Yahoo Finance Starbucks Boss Denies Making Money in Britain
Starbucks (NasdaqGS: SBUX - news) executive Troy Alstead has been told his claim the coffee giant makes a loss in the UK "doesn't ring true".
Mr Alstead, global chief financial officer at the company, denied lying to shareholders over the US chain's accounts when he appeared before the Commons Public Accounts Committee (PAC).
The PAC is questioning representatives of Starbucks, Amazon and Google (NasdaqGS: GOOG - news) about the amount of tax they pay in the UK amid mounting concern about tax avoidance by big international firms.
When grilled by PAC chair Margaret Hodge, Mr Alstead said Starbucks had only made a profit once in the 15 years it has been doing business in the UK.
"I assure you we are not making money," he told the committee.
"It's very unfortunate. We're not at all pleased about our financial performance here. It's fundamentally true everything we are saying and everything we have said historically."
Labour's Ms Hodge replied: "You have run the business for 15 years and are losing money and you are carrying on investing here. It just doesn't ring true."
Starbucks reportedly paid just £8.6m in corporation tax in 14 years of trading in Britain. It was also revealed it paid no corporation tax for the past three years, despite sales of £1.2bn in the UK.
Ms Hodge questioned how that could happen when a former chief financial operator said in 2007 that the division had an operating profit rate of 15%.
Mr Alstead denied knowledge of the statement and insisted the first profit Starbucks made was £6m in 2006.
Ms Hodge also questioned why the company had filed millions in losses then promoted the head of the UK business, Cliff Burrows, to take over the US operation.
She (SNP: ^SHEY - news) said also it did not "ring true" that the man in charge of an operation that was running such an unsuccessful division would be promoted.
Ms Hodge said: "You are losing money. You have tried for 15 years and failed and you have promoted the guy who failed."
She added: "Are you lying to your shareholders?"
Mr Alstead replied: "Absolutely not."
Mr Alstead faced repeated claims from MPs (BSE: MPSLTD.BO - news) that the firm was engaged in aggressive tax avoidance in the UK, but he insisted that globally it was "an extremely high tax payer".
He said: "Respectfully I can assure you there is no tax avoidance here.
"We have a global tax rate of 33% around the world. Our tax rate outside the US is 21%. That is higher than most multinationals' global rate. We are an extremely high tax payer. We are not aggressively looking to avoid tax."
Mr Alstead declined to give details publicly of a favourable rate granted to it in Holland. Dutch authorities wanted that to remain confidential, he said.
Matt Brittin, the chief executive of Google UK, and Andrew Cecil, Amazon's director of public policy, also gave evidence to the committee.
Mr Cecil was forced to explain why a CD or a book bought in pounds on Amazon.co.uk delivered from a UK warehouse by the Royal Mail is registered in Luxembourg.
"We have our European headquarters in Luxembourg... the books could be in the UK, they could be in France. If you are purchasing English books it is very likely they will be in our fulfilment centres (warehouses)."
Earlier in the year, The Guardian reported Amazon - Britain's largest online retailer - generated UK sales over the past three years of between £7.6bn and £10.3bn, but paid virtually no corporation tax.
Google's UK unit paid just £6m to the Treasury in 2011 on revenue of £395m, according to The Daily Telegraph.
The three firms are among several which have had their tax affairs put under the spotlight recently.
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