Starbucks pays £5m corporation tax

StarbucksCoffee chain Starbucks has paid corporation tax in the UK for the first time since 2008, the company announced.

The firm's cafes are a familiar sight on streets across the country but Starbucks told MPs last year it had made a loss for 14 of the 15 years it has operated in the UK, achieving just a small profit in 2006.
But, under pressure from politicians and the public, the firm committed to pay £20 million in corporation tax over two years and the Exchequer has now received the first £5 million.

A Starbucks spokeswoman said: "Six months ago, we felt that our customers should not have to wait for us to become profitable before we started paying UK corporation tax. We listened to our customers in December and so decided to forgo certain deductions which would make us liable to pay £10 million in corporation tax this year and a further £10 million in 2014.
"We have now paid £5 million and will pay the remaining £5 million later this year. We are 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."

In a fiery showdown with the Commons' Public Accounts Committee last year Starbucks insisted it was ''an extremely high taxpayer'' globally and acted ''to an ethical'' as well as a legal standard, despite declaring losses on its UK operation.

Its global chief financial officer Troy Alstead blamed an over-aggressive entry to the UK market which had left it with expensive properties that did not make money. ''It is fundamentally true, everything we are saying and everything we have said historically,'' he told the committee and said it remained committed to making profits here.

He conceded that a tax deal struck with the Dutch authorities - that he declined to detail - was ''an attractive reason'' for basing the coffee company's operations there.

A chunk of UK branch profits - 6% reduced to 4.7% in what one MP called a "cosmetic'' deal with HMRC - is transferred there as a dividend, meaning there is no profit to declare. It also charges a 20% mark-up on coffee which it buys via Switzerland where it pays 12% tax.

He told MPs: ''Respectfully, I can assure you there is no tax avoidance here. 'We have a global tax rate of 33% around the world. Our tax rate outside the US is 21%. That is higher than most multinationals' global rate. We are an extremely high tax payer.'' He added: ''We do not manipulate anything, anywhere.''
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