Coffee giant to raise contributions ahead of Autumn Statement

Starbucks has bowed to the public outcry over its tax affairs and agreed to amend its operation, increasing its rate of corporation tax contributions.

The company has been using a legal arrangement to transfer much of its UK profits to the Netherlands to reduce its taxable income. As a result, it has paid corporation tax only once in the 15 years since it opened its first UK store.

But while Starbucks' UK subsidiary will continue to be charged the 4.7 per cent rate by its Dutch counterpart for use of the Starbucks brands, it is planning to stop using that deduction to reduce its UK tax bill.

The coffee chain paid no tax last year on the £400m it took in sales. If it decides to go ahead with the plan, it will be announced before the Chancellor George Osborne's Autumn Statement to the House of Commons on Wednesday, the BBC reported.

The Chancellor also promised Her Majesty's Revenue and Customs an extra £77m in funding over two years to "go after" aggressive avoiders and evaders, branding the behaviour "unacceptable". He said: "It's important people who try to avoid their taxes understand we are going after them.

"The action... will help HMRC close in not only on those who seek to avoid or evade tax, but on the dubious 'cowboy' advisers who sell them the schemes and dodges they use to cheat the law-abiding majority."

Chief Secretary to the Treasury Danny Alexander said: "In restoring the public finances, our first priority must be to tackle those who avoid or evade tax.

"It is simply not fair that at a time when most people are making a contribution to balancing the nation's books, there is a small minority of taxpayers who try to escape their responsibility."

Other companies which are under pressure to increase their tax contributions to the Treasury include Google and Amazon.