Starbucks: No U.K. Tax Paid Since 2009

Starbucks pays first tax since 2008
Starbucks has made its first corporation tax payment to HMRC since 2008, paying £5m for the first six months of the year despite the business making a loss of £30m in the UK.

More Starbucks shops will be closed as Kris Engskov, the chief executive of Starbucks Europe, continues to try to turn around the British business. Photo: PA




By Kamal Ahmed
9:30PM BST 22 Jun 2013

147 Comments

The coffee shop chain will reveal the amounts in its annual report, which is set to be published as early as this week, saying that it has started the process of paying the £20m over two years it promised in 2012.
The figures will reveal that the business is still making an annual loss of £30.4m – a 7.5pc reduction in losses from the year before when they stood at £32.9m.
More Starbucks shops will be closed as Kris Engskov, the chief executive of Starbucks Europe, continues to try to turn around the British business.
The American company hopes that news of the tax payment will show that it has responded to criticism last year that licensing and supply agreements with the Dutch and Swiss divisions of the business helped it to avoid paying tax in the UK.
Another £5m in corporation tax will be paid in the second half of the year.
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The criticisms were sparked when it was revealed that Starbucks had only paid £8.5m of corporation tax in Britain since its launch in 1998, despite sales of £3bn.
The coffee chain did use a number of legal mechanisms to mitigate its tax payments.
It paid a 4.7pc licensing fee to Starbucks in Holland for image rights and use of the company’s coffee technology.
It also bought its coffee from a Swiss division of Starbucks which charged a 20pc premium on the product. Corporation tax in Switzerland is 12pc. In the UK it is 25pc.
The reports led to a major political debate, with David Cameron, the Prime Minister, making tax avoidance a key theme of the G8 summit at Lough Erne, Northern Ireland, last week.
Google and Amazon have also faced attacks from the Public Accounts Committee for the low amounts of tax they pay in the UK.
Starbucks responded to the avoidance row by saying that it would voluntarily pay tax whatever the level of profits or losses it made in the UK.
Danny Alexander, the Chief Secretary to the Treasury, appeared to question the tactic, saying that tax was not a matter of handing around “the church plate”.
Starbucks insists that its UK business is loss-making, although it has admitted privately that many of its customers did not believe it could be, given the high level of sales.
Critics said it paid high fees for licensing and supply agreements as a way of depressing UK profits. It has since changed the levels of payments.
Starbucks will announce it is closing between 25 and 30 shops this year in less lucrative locations. Last year it closed 30 and relocated others to less expensive sites.
For example, a flagship shop on London’s Oxford Street was moved around the corner to a site where rents are 80pc lower.
The company will also say that new licensing arrangements in its airport and railway station sites create better margins for the business. Seventeen shops in the Republic of Ireland have also been transferred to licensees.
Supply chains have been consolidated, with coffee and food being delivered together.
Mr Engskov will say that he hopes to return the business to profitability within three to five years. The last time it was profitable was in 2008, before the financial crisis.
Starbucks executives have privately admitted that the tax row was damaging, with customers angry at what they saw as double standards.
“There is always another coffee shop nearby,” one source close to the business said. “It was easy for customers to change.”
The issue blew up again at the beginning of the year when the Prime Minister made a speech at the World Economic Forum in Davos, Switzerland, against tax avoidance, saying that companies “should wake up and smell the coffee”.
Starbucks executives were furious at the attack, particularly after they had already announced the payments they would be making.

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It is said that people power forced Starbucks to pay , apparently they boycotted Starbucks .

I SAW COFFEE BEING MADE AT A STARBUCKS ON TV,LOOKED REVOLTING