Starbucks Tax Row: £10m Climbdown
Starbucks has vowed to pay more corporation tax than it is obliged to as the coffee chain denies hiding profits from the UK taxman.
The company's UK managing director Kris Engskov told Sky News that the decision to "take action" followed anger from its customers in recent weeks.
Starbucks will now pay around £20m in corporation tax over the next two years, after paying nothing last year.
The U-turn comes after the Government pledged to crack down on tax avoidance after public outrage over how little some multinational companies contribute to the UK Exchequer.
Mr Engskov told Sky's Jeff Randall: "We are paying corporate tax and we are going to do that beyond what is required by the law and whether we make a profit in the next two years and I think that is what we should do.
"We have reacted to our customers... We have seen that doing business responsibly is good for the bottom line and this is a good example of that."
In the same interview, he said the US coffee giant had not been profitable in the UK since it brought its brand to Britain 14 years ago.
And he admitted their 2011 report and accounts may be wrong when they referred to the fact that the UK was making a "significant portion of the net revenue and earnings of our international operations".
This could mean major penalties for the company.
Since arriving in the UK, Starbucks has paid just £8.6m in corporation tax despite taking billions of pounds in revenue from its shops, which now number more than 750.
The low bill has been explained by the practice of transfer pricing, which involves charges being made by companies in the same group based in different jurisdictions, with the effect of depressing profits in the higher-tax jurisdiction.
In Starbucks' case, that relates to the royalty fee paid to a sister company in the Netherlands for the right to use its brand and coffee recipe.
While the previous tax arrangements were legal, its actions were called into question amid a wider debate about tax avoidance which has also engulfed the likes of Amazon and Google.
The companies were accused of "immorally" minimising UK tax bills in a damning report by the Public Accounts Committee of MPs.
Its chairman, Margaret Hodge MP told Sky News the development was a "step in the right direction" which had been brought about by "people power."
The firm has argued that its UK operations already inject £300m into the UK economy annually.
Mr Engskov, speaking earlier in a speech to business leaders, admitted that the "emotion" surrounding the tax payments had "taken us a bit by surprise".
"Since we started doing business here, we have always organised our tax affairs according to the letter of the law - always," he said.
"We have used existing and agreed-upon measures to pay what is expected of us, but not more - just as most companies do and I am sure many of the people here today run their businesses in similar ways."
But in his remarks to the London Chamber of Commerce he admitted: "With the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more."
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."
Other critics suggested the country should wait to see the colour of Starbucks' money.
Hannah Pearce, a UK Uncut spokesperson said: "Offering to pay some tax if and when it suits you doesn't stop you being a tax dodger.
"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."
An HMRC spokesman said: "Corporation Tax is not a voluntary tax. The public expects businesses to pay their fair share and we will challenge, through the courts if necessary, any structures or tax payments that do not comply with the UK tax law."
what do you think?
So, is the boycott over then ?
tb, not for me its not. As someone who only drinks coffee I tried theirs years ago and a few times more recently,it was vile and well overpriced everytime,I'd sooner get one out of a machine.
My boycott agenda has just began.
Personally I think the coffee is overpriced at the best of times. I hope they aren't thinking of upping the price to compensate.
Just boycott them, there are plenty more local coffe shops around and cheaper and better and who pay the propper tax.
Chris you ever been in retail all that cash which comes over the counter?
Would you believe it, theyv've gone from every tax avoidance trick in the book to paying in their own words more than they need to. This was not done out of the goodness of they're heart but by people power Just shows how powerful us plebs can be when we want to be. Now they want to do somethying about the stewed coffee they serve up,tastes like it's been in a flask all day.
That's 10million more on foreign aid
I dont get how they can continualy say they are working at a loss when last year for all to see there proffit was around £243.4 million and there profit has only been going up each year so i realy dont get how they can say that 10 million over the next to years is more than there fair share my math isnt that good but thats what around 2% tax for per year give or take. I wish i only had to pay that little tax wonder if i could tell the tax man that i am living at a loss to and that i should be taxed less each month beter yet i wonder if i told the tax man that i was only going to pay 2% of my yearly income and thats more than i should pay. wonder if i could get away with it?
Turnover isn't Taxable Profit. Corporation Tax isn't Income Tax. Avoidance isn't Evasion.
Micheal seems you tell people the facts and get the thumbs down - aren't none so blind as those who do not want to see
So right Michael
The cappuccino economy was the creation of New Liebour, all froth. That fits in with the Starbucks chain opening in the UK. Interestingly coffee bars have opened as quick, if not quicker, than pubs have been closing. One of these days someone will argue that the caffeine is worse for you than alcohol. Not sure which is cheaper by the pint: Starbucks coffee or beer? Anyone know the answer?
Interesting. Not a beer drinker myself. Never thought beer was that expensive
what have you said that's so contentious? how can so many people of marked you down?
Watch out for an increase in prices to cover the cost.......... Companies like Starbucks never lose out in the long run and customers are the ones who usually end up paying..................
Windows Live User
Nope I still wont be going there, so no dosh from meuntil something comes over for 2010/12 at least. Dont like retrospective tax deals. I dont have one. Do you?
do you think starbucks are run just to provide coffee for the masses. of course things will change if margins are reduced, they are there to make money. would you voluntarily pay more income tax and demand your salary stay the same?
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HMRC should get its act together and make it clear what the tax situation is in UK so we don't have the loophole of repatriating profits. no country should be in this invidious position and no company should be in any doubt about their obligations. mind you, Margaret Hodge is a shareholder, I read in a company doing just this.
I think the blame here is in the wrong tax evasion (illegal) is not the same as tax avoidance. All Starbucks are doing is deducting on their tax through what the government allows them too. No different from a gardener deducting the cost of fuel for his strimmer. Really and truly if you want anyone to blame, blame the government that makes the rules, however remember that we have to make our tax laws attractive to international firms, they bring billions into the uk through employment and business. People are being very shot sighted!
adam, absolutely agree. if something is against the law, then fair enough to slag a company off who get caught. how many posters on here ensure they use their whole tax allowance and if self employed put as much down as possible as expenses? they work within conditions laid down by hmrc.
Windows Live User
Wow really looking forward to 2013 and 2014 for Starbucks to pay some corp tax. Assuming they are still here or have not found another loophole Would much prefer to see them pay some cash over for 2010, 2011 and 2012 which would help when we needed it Afraid it is off the shopping list until we see the colour of their dosh
That will do for this year - what about the previous 13 years
So they should keep the money in the uk the USA have to much yeh!!
there only going to pay tax on their terms, why doesn't the government make them pay for all the years they have avoided paying, and pay it off the national debt, because this is not what the coalition is about, seize their assets and send a clear message to multinationals were sick of being ripped off! supported by smug rich boys
they've not broken any tax laws and are contributing tax to improve their p.r. why slag off starbucks, it's the tax laws that are obviously wrong if one is allowed to make huge profits and avoid paying any capital gains or income tax.
if their was a loophole in the murder law or the manslaughter law,and i was to take advantage would you say he is not breaking the law,hes entitled to kill. whatever happened to morals and responsabilities?
DermottJoe responsability to who ? the first responsability is to shareholders who have put their money into the company. Morally governments should close tax loopholes
To be honest Starbucks are one of the easier companies to boycott over this tax evasion scenario. I'm having trouble with Google, Ebay and Amazon in the run up to Christmas. Guess it just means I'll have to get off my behind and support smaller business this year. It's not like Osbourne will ever close these loop holes as he uses them himself. Its down to us and people power to make these companies contribute !
Gafyn Will you and all other posters be boycotting the next tradesman who offers to do a job 20% cheaper for cash ?
right so we are allowed to open companies that will yield billions in turn over,and then we decide how much tax we will pay,if at all. carry on with the boycotte their coffee is k rap anyway.
We have a large customer that has just recently moved their head office to Dublin in Ireland. I have received an e-mail from them today which says - Quote "Our accountant will send you a cheque this morning for the amount of.........minus the VAT, but can you please resend your Invoices without VAT as soon as possible." They have moved to Ireland to escape paying any VAT although we do all their work in the UK.
you just dont seem to get it Starbucks, Amazon, Google all foreign companies BRITISH COMPANIES are doing exactly the same, they would be stupid not to How many of you that post, pay more income Tax than you have to, and if not why not - because that is what you are suggesting these companies should do