Why does Starbucks pay so little tax? - MoneyWeek Investment Tutorials

Big, profitable companies can reduce their corporation tax bill to almost nothing. Tim Bennett explains how they manage it.
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[@EclipseParadox]

He actually starts at 6:27, skip to then if you just want him to start explaining.

[@terryz.9918]

Thanks god!

[@captainbeaky8934]

@@terryz.9918 thanks for the tip I was about to leave this video the presenter needs to get a grip and learn about effective presentations, I'm sure they must be that shit on YT somewhere...

[@kerryjking6626]

Took 6 minutes providing explanation to 6 year olds.

[@leedobbs2435]

God sake... should of come straight to comments

[@johnboykin3128]

Thanks

[@Just-SomeGuy]

Really excellent video, carefully explained and easy to follow (not too fast!), I like your style.

[@Peteristrate]

And, to detail a little bit more, the LOSSES part is also split into a few types of losses: - overheads/running costs: salaries, utility bills, etc. - expansion costs: costs of expanding the operations like new offices, new factories, new other infrastructure. - R&D costs: research & development that costs you money to discover new ways of improving your business and the economy as a whole and even bettering people's lives(like discovering a new cancer cure or inventing a faster aeroplane or making a new spaceship or simply discovering a new product that makes your customers checkout faster and that saves you or them time/money/energy or anything that moves you and society forward). All these are considered LOSSES for a company, and rightly so.

[@billholt174]

Modeled on that, I ought to be able to write off every material bit of my existence and be tax-exempt, as a wage earner of meager means. Almost every dollar goes to 'maintenance' of some sort, and rarely to profit or outright enjoyment. ; ]

[@TokyoTaisu]

Dude we're talking about Starbucks. They're a liquid cake store.

[@edwarddavenport9881]

This guy is the best finance teacher on KZbin. Great watching. He’s really opened my eyes to a lot.

[@alliwanttosay11]

You Sir are a great presenter, cheers!

[@defaultname9893]

Tax optimization is one area where there is a ridiculous amount of savings that can be made. Startups often cut corners on researching or investing a bit in financial planning, and in turn lose thousands of dollars that would go the long mile in helping them invest in better assets. Over time, as the company scales up, more and more revenue is lost due to lack of planning from day 1. Clearly, one can be defeated by competitors without proper financial planning.

[@johnbenton4488]

Still immoral. No excuses!

[@pablozane7767]

John Benton You are an idiot. Tax is theft when it's not voluntary. Governments are not GOD. You can't steal a lot of someone's money simply because they optimised their opportunities and became wealthy whilst you stuck to your 9 to 5.

[@marklittler784]

One job making money another job keeping it, no point just putting hard work into making it, in business you need to automatically put hard work into keeping it if just to keep a level playing field with the competition, but at the end of the day individuals seem to be paying most of the taxes not international corporations, so individuals need to start using the same tricks.

[@saberur66]

if everyone had your mentality there would be no national economy. regardless of either you like it or not, there are things (such as roads) that is much easier and time efficient in the long run for the government to control it. if no one paid taxes their would be no roads, or roads with too many tolls that will increase time traveled, gas spent etc etc.

[@marklittler784]

@@saberur66 Tax planning is vital to compete with your tax planning competitors whether you like it or not, you simply don't have a choice, Govts compete to reduce corporation tax to attract investors so virtually how small you are, plumber, builder form a company to reduce taxes if you can't beat them join them.

[@mikeross1840]

This is why Amazon claims to be not profitable while they've been the biggest online retailer in the world. Meanwhile their stock has soared to all time highs.

[@superresistant0]

Not a claim, a fact.

[@David-ud9ju]

@@RichardG774 No, it is a claim. Reinvesting profits are still profits. We don't have that luxury. It doesn't matter how much of our income we spend, we still get taxed on all of it, so why shouldn't they?

[@ddillard143]

@@RichardG774 individuals get income taxed before expenses. With the exception of the things you just mentioned like charity, moving. Certain Medical. But how many people I'm moving every year? How many people had those same medical expenses every year? The write-offs that the working stiff gets are not of things that stay in that household such as meals, phone bills, Etc. But everything else I have to agree with you on. This country's economy is designed to benefit businesses. And they are creating jobs so they should have incentives

[@ddillard143]

@@RichardG774 yes you are correct I didn't think of that. But I guess because that is only temporarily. 2025 all of that goes away. I don't know what will replace it though but it's not etched in stone

[@ddillard143]

@@RichardG774 yes true

[@MoneyWeekVideos]

Yep - that was in a former life! And yes I enjoy my job even if it's not in the same league as my older ones money-wise...

[@tdwright91775]

The first method involving intercompany charges (interest in this case) may not work as well as the other methods since the interest received by the Starbucks U.S. would be taxable in the US. So you don't pay UK tax because of the interest deduction, but you end up paying US tax on the interest income. The third method does not work very well since Starbucks would have to incur a substantial operating loss in order to offset its income. The second method is golden. It is often used by companies with valuable intangible property (patents, brands, secret formulas, etc.).

[@joshuacolombi4538]

Any idea why Starbucks can't just up the salaries of the all the people in charge there (such that their costs are v large and they basically have no profits)? Is this not in interest because actually the personal income taxes are generally higher than the corporation taxes?

[@2yogz]

If taxation was less than it is in the UK, then the first method does work. They will never get away paying nil tax, but they will minimise it however possible.

[@samwood4733]

@@joshuacolombi4538 The issue with this is that shareholders would be very upset.

[@piotrmaj6706]

In the third method think about new Starbucks restaurant being opened. There is only loss of money at the beginning of a shop. Furthermore this is the main reason why they are still more Starbucks restaurants. New shops = higher losses = higher revenue.

[@peterwatson9047]

5:33 mentioned cost of the shops for a second then moved on. I'd like to see the amount of the total UK Starbucks sales that goes on property rents. People get angry about these tax approaches and completely overlook this part of the whole picture.

[@tomatobrush3283]

That is it, I am going to loan myself money at 50% interest. Genius!

[@liviustoiann]

You, sir, are very well documented on many levels and most important, you've got a remarkable ability to share your knowledge with the rest of people in such a way that it is easy to understand. Your popularity should be much higher. Cheers to you!

[@MoneyWeekVideos]

In my next video I'll be explaining why bank profits are a sham. Watch out for it! Cheers Tim.

[@DutchVikingGuy21]

Sir, you're making a student who used to be miserable in finance subjects, very passionate and knowledgable. Many thanks!

[@BigBengo]

how can I apply this structure to my self employed business and "legally" not pay any tax 😂

[@hassan123456killa]

You can start by getting a Good accountant and start by paying yourself minimum wage and stick your whole family on minimum wage.

[@thanimoinamkou8372]

And also May be change the legal structure of your company, and instead of paying yourself salary, pay yourself dividend while keeping salary at minimum wage

[@jaywarriuk]

Surely you have to make a profit to pay yourself with dividends? But then again, I suppose its better in the uk to pay 19% corp tax than 25% income tax, and then you only pay 7.5% on dividends...

[@hassan123456killa]

@@jaywarriuk No technically minimum wage cannot be taxed everyone has an allowance, so you pay yourself the bare minimum which is tax free less any NI contribution. Then you make smart investments back into the company until you get to the amount you want to take out as a dividend. And then based on the assumption you are in your second year you can waiver the tax bill with any previous losses that will be accounted for :)

[@0118uhauha]

Here is how McDonalds and Coca Cola avoid taxes in Europe: You are not allowed to use a trademark or "brand" which is registered and paid for at the national patent- and trademark offices by somebody else. Unless you ask the trademark owner ( McDonalds parent-company wherever it is ) for permission and agree on a yearly payment called royalty or franchise which VARIES from year to year. McDonalds-parent has given a small ( merely 12 employees ) subsidiary-company MCD in Luxemburg the right to make franchise-agreements with restaurants in all European countries. Thus if McDonalds-France one year makes , say 200 million Euro profits ( sales minus expenses including salaries ) then MCD will decide that royalty for France should be 200m. When this inflatable expense is added to the real expenses then profits ( and thereby taxes ) become zero. Or royalty can be used in combination with write-offs on equipment such as stoves , ovens and trucks. Normally small MCD rakes in about 10 billion Euro each year from restaurants all over Europe. But what about taxes in Luxemburg ? If you are big , you can obtain a sweetheart deal with the tax-department ( Bureau d'Imposition ) see also Google "Luxembourg Leaks Wikipedia". Average citizens in Luxemburg pay much higher taxes. S t r a n g e principle: the more you earn , the less tax you pay. Here is how Coca Cola gets zero tax in Denmark ( and most other countries ) : Coca Cola consists of soda-water and a powder. The water is sold from Danish brewery Carlsberg to Coca Cola-Denmark. The powder ( ingredients are listed on the bottle , manufacturing price is about the same as for coffee ) is IMPORTED to Denmark from USA. If Coca Cola-Denmark one year has profits of 50m Kroner then this powder will cost 50m DKK. But then Coca Cola-USA will have to pay taxes of these 50m ? Yes theoretically , but Coca Cola-parent's office is in tax-free Delaware and it is from here the powder-invoice is mailed to Denmark. It is called "price-transfer". The powder itself arrives from some Coca Cola brewery in USA. I do not blame these companies for running their business efficiently , merely the POLITICIANS are to blame for not taking action. How ? By forbidding to deduct any amount on the tax return which has merely been paid to another company within the same group.

[@InstTaxSolutionsLLC]

The short answer to how they do this is within the tax law itself. As indicated in the video, the profits are reported in certain offshore locations and they are exempt from being taxed in the U.S.

[@SurgeEquityResearch]

So well said. Sent this to my 15 year old and he loved it. You are so good at explaining!

[@jeanchung8746]

In addition to three indicated ways of reducing corporate taxes, the UK subsidiary can buy its coffee or any other raw materials from another subsidiary located in a lower tax regime at a higher cost than it would in the UK.

[@cfdProptrader]

When I was wondering about offshore company, MoneyWeek gave me an solution , Thank you.

[@szaki]

Millions of middle class, fix income 1040 people pay the most taxes by percentage.

[@SayMyName383]

The business manager is obligated to reduce expenses; including taxes. Also, it is legal and lawful. Paying higher tax equates to an idiotic business manager. Tax avoidance is legal. Tax evasion is not. There is a difference. Most journalists, apparently, don't know that.

[@ruisantos4520]

The reason why SB do this, assuming they do, is because Corporate tax for companies is too high. Countries need to realize that Company corporate taxes need to take in consideration by default 3 things ... 1- Type of business.... Not all types of business are the same and in many cases the profit is just matematical and not real 2- Quantity of employees-job creation capacity, deduct for ex 1% for each 20 workers the company have ... 3- Regional deduction ( for some countries ) ... IF THIS 3 facts are in the TAX system NO COMPANY will go into this kind of trouble and exercise to escape taxes... Countries ASSUME by default that corporation and business are bad guys... Answer is no... Corporations and businessmen are human beeings that will pay all taxes they should if they consider it fair ... IF the 3 factos above are taken in consideration the tax system will be FAIR.

[@mohammadsultan639]

Rui Santos No they wouldn't they'd still find ways to reduce tax they pay for the exact reason you suggested; they're human. Humans are greedy by nature to maximise chances of survival. Their greatest desires are to maximise profit and minimise losses and as far as they're concerned, tax is a loss that needs to be minimised.

[@andy199121]

I would place a 99% certainty that the majority shareholders of SB earn more in a month than you will in a lifetime. Tax is the only vehicle we have to slow the rate of capitalism, I.e the rich getting richer. If anything the people at the top of society should pay a hell of a lot more than at the bottom in percentage terms. The equivalent of Spain’s GDP is underpaid every year in tax globally.... Next time before defending these companies and directors, consider who has to pay for the school your children go to, the hospital your grandparents go to, how on Earth you will afford houses after the rich have used them as investment portfolios and driven up the prices. These people take so much out and try their damned hardest to put nothing back. Tax avoidance is as bad for society as tax evasion, legal or not.

[@marklittler784]

It seems the more a company makes the lower the percentage of tax paid

[@lameduck1690]

It's only "too high" if you're a greedy sociopath. The United States only taxes profits.

[@ten_tego_teges]

They're not human, Starbucks isn't owned by a person, it's owned by other private equity funds like pension funds. These people largely don't give a damn about the business, as long as share prices grow. And whatever proves you have more money at the end of the year works for them. It's distributed responsibility: CEO's feel pressure from shareholders, who feel pressure from investors, who don't even know where the money is going. This system is built to encourage very weird "on paper" behavior and shady tax practices, because no single person can really be blamed for it. That is the reason why companies like Microsoft, which make billions of dollars of profit keep restructuring every year, firing people are getting new ones with no real logic: they need to prove they're making better profit, so they send orders to HR and HR demands cuts in teams, despite the fact that business is actually going fine. Corporations are actually really inefficient, cause it's really hard to run organisations that are too big. But they make up with marketing tax cuts and many other practices that only work when you're sufficiently large.

[@ramonbs6075]

Avoid taxes is a human right.

[@Goreuncle]

Education, healthcare, security, housing, etc... these are actual human rights and people have access to such things thanks to taxes. Good luck getting those in societies where people don't pay taxes.

[@ramonbs6075]

@@Goreuncle I'm from Argentina. Good luck trusting the government to manage your money.

[@larryporter3744]

You simply remain providing instructive videos. You can keep them coming!

[@tindrums]

Yes... In India it us called Tax Accounting and Book Accounting. Govt has wised up and there is taxation linked to Book Accounting.

[@artjacob5359]

It's high time we ditched this regressive tax system and just charged a Turnover Tax to companies with a sliding scale exemption for SME's and capital re-investment, so it wouldn't matter how clever your accountants are !

[@farabix00880]

Bangladesh govt does tax on revenue, but at very low rates.

[@3e3op88]

Awesome video, Tim! I love your teaching style and wish you had been my professor when I was in college.

[@ptmagrath]

The carry forward of losses is not a trick or a scam, it makes sense to allow a startup or a business that is struggling in a particular year to utilizes losses against other years profits. There is no such thing as a year-end, it is a fictitious point in time to measure profits and performance only. He completely misses things like Management Fees and the charge for actual goods (raw materials, partially or fully finished goods) which allows the shifting of profits as well. Imagine you grow coffee in Burma, they have a low tax rate there ...why not jack up the price of the coffee you sell to the UK to keep more profit in the low tax country ...brilliant .....

[@johan6077]

Just found this channel, well explained Tim! Looking forward to more videos.

[@thegroove2000]

All legal. Designed that way.

[@drobin74]

Good info. Thank you for sharing. Please continue the great content.

[@emmafrost13333]

* I've just realised this video is from 2012. So here are some updates: Firstly, the interest issue is covered by anti-avoidance legislation such as Transfer pricing, Thin Cap, Worldwide debt cap. The trade loss is not a tax avoidance method, as the loss was made in UK. It can't transfer a loss from overseas. It is not a relevant example. Indeed, the royalties method was one that SB used, although this was not the main one. The main factor was SB made a Co in another country, smt like Starbucks Switzerland if I recall, from which SB UK buys it's beans. SB made the cost of the beans high enough that they would have no profits. Now there is an anti-avoidance rule, 'Diverted Profits Tax' which HMRC made specially for this type of schemes (the Google tax lol). But somehow SB's lawyers managed to convince the courts that they had 'magic beans' which could not be compared to market value, and their inflated prices were accurate. However, thanks to the bad publicity they paid some tax at the time, and are now making/declaring profits to not lose customers.

[@henrybn14ar]

The INCIDENCE of PAYE income tax and NI nominally paid by employees is on the employer. Add in UBR and VAT, and then it gives the real picture of the contribution a firm makes to the Exchequer.

[@svetlanachernysheva6942]

The author doesn't take on account withholding tax(19%) from interest and royalties paid abroad. There are Double Taxation agreements between USA - UK, and Holland - UK, I know. But HMRC permission is required to pay interest or royalties out of tax.

[@pradeepr9784]

Tim, When Starbucks UK pays interest to its US parent company, the company has to anyway pay tax on the interest income in the US. Why doesn't Starbucks lend money from a subsidiary in a tax haven instead? Say, Starbucks UK could take on debt from Starbucks Luxembourg and then Starbucks Luxembourg does not have to pay tax on the interest income?

[@FocusProj]

You forget about cost transfers, like Apple does in Spain, internal sales are so high that barley leave any profits to be taxed in Spain so the profits are taxed in Ireland at 10% instead at 25% in Spain.

[@EauRouge]

Tax haven 101...great video mate

[@remistaom]

Great video, again! The repeated information only makes it easier to understand! Thank you!

[@glennt1962]

The financing of the setup cost for Holland Starbucks would be by UK Starbucks and Holland Starbucks will pay the 6% of their sales to UK Starbucks? Some sort of corporate negative gearing. I never buy coffee myself, can't see the point in spending so much, don't know why so many people do. That's what I call value adding.

[@SBTRIS]

Simple fix, use personal income tax approach on companies. Initial revenue below threshold free, above that pay incrementally increasing percentage. Domestic businesses are suffering and as a result people get less pay, less overall wealth.

[@iraasta]

Found it by accident. Such a great talk. Could understand it all without any economical background

[@IanFosterServices]

Very interesting tutorial for business owners.

[@AM-cx1ng]

A bit of free information. These cases were part of the background that moved OECD Countries to take the decision of implenting the Base Erosion and Profit shifting project. Which last Action (Action 15 - Multilateral Instrument), was signed in 2017 and already came into effect in some countries. The mechanism were Tax Treaties, pricesly Double Tax Treaties, which in most part, follow the basic analytic structure as the Viena Convention over the Law of Treaties in 1969. So they implement a Master Treaty to integrate them into a common tax system, that in principle would make much easier to apply double tax treaties in an homogenous international environment (tax wise). It is logical, since the best ideas adopted by the most advanced economies on dealing with issues of treaty shopping, which is synonym of abusing loopholes in double tax treaties. The most common strategy these companies followed is dubbed the Double Irish Dutch Sandwich as a sort "technical tax jergon".

[@robbyduffy1]

I agree that as long as the profits are taxed in some country then that's 'fine'. It actually just shows a need for a reworking of the rules and perhaps internationalisation of such rules.

[@chahal_s]

Actually there are stringent Transfer Pricing rules which make this illegal.

[@jmo2230]

As of 2021 Holland is introducing a witholding tax on outgoing interest and royalties, to stop big multinationals incorporate so called 'mailbox-companies' in The Netherlands. The problem in this case was the fact that The Netherland until now does not have a withholding tax on royalties. So paid royalties by the dutch entity weren't taxed.The corporate tax rate is actually pretty average with 25% on profits.

[@ppumpkin3282]

This is kind of silly, so basically Starbucks pays little tax, because it makes little money 1) it has past losses, it is recovering. 2) it's paying interest on its investment 3) it's paying royalty fees. If any of these transactions are invalid, than that's another issue. But so far nothing indicates that these expenses are invalid.

[@Goreuncle]

then* Also, you might want to watch the video again. A chunk of the profit is converted to royalties and interest, which Starbucks ends up cashing. Basically, Starbucks pretends to make less money, by concocting fake costs.

[@sharon246787]

That was so well explained even your doodles looked great ha ha..... i subscribed... brilliant!...

[@Pagan1Huayra]

But the Corporate tax rate in the Netherlands is 25% as well. So how are they making a profit? Or are royalties taxed at a different rate?

[@affluentishmael1045]

Does this mean that they have two sets of financial statements, one set for investors and another set for the local tax office...?

[@niclash]

Forgot that the coffee is purchased from Starbucks "Global" and simply increase the price to bring down the profit. Might be slightly less suitable for a commodity like coffee, but any manufactured goods...

[@newageeducation5908]

SO YOU SAID INTEREST IS ONE WAY. But the startbuck in USA will show that interest they receive as interest income and Interest income is taxed at 50 % in USA so the interest game did not serve its purpose when we look at the large picture from star bucks point of view. but this way can work if the HQ are based in country where interest income and capital gains have very low tax rates. May base the HQ in Ireland which has lowest corporation tax.

[@I_Was_Chrispy_Kreme]

The very simple solution to this kind of tax manipulation is to insist that companies pay over 10% of their revenue to HMRC (on top of the 20% VAT) each quarter. This would be 'tax on account'. Then when the tax returns are filed the company would use this against the amount due. If they owe more they then pay that as normal 9 months & 1 day after the Year End, if they don't owe anymore they do not get a refund. This has the added benefit that the UK government would not need to borrow to fund welfare payments and pensions as it could use this tax in advance knowing that it did not need to hand it back. The same could be done for Sole Traders & Partnerships removing the need to ask for payments in January and July.

[@TXLionHeart]

In 2012 (when this video was made), the US had a corporate tax rate of 35%. Why would a company charge itself a high interest rate in the UK, who has a corp. tax rate of 25%, only to have to pay a higher tax rate on the interest revenue in the US?

[@pavelp.3743]

This was a Very simple solution explained in this video. The most interesting I would like to hear (but have not heard) is list of countries with lower tax rates where UK company can pay ("the royalty and debts") without problem with tax authorities and Bank complience.

[@eddiekoh9331]

UK has no withholding tax for Interest and royalty? the profit needs to be recognised eventually within the group, and unless the profit is eventually recognise in a lower tax countries, these method don't save much, right?

[@0118uhauha]

Here is how McDonalds and Coca Cola avoid taxes in Europe: You are not allowed to use a trademark or "brand" which is registered and paid for at the national patent- and trademark offices by somebody else. Unless you ask the trademark owner ( McDonalds parent-company wherever it is ) for permission and agree on a yearly payment called royalty or franchise which VARIES from year to year. McDonalds-parent has given a small ( merely 12 employees ) subsidiary-company MCD in Luxemburg the right to make franchise-agreements with restaurants in all European countries. Thus if McDonalds-France one year makes , say 200 million Euro profits ( sales minus expenses including salaries ) then MCD will decide that royalty for France should be 200m. When this inflatable expense is added to the real expenses then profits ( and thereby taxes ) become zero. Or royalty can be used in combination with write-offs on equipment such as stoves , ovens and trucks. Normally small MCD rakes in about 10 billion Euro each year from restaurants all over Europe. But what about taxes in Luxemburg ? If you are big , you can obtain a sweetheart deal with the tax-department ( Bureau d'Imposition ) see also Google "Luxembourg Leaks Wikipedia". Average citizens in Luxemburg pay much higher taxes. S t r a n g e principle: the more you earn , the less tax you pay. Here is how Coca Cola gets zero tax in Denmark ( and most other countries ) : Coca Cola consists of soda-water and a powder. The water is sold from Danish brewery Carlsberg to Coca Cola-Denmark. The powder ( ingredients are listed on the bottle , manufacturing price is about the same as for coffee ) is IMPORTED to Denmark from USA. If Coca Cola-Denmark one year has profits of 50m Kroner then this powder will cost 50m DKK. But then Coca Cola-USA will have to pay taxes of these 50m ? Yes theoretically , but Coca Cola-parent's office is in tax-free Delaware and it is from here the powder-invoice is mailed to Denmark. It is called "price-transfer". The powder itself arrives from some Coca Cola brewery in USA. I do not blame these companies for running their business efficiently , merely the POLITICIANS are to blame for not taking action. How ? By forbidding to deduct any amount on the tax return which has merely been paid to another company within the same group.

[@40rty7even4]

Also any successful business will open more branches, and spend on advertising and marketing to expand its brand. Spend profits back on the business rather than paying tax.

[@benderbendingrofriguez3300]

Thist is why I don't buy Starbucks... I buy their stocks.

[@brutallyhonest9140]

What the UK could do is create an operating licence for all UK retail stores with over 10 outlets for example and the terms of the licence is all UK generated income must remain as UK profit and not fund any overseas loan or directors wages or business expenses. But to incentivise them to expand give tax concessions for every UK employee that recruit. I know anything is possible but its the expense and resource to ensure compliance which is the drawback.

[@joshcostanza7250]

Net operating losses carry forward 7 years. The greatest invention for corporations since sliced bread. Ones he forgot were accelerated depreciation, capital investment losses, and LIFO/FIFO differences. Absolutely brilliant!!

[@georgekwasiboatengaddo2563]

There are several anti avoidance measures used by tax authorities to counter the Base erosion practises you described through thin cap and transfer pricing

[@SunilKumar-rz3qi]

This is why India brought Transfer Pricing and BEPS provisions in the Indian Income Tax to collect it's due share of taxes.

[@pepperpeterpiperpickled9805]

4 minutes in and I had to subscribe; I love this guy

[@Nikhil-oi9fn]

This guy is brilliant. It's so easy to understand.

[@RohanK]

You sound like a magician who is performing tricks at the end of every sentence

[@swilhelm3180]

What I don't understand is why large companies bother with low tax places like Holland or Ireland and not base themselves in zero tax offshore areas?

[@deal2live]

It cost Starbucks to lease sites and to fit out , so should be easy to charge those costs to debt and expenses.

[@NorthPoleJeff]

Did you know that Property tax only penalizes people who are disabled, lose a spouse, lose their job, have excessive medical bills and farmers who lose a crop, to name a few.. Property tax is discriminatory. Property tax should be replaced by sales tax and the internet sales tax should be enacted, nationally, as governor Pat Quinn suggested. These big corportations are not paying any taxes, yet the common citizen is left holding the bill their property is being rented from the government or stolen by the government. Look at this, if you own a business and some people come in and say you owe us money or we will smash your windows and destroy your business, is that illegal. Absolutely! But this is exactly what property tax is doing to every citizen. This is a crime that is being commited by all states and a way to say that your deed is not your deed, but you owe us rent or they will destroy your life and take everything you own for pennies on the dollar.. Did you know that on the day of the property tax sale, if your car is on the property, the buyer of the property also owns your car, or your motorcycle, or your boat, lawn mower, tools and everything that is in the house and on the propey. I know about his because I am going through this right now. Property tax is only designed to take your property and transfer it to a big corporation just for pennies on the dollar. Professor Wolf Blitzer explains this very well. The corporations buy your property and then resell it, and then buy bonds which are non taxable, theyfore the state is stealing from the poor and giving it to the rich who don't pay any taxes. Pretty convinenent. People buy property to ensure that when they have hard times, they will always have a place to live and a roof over their head. This is explained in the constitution when it talks about life, liberty and the persuit of happiness. Property tax says, tough luck, we want your property tax so that our campaign funders, the rich, will own everything and you will become a slave to their every whim. Are you aware that when a high school runs its lights for a football game that it cost the tax payers between 1500-2500 dollars per night for every game. And the tax payer is told that their taxes are necessary to pay for education. Why don't they play the games duing the day and stop burning up our money on these expensive lights. So here's what we really need to do to avoid property tax. 1. Make sure that the Internet Sales Tax is enstated in every state. 2. Stop playing sports at night. 3. Elimate property tax on a primary residence and up to 80 acres, the rest must pay tax. 4. Move to the pre Regan trickle down economics, an experiment that didn't work and make the rich pay their fair share of tax. 4. Reinstate the tariff so that imports are taxed and that industry again thrives in the U.S. 6. Make Congressmen and Senators pay to redecorate their offices themselves, and not the taxpayer. These things will put tax money in our governments and would stop stealing from the people who have had hard luck or who have become disabled. C. Jeff Dyrek, Webmaster, Disabled Veteran. P.S. Yes, they are taking my property and why did I join the military during a time of war, it makes me wonder. It sure wasn't to protect our country, it was so that big corporations can make huge amounts of money while they are shipping our jobs overseas and taking our property when our economy continues to fail. That's the truth.

[@sl2148]

yes paying tax when money is in transaction is fine, but paying annual property tax is theft. they are taking a percentage a year which adds up in one lifetime

[@abhinavitsmebellamy]

Thank you. Really well explained!!

[@krisgjogu5832]

YES but related party loans' interest rates are carefully monitored by the government. You can't report an unrealistically high interest rate in order to reduce your net profit and ultimately reduce your tax liability (Unrealistically high means 1% over the current market rate. Your example of 50% is the equivalent of saying an elephant can fly). As a matter of fact, many governments worldwide expect you to use the market rate at the time of when the transaction takes place. Therefore, your "TRICK" is not practicable. There are restrictions and limitations on the deductibility of interest expense on debt with foreign related parties. The government is not stupid. Regards,

[@szury]

Ok but if they 'move' the money from the UK to the US, won't they have to pay taxes anyway in the US for that 'interest'?

[@luphelele]

+GamingDeluxe i stand corrected, but my understanding is that while the interest does constitute income, in some jurisdictions(not sure if this applies to the US), because it is foreign interest, it is exempt from taxation. In this way, the interest escapes taxation. So the idea in these companies is to shift income around between different jurisdictions so that they are either exempt from paying taxes on their income or they pay lower taxes. Hope this answers your question

[@Unfashionnable]

would still make financial sense for them if us income tax is smaller than uk corporation taxes - cost benefit analysis.

[@svetlanachernysheva6942]

On top of that, it's so silly to move profit to USA, cause corporation tax higher. Transfer pricing requirements in USA should also be applied...

[@yawzerdoink-a-sore-as8159]

Spend money on marketing and that is a loss? Wow.

[@joseph3543]

Liked and subscribed within about 5 minutes, very good video. Thanks!

[@RB-nz3ve]

This is too basic, I was actually expecting something adventures. Few more things you could have added on; Management fee to the parent company? Capital losses from a lower rate country Timing difference of bonuses, Transfer price, Capital expenses, Supplying to own company at higher price, i.e shops rent, furniture, etc at higher than market rate.

[@badrulhussain5545]

Do you think there's better videos then this you can tell us about?

[@bengunns9500]

I think Pepsico/Walkers crisps in the UK are doing that, they put in a new software system in mid 2021 and the whole production has gone down, with the products trickling out, they said it will take a month or two to rectify the problem. As a truck driver who works there, i was thinking why would they do that, well after watching your excellent video, everything makes sense, once the tax return has been submitted at the end of January, i bet Production suddenly takes off again in 2022. Thanks for your great Videos Tim i am watching you on Killik now.

[@ChristianPierreW]

I love your content. Thank you for taking the time.

[@dabdow3454]

very good videos. You very good at giving lectures. I am a undergraduate studying Finance, Accounting, and Management, so I appreciate these videos for free.

[@cxjiek]

In summary - paying interest to related company, paying royalty to related company thats setupped in a tax haven, utilise prior years losses.

[@TreverBettis]

Should be new law companies over 50m must pay 5% tax minimum per year as a baseline.

[@dumky]

Just curious: like the royalty trick, couldn't you set things up such that the UK stores are buying the paper cups and the coffee from the Starbucks cups sub-company in Holland? That would offer some latitude to shift profits from the UK to Holland.

[@mariaespinoza3331]

:( sad ... that a paycheck employee pays a lot while this big corporations pays so little

[@luknei]

4 th way is to make offshore company which let's say distributes coffee beans in the country with low corporate tax. So that all the margin of the beans would go to that country and in that case you would rise your direct materials price, in this case coffee beans.

[@erichooijer1565]

The Netherlands is not a low tax country. The corporate tax rate is 25% ! The trick is that the Netherlands has a lot of tax agreement

[@Siemianowicee]

Yes, yes, … 2.38 … … Few people outside of business know anything about the difference between gross takings and net.

[@gurupurkha]

Thanks for the well done video. It is very easy to understand.

[@farishaddadin1]

Please answer me this, all of the entities of Starbucks worldwide have the same parent company? In which case cant a law be passed to prevent this kind of behavior, a law that says a subsidiary cannot pay a parent company for a license?

[@Vengeance703]

Easy to understand explanation. Thanks. Respect from India.

[@baxter265]

Companies don’t pay taxes, they add those prices to the product they sell, so the customer pays the taxes. Taxes are part of the cost of the product like coffee, cups, employees, etc.

[@G00n3r4Life]

Well considering the UK deficit is so large, every one in the country should care that big companies aren't paying any taxes, if they make a fortune in the UK quite frankly they should pay tax.

[@malikrahman8649]

Any transactions within the group world wide should not be treated as expense or loss on its balance sheet report...but everything's always far completed to put into practice.

[@Rapscallion2009]

I've had this discussion with quite a few people over the years. They say "Starbucks pay no tax!", which is ridiculous. Yes, if you focus on one particular category of tax it might look like that but in reality a lot of it is shuffling tax from one category to another in order to pay it at a more favourable rate. Straight away 20% of virtually everything they sell is VAT. Then there are business rates and other categories of tax they're liable for all of which are counted before corporation tax. So "No tax" is stretching a point somewhat. In any event. None of this is actually illegal. So, if you want to get angry about it, get angry towards the tax authorities. On a much, much smaller scale many people I know have done much the same thing when driving for work or working as a contractor. Oddly it's often the same people getting mad about the poorly-written and misleading journalism concerning Starback's tax arrangements.

[@victorreyes6132]

Intern-company transactions are done at market price. Starbucks cannot just set up interest rate a 50 percent that is illegal. The other ones are good points that not only Starbucks uses but every person should use with their business. Like if you work in your company you should pay yourself a good salary because that will increase expenses and reduce you taxable income. The problem is that later you will pay personal taxes at an individual level. You will have to see how your country tax persons and how they tax companies to make that decision.

[@Afshin7891]

Shouldn't the loan interest that U K is paying be considered as an income for the Starbucks ? Another word, who is paying the tax on the interest profit since this interest profit is gained in UK, therefore the tax should be paid on it in the same country.

[@faithlesshound5621]

It's not just "quirks" of tax law that allow these multinational companies to pay little or no tax. The loopholes are placed in the tax laws, which are revised every year, by negotiation between business and accountancy organisations (or their lobbyists) and the Treasury or their political masters (members of parliament, Lords, party officials). Surely there must be some quid pro quo? Many of these companies (especially Google) employ unnecessary numbers of top graduates from famous universities, former broadsheet journalists, ex-members of think tanks, former party officials (of all major parties) and their relatives. That must give them "soft power" in the establishment, or goodwill, which gets in the way of crusading politicians who want these companies to pay tax like everyone else. This sort of thing happens all around the world. Companies drilling for oil in West Africa transfer their profits to Mauritius, where they are relatively powerful compared to the government, as well as paying off politicians where they actually work. Japan however is not so friendly. Amazon UK dispatches its goods from giant warehouses around the country built with government subsidies and staffed at minimum wage, but claims that their internet transactions take place in Ireland, where they have a deal to pay very little tax.

[@ether5148]

I don't understand how this is a trick... shifting profits to the US in the form of interest or royalties will result in a higher US tax rate of 35% compare to the UKs 25%.

[@krishnannarayanan5252]

Tax planning is the word you missed. Tax planning is both good moral and legal. Tax avoidance is illegal.

[@DylanBasu]

You have very interesting videos. Thank you again for a very good example. Was very grateful. Good job!

[@av733]

Great videos, people like you make me interested in this topic.

[@d-javu9840]

Nice explaination, however, I thought the tax scheme includes Ireland in the story?