Apple, Google's tax avoidance strategies to be scrutinised at European leaders meet

Following is a summary of several recent cases and links to the Reuters stories on each one.

Apple Inc.

An investigation by the U.S. Senate showed this week that the maker of iPads and iPhones had paid just 2 percent tax on income of $74 billion over the past three years, largely by exploiting an unusual loophole in Ireland's tax code.

Ireland has said it is not to blame, and Apple has defended its practices, which are legal. But the Senate report has added to the furore surrounding tax avoidance by major companies.

Google Inc.

Despite generating $18 billion of revenue in Britain from 2006 to 2011, the Internet search giant paid only $16 million in taxes to British authorities. Google says it does not have a sales presence in Britain and therefore cannot be considered resident for tax purposes, lowering its obligations.

An investigation by Reuters has shown that some of the 1,300 people employed by Google UK Ltd are engaged in sales-type work or have titles that suggest involvement in sales and marketing activities, but Google says it hires people with a sales background even if they are not directly involved in selling.

The British parliament has called Google executives before a hearing to try to understand more about its activities.

Starbucks Corp.

Starbucks came under criticism last year after Reuters revealed that the coffee chain paid only 8.6 million pounds in taxes on 3.1 billion of revenues since 2000.

Starbucks has said it is down to where the company books its profits. Accounts filed for its British, German and French units, which make up 90 percent of European revenues, show a loss of $60 million in 2011, hence very little tax.

However, Starbucks told investors that its European business were actually profitable, making $40 million in 2011. The gap is all down to clever tax planning and exploiting loopholes.

Amazon.com Inc.

The Internet retail company runs the bulk of its European operations out of Luxembourg, allowing it to minimize the amount of tax it has to be pay on revenue generated in other European countries.

But the tax avoidance mechanism has also allowed Amazon to dramatically cut its U.S. tax bill, an investigation by Reuters has shown, with the company paying a tax rate of around 5.3 percent over the past 5 years. The U.S. tax authorities have asked Amazon to pay back taxes totalling $1.5 billion, a demand that the company has said it will "vigorously contest".

Vodafone Group Plc

The world's largest mobile phone operator has managed to gradually reduce the amount of tax it pays in Britain over the past decade by using legal tax avoidance schemes, including registering profit in other jurisdictions, such as Luxembourg.

A Reuters examination of statutory filings by Vodafone across Europe over the past 16 years shows that the British taxman has frequently gone empty handed, losing out on perhaps has much as 1 billion pounds in revenue.

© Thomson Reuters 2013