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Starbucks Says May Pay More UK Tax

Monday, 3 Dec 2012 | 2:18 AM ET
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Coffee chain Starbucks said it was considering changes to its U.K. tax practices, which allowed it to make billions in revenue while paying little in income taxes, following criticism from lawmakers, tax campaigners and the media.

A Reuters examination of Starbucks accounts published in October showed the company had reported 13 years of losses at its U.K. unit, even as it told investors the operation was profitable and among the best performing of its overseas markets.

The chain's UK unit paid no corporation tax — a tax on a company's income — in the last three years for which figures are available and has only paid 8.6 million pounds income tax since 1998, despite racking up 3 billion pounds ($4.8 billion) of sales.

The revelations led to calls for a boycott of the store and protests at its branches, and the company's Chief Financial Officer Troy Alstead was called to give evidence to a parliamentary committee.

Should Corporations Get Away With Avoiding Tax?
Peter Toogood, investment services director at OBSR, a Morningstar company, tells CNBC that it is inevitable that indebted governments will start cracking down on corporate tax avoidance like Starbucks in the UK.

Starbucks repeated on Sunday that it had always complied with British tax laws and blamed its low tax payments on a tough operating environment in the U.K.

However, a spokeswoman added in an emailed statement that the public mood had caused the company to reconsider its tax arrangements, which include inter-company royalty and interest payments that reduce the U.K. unit's taxable profit.

"We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more," she said. "As part of this we are looking at our tax approach in the U.K. The company has been in discussions with HMRC for some time and is also in talks with the Treasury."

The company, the largest coffee chain in the world, with a market value of $39 billion, said it would release more details later this week.

The Public Accounts Committee, which grilled Alstead and managers from Google and Amazon over their tax planning, is due to release its report on corporate taxation in the UK on Monday.

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