Starbucks to pay £10m tax after customer revolt

Starbucks UK says it will pay corporation tax over next two years after consumer anger comes across ‘loud and clear’

Starbucks is to pay £10m in taxes over the next two years as it restructures its complex arrangements that have seen its UK operation pay no corporation tax in the past three years.

Kris Engskov, the managing director of Starbucks UK, said even if the company failed to make a profit – due to a series of payments to various European subsidiaries – it will still make the unprecedented payment to HM Revenue and Customs.

He said the anger among consumers over revelations that the coffee chain paid just £8.6m in corporation tax since arriving in the UK 14 years ago, despite sales of £3bn, “has taken us a bit by surprise”, suggesting sales had been hit as customers boycott the stores.

UK Uncut, which is encouraging consumer action against the chain, was not appeased. Hannah Pearce, a UK Uncut spokesperson, said: “The £10m that Starbucks have estimated they may end up paying is £5m less than that paid by their nearest competitor, Costa Coffee.”

“This weekend 40 actions will take place in Starbucks stores in towns and cities across the country. People will be transforming Starbucks stores into refuges, creches and other services which the government are cutting with their unjust and unnecessary austerity plans,” she said.

Giving a speech at the London Chamber of Commerce, Engskov said: “I am announcing changes which will results in Starbucks paying higher corporation tax in the UK – above what is currently required by law.

“Specifically, in 2013 and 2014 Starbucks will not claim tax deductions for royalties or payments related to our intercompany charges.

“In addition, we are making a commitment that we will propose to pay a significant amount of corporation tax during 2013 and 2014 regardless of whether our company is profitable during these years.

“These decisions are the right things for us to do. We’ve heard that loud and clear from our customers.”

He added that the tax authorities are unaware of the company’s plans but said they had been in negotiations generally.

Starbucks currently makes a loss due to a 4.7% premium paid to the Netherlands division – where the coffee beans are roasted, and another 20% premium to Switzerland to buy the coffee beans. The company said it would not claim deductions on these payments, or against intercompany loans.

The business has faced severe criticism for its tax arrangements, including a grilling by MPs on the public accounts committee for the global firm’s chief financial officer, Troy Alstead.

Other companies who have come under attack for their tax arrangements include Google and Amazon.

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