A common criticism of the U.S. tax code is that corporations do not pay a fair share of taxes on income. But this is more widespread than just the U.S. Since 1998, Starbucks has earned over £3 billion ($4.8 billion) in revenue in the U.K. yet has paid only £8.6 million pounds ($13.44 million) pounds in taxes. There is no indication that Starbucks has done anything illegal, but it has used the U.K. tax code to its advantage. Overall, Starbucks has paid 13 percent tax on its international operations. One way companies as diverse as Starbucks and Google avoid taxes is to charge subsidiaries for intellectual property from a business that is domiciled in a tax haven country. The second method used is that the coffee sold in the U.K. is roasted at a subsidiary in Amsterdam, which sets the price it charges U.K. Starbucks. A final method is inter-company loans. A subsidiary in a low or no tax country makes a loan to a subsidiary in a high tax country. The borrower can deduct the interest payments, but the low tax subsidiary pays little or no tax on the interest income.
