues” are lower in Britain than they really are.