Starbucks to subsidise university fees for American employees

European Commission recently launched a tax probe into Starbucks' transfer-pricing arrangements in The Netherlands

A branch of Starbucks in central London (Getty Images)

Coffee giant Starbucks will pay university fees for its American workers to complete an online bachelor's degree in a joint programme with Arizona State University.

More than 130,000 US employees working at least 20 hours a week will be eligible to take part in the Starbucks College Achievement Plan.

The coffee chain did not disclose the financial terms of its agreement or how much it will cost the company. The university’s annual fee for online courses can top $10,000.

In a statement, president and chief executive Howard Schultz said: "In the last few years, we have seen the fracturing of the American Dream.

"There’s no doubt, the inequality within the country has created a situation where many Americans are being left behind."

Starbucks said it will phase out its existing tuition reimbursement programme, which gave workers up to $1,000 a year for education at certain schools. So far, the company has paid out $6.5 million in fees since 2011.

The announcement comes a week after the European Commission said it would investigate Starbucks' tax arrangements in the Netherlands, where it transfers much of its profits from its European subsidiaries to legally reduce its taxable income.

The Commission will focus on so-called transfer-pricing arrangements under which tax bills can be reduced where a subsidiary in one country pays an artificially high price for goods or services to a subsidiary located in another.

The practice can in effect shift tax from a high-tax regime to another offering lower rates. However, under European regulation, companies must charge their subsidiaries market rates or risk violating EU rules on state aid.

In 2012, the coffee giant admitted it paid just £8m in tax on £3bn of UK sales since 1998, when it opened its first Starbucks coffee shop in Europe. In April, the company announced it would transfer its European headquarters to London from the Netherlands.