Starbucks is a multinational company with over 30,000 locations across more than 70 countries. The business has come under fire for not paying its fair share of taxes despite its enormous profitability. The issue is: How does Starbucks avoid paying taxes?
Starbucks moves its profits to nations with low taxes as one method of avoiding paying taxes. The business is said to have utilized transfer pricing, a tactic wherein a corporation charges subsidiaries in nations with high taxes higher costs for goods and services in an effort to decrease earnings and minimize tax obligations. Starbucks has come under fire for allegedly charging exorbitant costs for coffee beans from its Swiss company, which has lower tax rates, to its subsidiaries in high-tax nations like the UK. In this manner, the business can show smaller profits in nations with high taxes and pay less tax.
Utilizing tax havens is another way Starbucks avoids paying taxes. Tax havens are nations or territories that provide low or no tax rates, confidentiality, and other benefits to entice foreign investment. Starbucks has been accused of lowering its tax burden by exploiting tax havens including the Netherlands, Luxembourg, and Bermuda. To be able to transfer profits to low-tax jurisdictions, the corporation has established a complicated network of holding companies and subsidiaries.
Taking this into account, how do you calculate sales tax? Sales tax is a fee levied by the government on the purchase of goods and services and is paid by the seller to the government. You need to know the item’s price as well as the applicable sales tax rate in order to calculate the tax. For instance, if the item costs $100 and the sales tax is 7%, you would multiply 0.07 by 100 to obtain $7. The item would cost $107 in total after sales tax.
Finally, Starbucks uses tax havens and transfer pricing to avoid paying taxes. Due to the complicated tax structure of the corporation, profits can be moved to low-tax jurisdictions while paying less tax in high-tax nations. Although utilizing these tax evasion techniques does not violate any laws, many individuals contend that Starbucks should pay its fair amount of taxes. The process of calculating sales tax is straightforward and is based on the product’s price and the applicable sales tax rate.