Good bean counters? Starbucks has paid no tax in UK since 2009
Probe shows coffee chain used clever accounting to minimise bills – despite UK sales of over £1bn
Following stints with Reuters and the Press Association, Martin Hickman joined The Independent as a news editor in 2001. He became the Consumer Affairs Correspondent in September 2005 and has run the paper's trenchant campaigns on packaging, bank charges and factory-farmed chicken. He writes on subjects as diverse as food, finance, energy and fashion. With Tom Watson, he is author of a new book on the phone hacking scandal, Dial M for Murdoch - News Corporation and the Corruption of Britain.
Tuesday 16 October 2012
Starbucks has exploited accounting tricks to pay almost no UK tax on the millions of coffees, sandwiches and cakes bought by the British public over the past decade, it was revealed yesterday.
An investigation showed that the coffee company has paid only £8m in corporation tax to HMRC in the 14 years since it arrived on British high streets, despite generating sales of £3 billion.
Starbucks UK’s accounts shows that it has minimised its tax burden by officially recording losses of tens of millions of pounds year after year.
Yet in its briefings to stock market investors and analysts during the past 12 years, Seattle-based Starbucks has consistently stated that its UK unit is “profitable” and three years ago even promoted its UK head, Cliff Burrows, to run its vastly larger US operation.
According to an investigation by Reuters, the anomaly can be explained by the use of legal accounting techniques which leave the coffee company paying HMRC proportionately less tax than other firms such as McDonald’s and KFC.
The disclosure, which brought immediate condemnation from tax campaigners, follows criticism of the tax record of two other large American corporations, Amazon and Facebook.
In April, Amazon was revealed to be routing its UK sales through its European headquarters in low-tax Luxembourg, meaning that last year its UK corporation tax bill was nil, despite revenue of £3bn from the sale of books, DVDs and other goods.
Most of Facebook’s UK income is thought to be routed through its European HQ in the Republic of Ireland, where corporation tax is lower. It paid tax of £238,000 on £20.4m sales last year, although one estimate puts its advertising revenue at £275m.
There is no suggestion that any of the three companies have broken the law, but Starbuck’s case has aroused particular interest because its almost zero tax bills contrasts so starkly with its bullish message to investors.
The investigation by the Reuters reporter Tom Bergin found that in 2009, Starbucks UK filed a loss of £52m in accounts lodged at Companies House- while its chief financial officer Troy Alstead told investors on a conference call that the UK was “profitable.”
In 2010, the loss was £14m, but Starbucks reported sales growth, and in the year to September 2011 - when the loss was put at £33m - John Culver, Starbucks’ international president, said he was pleased with the UK unit.
In common with other large companies, Starbucks appears to be exploiting differing tax regimes around the world. The coffee company’s UK unit, for instance, is required to pay a royalty rate of 6 per cent of sales to Starbucks for using its intellectual property. It is not clear where this money goes.
However, there is concern in the US that some American firms are using tax havens such as Switzerland - where tax on royalties can be 2 per cent - to collect charges for intellectual property.
Starbucks UK also repays loans to Starbucks at an interest rate set at Libor (London InterBank Offered Rate) plus 4 percentage points, more expensive than similar arrangements at KFC, where the rate is Libor plus 2 percentage points, and McDonald’s, where the rate is at or below Libor.
Michael Meacher, a Labour MP and tax campaigner, complained that Starbucks was behaving in an “extremely unfair” way and acting against the interests of the public, telling Reuters it was “trying to play the taxman, game him. It’s disgraceful.”
Starbucks UK said it was following the rules. In a statement, a spokesman for the company said: “We have paid and will continue to pay our fair share of taxes in full compliance with all UK tax laws, as we always have.
“There has been no suggestion by any authority that we are anything but compliant and good tax payers. We do this in a way that is consistent with the values that have guided us since we were founded more than forty years ago - balancing our need to operate a profitable business with a social conscience.”
Oscar Pistorius trial: Defence witness contradicts athlete version
Oscar Pistorius trial: The case against Oscar Pistorius – and why the prosecution claims his story doesn't add up
South Korea ferry: Captain Lee Joon-seok could face criminal investigation as over 280 remain missing
Peaches Geldof dead: Private funeral for the family and friends of the socialite will take place next week
Shropshire criminals ‘using unmanned drones and infrared cameras to find illegal cannabis farms’ – and then steal from the growers
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
US Navy christens huge $3 billion destroyer ship USS Zumwalt that appears as a fishing boat on enemy radar
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
Nigel Farage fatigue? Half of voters ‘immune’ to Ukip’s appeal
Nigel Farage on Have I Got News For You: Ukip leader ridiculed over expenses and party 'fruitcakes'
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
- 1 Poveglia: 'World's most haunted island' up for sale...is anyone brave enough to buy it?
- 2 The Hobbit: There and Back Again set for possible title change
- 3 Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'
- 4 24 people applied for the 'world's toughest job', here are their interviews
- 5 Andre Johnson: Wu-Tang Clan-discovered rapper severed his penis and jumped from LA building
iJobs Money & Business
£150.00 per week: QA Apprenticeships: This company has been providing on site ...
£221.25 per week: QA Apprenticeships: This company is a well established Inter...
£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...
£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...