Starbucks has been telling investors that it's been profitable in the United Kingdom but telling tax collectors just the opposite, part of an apparent attempt to avoid paying income taxes, an investigation by Reuters has revealed. The tactic is a popular and "perfectly legal" tax loophole. Over the past three years, Starbucks has reported no profit, and therefore paid no income tax, on sales of 1.2 billion pounds in the UK, according to Reuters.
Reuters found that Starbucks' overall tax rate isn't bad, coming in much higher than most companies at 31 percent. The typical United States corporation pays an average rate of 18.5 percent. But Starbucks' overseas income tax rate is curiously lower, coming in at 13 percent.
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"Starbucks are playing the game here. This is tax avoidance, they're doing nothing illegal. That doesn't mean to say it's right, in my opinion," Richard Murphy from Tax Research UK told BBC News."When we have a tax system that lets very large companies like Starbucks be on our High Street and pay no tax and are competing with small locally owned businesses who are paying tax on all their profits, then there's something very clearly wrong with our tax system."
Meanwhile, Starbucks' nearest UK rival, Costa, earned 377 million pounds in 2011 (compared to Starbucks' 398 million) yet paid a whopping 31 percent in income taxes, Channel 4 in London reported.
The news comes less than a month after a US Senate panel announced that Microsoft and Hewlett-Packard have also avoided taxes on billions of dollars by using offshore units.