We’ve learned it is vital to listen closely to our customers – and that acting responsibly makes good business sense
Since Starbucks coffee arrived in London, on the King’s Road, back in September 1998, we have become part of the fabric of this country, up and down high streets from as far south as Cornwall to as far north as Inverness.
Doing the right thing is part of the DNA of our company (and of the thousands of people who work here that we call “partners”, because each of them have equity in the form of shares in our company) and over these past 14 years we’ve been doing business here in the UK, the most important asset we have built and developed with our customers is trust.
As we all know, trust is developed over time. Trust is about making a commitment and keeping it, in good times and bad. It’s developed by doing the things you say you’re going to do, and then keeping those promises. And, always living up to the expectations you’ve set. Most importantly, it’s built by doing the right thing.
And, frankly, doing the right thing at Starbucks doesn’t mean only doing what is right by our shareholders. It also means doing the right thing and building trust with our partners, with our customers and for the many communities we operate in all across the country.
There is no doubt that tax has become an important subject of debate over the past several weeks and I think it’s important to share that the emotion of the issue has taken us a bit by surprise. Since we started doing business here, we have always organised our tax affairs according to the letter of the law – always. We have used existing and agreed-upon measures to pay what is expected of us, but not more – just as most companies do and I am sure many of the people here today run their businesses in similar ways.
We’ve learned it is vital to listen closely to our customers – and that acting responsibly makes good business sense. We’re experiencing one of the most difficult macroeconomic periods in many years and our customers are under a great deal of financial pressure. With the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more.
Today, I am announcing changes that will result 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.
We are still working through some of the calculations, but we believe we could pay or prepay somewhere in the range of £10m in each of the next two years in addition to the variety of taxes we already pay. This is an unprecedented commitment. It hasn’t been done before. So there is no procedural guideline for how to do it. As such, I want to clarify something that has been the subject of inaccurate reports this past week: despite the fact that we have a consistent and ongoing dialogue with the tax authorities over our business affairs here in the UK, we have not yet shared this particular proposal with HMRC.
Looking ahead, if we are not able to generate substantial profits in the years ahead (meaning beyond 2013 and 2014), we will consider extending this commitment until we are paying corporation tax at a material rate.
I’d like to highlight a few details behind these commitments. To be clear, Starbucks UK will not claim deductions:
• For the royalties it pays
• For the intercompany profit on the coffee it purchases
• For interest paid on intercompany loans
• For capital allowance deductions nor our carry-forward losses
I am confident these actions, when taken together, will position us as a company to make a larger contribution to the exchequer and most importantly to the communities we serve while we make the moves necessary to achieve a sustainable level of profitability.
These decisions are the right things for us to do. We’ve heard that loud and clear from our customers. And, today, we’re taking the actions necessary to pay more corporation tax in the UK.
• This is an edited version of a speech Kris Engskov gave to the London Chamber of Commerce