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Fashion giant questioned over a Gap in UK taxes

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Following the exposure of Google’s tax evasion and agreement to payback £130m last month, fashion retailer Gap is next to face questioning over its minimised tax bill in Britain.

Since 2011 the retail giant has paid almost no corporation tax, once rebates are considered. The company has avoided these despite total revenues exceeding £1bn in that time.  

Originally established in San Francisco in 1969, Gap now has 132 stores, as well as eight Banana Republic outlets in the UK and a turnover of over £300m a year. The recent scandal suggests the group has been shuffling revenue between its businesses.

Between 2012 and 2015, Gap set up a network of “opaque” accounts to reveal its net losses. This enabled the company to reclaim more than £4.2m in taxes and use it against its future profits.

“It’s disappointing to find yet another multinational organising its financial and taxation affairs in such a complex and potentially opaque manner — especially when the result is the UK taxpayer will be substantially subsidising any future tax bill Gap might finally end up paying” said Nick Hood, Business Risk Adviser at Opus Restructuring and Founder of Consultancy Company Watch.

“Gap Inc. is committed to operating according to and complying with all multinational tax laws.  We maintain an open and transparent dialogue with regulators in jurisdictions where we operate” Gap said. 

“We are a taxpayer in good standing in the UK, and have transfer pricing agreements with tax authorities in the UK and the US covering business activities between our entities. Our global effective tax rate has averaged approximately 39% over the past decade, and we have paid almost $7bn in taxes during this time.”

“Multinational companies must pay the tax that is due and we do not accept less” said HMRC.

The new findings regarding Gap’s finances, in addition to Google and Starbucks’ similar activity is likely to put pressure on Chancellor George Osborne to eradicate loopholes allowing companies to evade taxes in Britain.  

Published on Thursday 11 February by Talya Misiri

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