Government not ‘bullying’ Starbucks, says Shapps

Starbucks is understood to be close to a deal with HM Revenue and Customs over corporation tax (Reuters)

Starbucks is not being bullied over its tax affairs despite the Prime Minister telling firms to “wake up and smell the coffee,” the Conservative Party chairman, Grant Shapps, insisted today.

He said the Government was not seeking to "single out" any business following speculation that the US coffee chain would stop opening new outlets in the UK unless ministers backed off.

Starbucks has been heavily criticised by politicians for its "aggressive" tax avoidance. During its first 14 years of trading in the UK, it has paid only £8.6m corporation tax, having exported royalties and commissions to low-tax jurisdictions on mainland Europe.

Following public uproar which affected sales, Starbucks voluntarily offered to pay around £10 million corporation tax this year.

In a speech at the World Economic Forum in Davos last week, Mr Cameron said tax-avoiding companies should "wake up and smell the coffee".

Asked at the time whether the remarks were aimed at Starbucks, the Prime Minister's official spokesman said the speech "speaks for itself".

When previously asked about Starbucks, the Prime Minister said that companies which avoided tax lacked "moral scruples", while Danny Alexander, Chief Secretary to the Treasury, hinted that he was boycotting the chain.

According to a press report yesterday, Kris Engskov, managing director of Starbucks UK, was so irritated by Mr Cameron's comments that he asked for talks at No 10, where he met officials last Friday.

The Sunday Telegraph reported that Starbucks warned that plans to invest £100m in the UK could be suspended unless ministers stopped targeted the firm, quoting a Starbucks source as saying it was tired of Mr Cameron "singling the business out for cheap shots".

Asked about the disagreement, Mr Shapps: "I don't think we would ever single out a single company but I do think companies in this country need to pay their way."

He told Sky News: "I think they need to do what's right as far as that is concerned and I think most people watching this would agree, companies should pay their fair share of taxation."

Starbucks declining to be drawn directly on the row last night, but company sources insisted "no threat was made" and described last week's meeting at No 10 as "long-scheduled".

In a statement, Starbucks said: "We agree with the Prime Minister that all companies should pay their fair tax. We employ 9,000 people, contribute £300m worth of annual economic benefit and are forgoing tax deductions that will make the UK Exchequer at least £20m better off."