Amazon.com Inc. and Starbucks Corp. were picked out by Britain’s top competition cop in a warning over tax arrangements that may help big companies thwart smaller rivals.
The pair’s ability to profit from international loopholes could potentially hinder the “level playing field” needed for effective competition, Competition and Markets Authority Chief Executive Officer Andrea Coscelli said in prepared remarks for a speech in New York on Friday.
Both firms engage in “complex international tax planning” to reduce their corporate tax rate that isn’t available to local stores and independent coffee shops, Coscelli said. “Existing laws in a number of sectors may not be well designed to deal with a new business model,” Coscelli said, specifically citing Starbucks and Amazon’s tax policies.
The U.K. has previously come under criticism for allowing multinational firms to pay reduced rates of corporate tax by routing income through overseas units. Coscelli’s comments suggest the regulator doesn’t see a future where companies can benefit from lower tax schemes in the U.K. after it leaves the European Union.
The tax arrangements of Amazon and Starbucks have already been targeted by the EU’s competition authority as part of a wider crackdown on unfair privileges doled out to big companies by some of the bloc’s member states.
While the CMA has no formal involvement in the area of tax, it is the first time the regulator has referenced taxation as a competition matter.
“Loopholes in regulation can allow a new entrant harnessing a new technology to take hold of the emerging market while established players are hamstrung by regulation,” Coscelli said.
