24 Jun 2013 10:20am

Starbucks makes £5m tax payment

Starbucks has made its first corporation tax payment since 2009

The company said it had “listened to customers” and had paid £5m, with another £5m to be paid later this year.

Starbucks has only reported taxable profits once in 15 years in the UK, claiming that high rental costs for shops have prevented it making a profit. It is not expected to make a profit this year.

The coffee giant attracted fierce criticism from campaigners last year when it emerged that the company had reportedly paid £8.6m in corporation tax in the UK over 14 years and nothing at all in the last four years. In December it announced plans to pay £20m in installments by the end of 2014.

"We listened to our customers in December and so decided to forgo certain deductions which would make us liable to pay £10m in corporation tax this year and a further £10m in 2014," a Starbucks spokesperson said.

The company also said it was “also undertaking measures to make Starbucks profitable in the UK, such as relocating unprofitable stores to more cost effective locations, closing them where that is not possible and placing greater reliance on franchised and licensed stores.”

However, the approach taken by Starbucks has met with criticism from some tax experts.

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.

“There is simply nothing to commend this outcome and it will be difficult to contain the long term damage which will result for UK employees, job-seekers, the Exchequer’s tax receipts and the perspective from overseas about the UK’s attitude to successful global businesses which provide choice to consumers, opportunities for the workforce and generate substance income tax, national insurance and council tax revenues to finance public expenditure," he added. 

Starbucks was a key part of the Public Accounts Committee (PAC’s) inquiry into tax at the end of last year, and gave evidence before the committee in November.

It was subject to some harsh criticism from MPs, including the PAC chair Margaret Hodge telling the coffee chain's chief financial officer Troy Alstead that the company's tax arrangements made people "incredibly angry in the current fiscal climate."

Helen Roxburgh


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