Starbucks boss unrepentant about tax avoidance

Emma Woollacott
BANGKOK, THAILAND - August 12, 2014: A cup of Starbucks coffee. Starbucks is the world's largest coffee house with over 20,000 s
BANGKOK, THAILAND - August 12, 2014: A cup of Starbucks coffee. Starbucks is the world's largest coffee house with over 20,000 s

The new chief executive of Starbucks has admitted that the coffee shop chain is unlikely to pay any UK corporation tax for another three years.

Speaking to the Evening Standard, Mark Fox said the tax wouldn't be applicable until the company turned a profit - and that this could take years.

"There is nothing abnormal about the way Starbucks is run in the UK," he said. "What is abnormal is that we haven't been making a profit."

Indeed, Fox complained that the company had been hit by bad publicity after its tax avoidance was revealed two years ago. The company was keeping revenues down by paying an annual six percent 'royalty' payment to its European headquarters in Amsterdam. It also 'sells' coffee beans from one part of the company to another, making a mark-up each time. This means a high price paid by the UK outfit, hitting the profits made here.

As a result, Starbucks has paid just £8.6 million in corporation tax since starting up in the UK in 1998.

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How Starbucks Avoids UK Taxes
How Starbucks Avoids UK Taxes

"Fundamentally, the piece that was aerating was around royalties - the fact a brand is paying a royalty to an entity outside the UK, and to me that's very, very ordinary," Fox told the Standard. "It happens across the sector and therefore it didn't bother me at all."

The company's currently under investigation by the European Commission over alleged "sweetheart" deals with the Dutch government.

"What we're seeing is large numbers of multinational companies around the world who are shifting profit," says tax campaigner Richard Murphy from Tax Justice Network.

"And if you start from their accounts and work downwards... you find that they should and do appear to be making a profit in the UK - and yet aren't paying tax here."

Yesterday, more than 30 organisations, including major charities such as Oxfam and Christian Aid, called on the European Parliament to set up a committee to investigate corporate tax avoidance.

"The 'Luxembourg leaks' scandal and recent inquiries by the European Commission have brought home the enormously damaging scale of tax avoidance within the European Union which has been facilitated by the tax laws and rulings of EU member states," they write.

"Rising public anger against tax avoidance makes it essential that the European Parliament be seen to take the strongest possible measures to counter the problem."

In January, David Cameron had a pop at Starbucks by saying multinational corporations needed to "wake up and smell the coffee" about tax avoidance.

But by the Conservative party conference in October, it seems all was forgotten. "He came behind the bar, met our baristas and had a coffee," Fox told the Standard. I don't think there are any hard feelings between us, and he loved his cappuccino."

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