Ground down: Starbucks pledges to pay £20 million tax over next two years
Thursday 06 December 2012
Coffee giant Starbucks today said it expects to pay “somewhere in the range of £10 million” in UK corporation tax for each of the next two years.
The announcement comes after it emerged Starbucks paid just £8.6 million in corporation tax in 14 years of trading in Britain and nothing in the last three years.
Starbucks UK managing director Kris Engskov told the London Chamber of Commerce that changes to its tax arrangements will see the firm pay above what is required by law.
Mr Engskov said the proposal had not been discussed with HM Revenue & Customs, adding: "With the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more."
Activist group UK Uncut is planning protests at Starbucks cafes on Saturday in protest at the company's tax arrangements as well as the impact of government spending cuts on women.
Starbucks, which has more than 700 outlets in the UK, made the announcement amid increased public pressure on multinational corporations to pay a fairer share of tax.
The chain, along with Google and Amazon, was accused of "immorally" minimising UK tax bills in a damning report by spending watchdog the Public Accounts Committee.
The committee criticised the companies for the "unconvincing and, in some cases, evasive" evidence they gave on why their corporation tax payments were so low.
Starbucks cut income tax by paying fees to other parts of its global business, such as royalty payments for use of the brand.
This meant Starbucks UK was effectively making a loss and therefore did not have to pay any corporation tax. As a result, it has not broken any law.
The Seattle-based company vowed not to claim tax deductions for royalties or payments related to its intercompany charges in 2013 and 2014.
Mr Engskov said Starbucks had always organised its tax affairs "according to the letter of the law" and added "the emotion of the issue has taken us a bit by surprise".
"These decisions are the right things for us to do," he said. "We've heard that loud and clear from our customers. And today, we're taking the actions necessary to pay more corporation tax in the UK."
Its nearest UK rival, Costa, recorded £377 million sales last year, compared with Starbucks' £398 million, but its tax bill came to £15 million.
Hannah Pearce of UK Uncut said that offering to pay some tax "if and when it suits" did not stop a company being a tax avoider, adding: "Starbucks have been avoiding tax for over a decade and continue to deny that it paid too little tax in the past.
"Today's announcement is just a desperate attempt to deflect public pressure. There's no money yet, and hollow promises on press releases don't fund women's refuges or child benefits."
She said the Government must be kept under pressure to force Starbucks and other tax avoiding companies to pay their fair share, instead of cutting welfare and tax credits for single mothers and disabled women.
UK Uncut said it was pressing ahead with protests on Saturday, targeting 40 Starbucks stores in towns and cities across the country.
MP Stephen Williams, who co-chairs the Liberal Democrat Treasury Committee, said: "I am glad that Starbucks has finally given in to public outrage and agreed to pay a fairer share tax in the UK. Other companies should follow suit."
Meanwhile, Mike Lewis, tax justice policy adviser for charity ActionAid UK, said: "Starbucks' tax back-down proves that companies do have a choice about where and how they pay taxes.
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