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Starbucks, under fire in UK, seeks U.S. tax breaks

Packets of Starbucks coffee are seen in a supermarket in Santa Monica, California, January 27, 2011. REUTERS/Lucy Nicholson
Packets of Starbucks coffee are seen in a supermarket in Santa Monica, California, January 27, 2011. REUTERS/Lucy Nicholson

By Kim Dixon

WASHINGTON (Reuters) - Coffee chain Starbucks Corp , which has faced criticism for its low tax rate in Britain, has sought new tax breaks in the United States in comments to a congressional committee.

As U.S. lawmakers move closer to possibly overhauling the tax code for the first time since 1986, scores of companies and interest groups have submitted comments to the tax law-writing Ways and Means Committee in the U.S. House of Representatives.

Ways and Means Chairman Dave Camp, a Republican, has vowed to introduce tax code overhaul legislation this year.

Like other companies with substantial foreign profits, Starbucks wants profits made outside U.S. borders to be spared, in whole or in part, from the U.S. corporate income tax. Starbucks expressed support in its comment letter for a territorial tax system that would permit this.

More particular to Starbucks itself, the company also asked for expanded tax breaks for the royalties it pays to entities that operate many of its stores outside the United States

Tax economist Martin Sullivan, a former Treasury Department official who has testified in hearings for Democrats, said the Starbucks proposal would move policy in the wrong direction.

"In a principled territorial system, all royalties would be subject to tax because they are deductible in a foreign jurisdiction," Sullivan said. "Otherwise that income is not taxed anywhere."

Tax treatment of royalties for the use of intellectual property, such as the brand, were a part of the controversy in Britain.

Starbucks spokesman Corey duBrowa said in an email: "We are simply seeking a level playing field and fair treatment of income from royalties for U.S. tax purposes regardless of business structure."

Starbucks said it pays a high effective U.S. tax rate of 32 percent, near the statutory rate of 35 percent. Many U.S. companies, by taking advantage of the many tax breaks available in the code, pay far lower effective rates.

Starbucks has faced months of controversy in Britain and elsewhere in Europe, over reports that it has paid little or nothing in corporation tax in some EU countries.

(Editing by Kevin Drawbaugh. Editing by Andre Grenon)

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