Starbucks 'chooses' to pay tax for first time in five years

Jun 24, 2013

Coffee chain makes £5m payment to Revenue in an effort to placate unimpressed customers

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STARBUCKS has made its first payment to HM Revenue and Customs since 2008. The company said it had "listened to customers" and had paid £5m, with another £5m to be paid later this year and a further £10m in 2014, The Guardian reports.

Starbucks paid just £8.5m in tax between 1998 and 2008, and nothing since then, despite total sales of £3bn over the past three years. That's because the company has made use of perfectly legal tax avoidance techniques and remains, on paper, unprofitable in the UK. Indeed, the chain is due to close up to 30 of its shops around Britain this year because of tough competition from rivals like Costa.

When its various tax-avoidance techniques were revealed last year, the company faced a barrage of criticism and a widespread boycott of the brand, with UK Uncut organising protests outside a number of branches.

In January, David Cameron told the World Economic Forum in Davos that tax-avoiding companies should "wake up and smell the coffee". He never mentioned Starbucks by name but the comment was widely taken as a dig at the coffee chain.

Despite its continued insistence that it is loss-making in the UK, the company decided to pay the £20m corporation tax in an attempt to "please" customers. In a statement, the company said: "We felt that our customers should not have to wait for us to become profitable before we started paying UK corporation tax."

However, the move has left a bitter taste in some mouths. Labour MP Margaret Hodge, who as chair of the Public Accounts Committee has led the campaign to force multinationals to pay a fair tax in Britain, said: "Companies should not be able to pick and choose how much tax they pay. We need a system which ensures that everybody pays a fair share of tax on the profits they gain from the economic activity they undertake."

Stephen Herring, tax partner at BDO, said: "In my view this is a very bad outcome for UK plc. Are all overseas businesses looking at projects in the UK going to need to assess whether their corporation tax will look acceptable in relation to their turnover? No one should believe that a global corporation system based upon turnover rather than profit will be fairer or simpler, because it won't.

"What we now have in the UK is the worst of all outcomes, a corporation tax system based upon taxable profits with an alternative 'system' focusing upon turnover, implemented upon an uncontrolled basis."

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