Corporate tax dodges are un-American (Fortune)

By the way, Robert Reich just wrote a piece about Walgreen's plan to do a tax inversion. He noted [emphasis mine]:

It’s true that the official corporate tax rate of 39.1 percent, including state and local taxes, is the highest among members of the Organization for Economic Cooperation and Development.

But the effective rate – what corporations actually pay after all deductions, tax credits, and other maneuvers – is far lower.

Last year, the Government Accountability Office, examined corporate tax returns in detail and found that in 2010, profitable corporations headquartered in the United States paid an effective federal tax rate of 13 percent on their worldwide income, 17 percent including state and local taxes. Some pay no taxes at all.

Now read from a conservative publication like Fortune why these tax dodges by "American" companies have gone way too far....

UPDATE (07/09/2014):  In response to this post my Uncle T. freaked out, saying I was being manipulated by statistics.  For some reason he thought the "effective tax rate" of a company was calculated on income before expense deductions, i.e. gross profit.  

But I pointed out to to him that, according to the GAO report cited by Reich, "The most common measure of income for these estimates has been some variant of pretax net book income."

So the starting point for calculation is net profit before taxes, not gross profit, just in case anybody else shared my uncle's confusion.

Positively un-American tax dodges

By  Allan Sloan

July 7, 2014 | Fortune 

URL: http://fortune.com/2014/07/07/taxes-offshore-dodge/

Starbucks' surplus of hypocrisy on deficits

Starbucks CEO Howard Schultz is asking Americans to gather (at Starbucks, of course, over coffee) to petition national politicians to "Fix the Debt" and "find common ground" on the fiscal cliff.  More:

Schultz told CNN earlier this month that he believed the failure to reach a deal has created uncertainty among consumers and businesses and risks hurting the economy. "This single issue has a seismic effect on the rest of the world," he said.

Now, we all know that debt comes from two things: too much public spending and/or too little tax revenue.  And the fact that Starbucks is a notorious tax dodger means that it increases government deficits around the world. What a self-serving hypocrite! 

Boycott Starbucks!

UPDATE (01.01.2013): Thank goodness Paul Krugman was having none of Howard Schultz's inspid insistence on "bipartisanship" to solve the "fiscal cliff" dilemma, pointing out that all the concessions have been one-sided -- from Democrats. 

Any parent with children knows what happens when you give in to their irrational demands and tantrums: the tantrums never stop, and you continually lose ground in an attempt to be "reasonable."  Today's Congressional GOP is like an unruly, spoiled child who doesn't know what's best for itself, much less the country.

Starbucks makes political push on fiscal cliff

By Poppy Harlow and Rich Barbieri

December 26, 2012 | CNN

URL: http://money.cnn.com/2012/12/26/news/companies/starbucks-fiscal-cliff/index.html?hpt=hp_t2

Starbucks serves up a lesson on tax dodges

Seattle-based Starbucks is one of those ubiquitous consumer products, like iPhones, that I am just way too savvy, original and discerning to endorse.  In fact I enjoy taking pot shots at these Giants of Cool.

Anyway, I don't know if this story is making news in the U.S., but in Britain, Starbucks' brand name is taking a pounding after a Reuters investigation revealed that the chain has declared zero profit and paid zero corporate tax over the past three years on close to $2 billion in gross sales.  This is despite Starbucks' assurances to investors and analysts over the years that its UK business is indeed profitable, and its main source of revenue to expand into overseas markets!

So how does Starbucks get away with it, legally?  Three accounting gimmicks, according to Reuters.  First, by copying Google and Microsoft:

Like those tech firms, Starbucks makes its UK unit and other overseas operations pay a royalty fee - at Starbucks, of six percent of total sales - for the use of its ‘intellectual property' such as its brand and business processes. These payments reduce taxable income in the UK.

[...]  The fees from Starbucks' European units are paid to Amsterdam-based Starbucks Coffee EMEA BV, described by the company as its European headquarters, although Michelle Gass, the firm's president in Europe, is actually based in London.

Second, like most MNCs, Starbucks by pays "arms length" "transfer prices" to its Starbucks subsidiaries in other countries for its goods like coffee beans and wooden swizzle sticks.  This is basically Starbucks' right hand in a higher-tax country (Britain) paying Starbucks' left hand in a lower-tax country (Netherlands, Switzerland, etc.), and the right hand deducting the payment from its gross profit as a "business expense."

Third, Starbucks uses inter-company loans to its subsidiaries in other countries. Ridiculously, on paper, Starbucks' entire UK operation is funded by borrowed money, and to boot Starbucks UK pays its subsidiaries overseas a curiously high interest rate on that debt.  Starbucks UK (the right hand) gets to deduct the debt and the interest paid from its tax bill; meanwhile Starbucks overseas (the left hand) is based in a country that doesn't tax interest earned on loans.  The money is thus wiped clean.

Meanwhile, mom & pop coffee shops in the UK have no overseas subsidiaries with which to wipe out their tax liability.  Thus they compete with this giant on an uneven playing field. 

So you see, this game of tax avoidance that we all close our eyes to is not just a U.S. problem.  It's everybody's problem.  Governments have to start working together across borders to stop these MNCs from gaming the system at their host countries' expense.  

In the meantime, let's all agree to expand the definition of Corporate Social Responsibility (CSR) to paying your damn taxes in every country where you operate, at least once in a decade, for crying out loud!

Until they pay their taxes... Boycott Starbucks!

London mayor Boorish Johnson toasting Starbucks CEO Howard Schultz for running such an unprofitable operation in Great Britain and paying no tax.