UK Tax Story ‘Sensationalized’: Starbucks CEO
The widespread criticism and controversy leveled at global coffee chain Starbucks over the amount of tax the company has paid in the U.K. has been exaggerated, Chief Executive Howard Schultz told CNBC-TV18 in India.
"I was surprised to see the headlines come out because I think they're somewhat sensationalized," Schultz said during an interview in Mumbai, where the chain has just opened its first store.
"Being accused of not paying income taxes, it has to be related to whether or not you have made a profit … we haven't paid corporate income tax because we haven't made a profit," Schultz told CNBC on Monday.
The Seattle-based firm paid a mere 8.5 million pounds ($13.7 million) in corporation tax in the U.K. since 1998, even while it racked up 3 billion pounds ($4.8 billion) in sales in the U.K., Reuters revealed in a report last week.
The announcement caused a backlash among politicians and the public, with some critics arguing that U.K. tax rules were too lenient and that Starbucks was bending the rules by reporting losses to authorities to lower its taxes while reporting successes in earnings to shareholders.
Starbucks reported a 34 million pounds loss for 2010 and a record loss of 52 million pounds in 2009 for the year to Sept. 27, Reuters reported.
But Schultz defended Starbucks' tax record.
"Let me try and explain the situation, over the last three years, Starbucks has paid over 160 million pounds in taxes, in VAT (value added tax), in insurance, in real estate taxes, so that's one piece of the puzzle," he said. "The accusation that we have not paid any taxes should be skewed to the fact that we haven't paid income taxes and the reason is we are not a profitable business in the U.K. and we haven't been profitable for a while because of the significant investments that we've made in that market."