LONDON — British media has reported that Gap Inc. has been organizing its financial affairs in a complex and potentially opaque manner, in order to minimize taxation paid by the company in the U.K.
The Evening Standard reported that the company has not paid its corporation tax for five years, taking rebates into account.
The publication also noted how the company has managed to avoid paying any corporation tax by shuffling profits between its European businesses and the parent company in San Francisco. Gap firms have also reported net losses between 2012 and 2015, allowing the retailer to reclaim 4.2 million pounds, or $6.1 million at current exchange, of taxes paid.
The brand has 132 stores in the U.K. and owns Banana Republic, which has another eight outlets in the country. The company pays an annual royalty fee to a Dutch company, which has a statutory seat in Amsterdam and operating offices in London. According to the Standard, this reportedly results in wiping out profits made in the U.K. so that GPS does not have to pay corporation tax.
The news follows an announcement of Google’s agreement with HM Revenue and Customs to pay 130 million pounds or $188 million in tax for the past ten years.
“We maintain an open and transparent dialogue with regulators in jurisdictions where we operate. We are a taxpayer in good standing in the U.K. and have transfer pricing agreements in place with the tax authorities in the U.K. and the U.S. covering business activities between our entities,” said a Gap company representative. “Our global effective tax rate has averaged approximately 39 percent over the past decade, and we have paid almost $7 billion in taxes during this time frame.”
Gap is not currently being investigated in the U.K.