An MP has warned Coca-Cola that any attempts to shy away from paying its fair share of tax in its £3.9billion takeover of Costa Coffee will not be tolerated.
Peter Kyle, a member of the Commons business committee, said the US fizzy drinks conglomerate could face a full investigation if its purchase of Costa poses a threat to the amount of tax flowing into HMRC’s coffers.
Whitbread, the owner of Costa, stunned markets last week when chief executive Alison Brittain revealed it was selling the High Street coffee chain.
An MP has warned Coca-Cola that any attempts to shy away from paying its fair share of tax in its £3.9billion takeover of Costa Coffee will not be tolerated
The deal boosted shares in Whitbread, which also owns Premier Inn, by more than 14pc at the time.
But MPs and tax experts have raised concerns that Coca-Cola could rearrange Costa’s structure so that it resembles that of Starbucks, which has a reputation for paying low levels of corporation tax.
Costa, which has been dubbed ‘the taxman’s favourite coffee shop’, forked out £24.7million in corporation tax on profits of £103million last year – more than the headline 20per cent rate required by the Treasury.
In contrast, Starbucks paid just £2.6million of tax on its European operations on £43.8m of profits in 2016. Pret A Manger paid £5.6million on £86million in 2016 while Caffe Nero paid no taxes on losses of £25.5million in 2017.
According to a report by the Institute on Taxation and Economic Policy from 2017, Coke made profits of $23.9billion and paid taxes of $4.9billion over an eight-year period in the US. This amounts to a US corporate rate of 20.4per cent when the main tax rate was 35per cent.
Labour MP Kyle, who sits on the Business, Energy and Industrial Strategy Committee, said: ‘If it looks like this is sliding to a position where it could negatively impact our High Street or our country’s ability to generate revenue, then of course our committee will take an interest.
Whitbread, the owner of Costa, stunned markets last week when chief executive Alison Brittain (pictured) revealed it was selling the High Street coffee chain
‘Coca-Cola has a decision to make. Does it want to be a company that is known for putting profit ahead of everything else, such as Starbucks?
‘Or does it want to maintain the reputation that companies like Costa have of honouring the spirit of being a British company that contributes not just to our High Street but to our country through its honest contribution to our tax system.’
Kyle, 47, raised concerns that the purchase of Costa could have similar implications to US conglomerate Kraft Foods’ takeover of Cadbury in 2010.
That controversial deal led to thousands of job losses and some production moved abroad, despite promises a factory near Bristol would be kept open.
Kyle added: ‘Our country desperately needs companies to pay their taxes along the lines of any other company domiciled here. Increasingly going forward the actions of these sorts of transactions are going to influence the way we regulate.’
Richard Murphy, an independent tax expert, warned HMRC may not have the capacity to investigate Costa’s tax affairs after the takeover.
An HMRC spokesman said: ‘We subject large businesses to an exceptional level of scrutiny. We actively investigate more than half of the UK’s largest businesses at any one time. This does not imply wrongdoing, it’s a reflection of how complicated their tax affairs can be and how determined we are to ensure they are paying all the tax they owe.’
Whitbread and Coca-Cola declined to comment.