Starbucks caves in to ‘moral outrage’ with vow to pay £20m tax

Starbucks will pay �10 million in tax over the next two years
Starbucks will pay �10 million in tax over the next two years
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COFFEE giant Starbucks said it expects to pay “somewhere in the range of £10 million” in UK corporation tax for each of the next two years.

• The business will not claim tax deductions for royalties or payments related to intercompany charges in 2013 or 2014

• The proposal had not been discussed with HM Revenue & Customs

The announcement comes after it emerged Starbucks paid just £8.6m in corporation tax in 14 years of trading in Britain and nothing in the past three years.

Starbucks UK managing director Kris Engskov yesterday told the London Chamber of Commerce that changes to its tax arrangements will see the firm pay above what is required by law.

Mr Engskov said the proposal had not been discussed with HM Revenue & Customs, adding: “With the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more.”

Activist group UK Uncut is planning demonstrations at Starbucks cafes tomorrow in protest at the company’s tax arrangements, as well as the impact of government spending cuts on women.

Starbucks, which has more than 700 outlets in the UK, made the announcement amid increased public pressure on multinational corporations to pay a fairer share of tax.

The chain, along with Google and Amazon, was accused of “immorally” minimising UK tax bills in a damning report by spending watchdog the Public Accounts Committee.

The committee criticised the companies for the “unconvincing and, in some cases, evasive” evidence they gave on why their tax payments were so low.

Starbucks cut tax on profits by paying fees to other parts of its global business, such as royalty payments for use of the brand.

This meant Starbucks UK was effectively making a loss and therefore did not have to pay any corporation tax. As a result, it has not broken any law.

The Seattle-based company vowed not to claim tax deductions for royalties or payments related to its intercompany charges in 2013 and 2014.

Mr Engskov said Starbucks had always organised its tax affairs “according to the letter of the law” and added “the emotion of the issue has taken us a bit by surprise”.

Starbucks’ nearest UK rival, Costa, recorded £377m sales last year, compared with Starbucks’ £398m, but it paid £15m in tax.

Hannah Pearce of UK Uncut said that offering to pay some tax “if and when it suits” did not stop a company being a tax avoider, adding: “Starbucks has been avoiding tax for over a decade and continues 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. Hollow promises on press releases don’t fund women’s refuges or child benefits.”

She said the government must be kept under pressure to force Starbucks and other tax-avoiding companies to pay their fair share, instead of cutting welfare and tax credits.

UK Uncut said it was pressing ahead with protests tomorrow, targeting 40 Starbucks stores in towns and cities across the UK.

MP Stephen Williams, who co-chairs the Liberal Democrat Treasury committee, said: “I am glad that Starbucks has given in to public outrage and agreed to pay fairer tax in the UK. Other companies should follow suit.”

Meanwhile, 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.”