Starbucks 'pays £8.6m tax on £3bn sales'

Coffee chain says it is a 'compliant and good taxpayer', but disclosure has led to calls for an inquiry into its tax affairs

Starbucks has paid just £8.6m in taxes on a reported £3bn in UK sales since 1998, when it launched its first UK coffee shop, despite having opened 735 outlets, according to research by Reuters.

The disclosure led to calls by pressure groups and MPs for an inquiry into the company's tax affairs, which one MP called scandalous.

In the past three years, Starbucks paid no tax on its UK earnings after recording annual losses in company accounts, despite US executives of the Seattle company claiming in telephone calls with investors, transcripts of which have been seen by the news agency, that the UK business was profitable.

The contradictions highlight legal tax-avoidance tactics used by multinational companies by loading UK subsidiaries with debts from other parts of the business based in countries with lower tax thresholds.

In 2007, the chief operating officer, Martin Coles, told analysts in a fourth quarter results presentation that the UK unit's profits were funding Starbucks' expansion in overseas markets. The chief finance officer at the time, Peter Bocian, added that the UK division enjoyed operating profit margins of almost 15% that year, equivalent to nearly £50m in profit.

Accounts filed with Companies House, which must be a truthful reflection of the business, according to HM Revenue & Customs (HMRC), showed a 10th consecutive annual loss.

A year later, after filing a £26m loss in the UK, Starbucks' chief executive, Howard Schultz, told investors the business here was so successful he planned to apply the lessons to the company's biggest market in the US.

Chief financial officer, Troy Alstead, called the UK business "profitable" in 2009 after accounts revealed a record £52m loss. Last year, John Culver, the president of Starbucks international division, said: "We are very pleased with the performance in the UK." Accounts reported a £33m loss.

Michael Meacher, the Labour MP for Oldham West and Royton, who has campaigned against companies that use tax avoidance techniques, said: "HMRC should be having a look at this, especially since they keep saying there should be a crackdown. This has been going on for years and there are many companies involved.

"The fact they have paid 0.3% tax on their turnover is utterly scandalous. If they didn't think they could get away with it, they wouldn't dare do it."

HMRC said: "For legal reasons, we cannot comment on the tax affairs of individual businesses, but we make sure that multinationals pay the right tax to the UK in accordance with UK tax law.

"Our tax rules combat tax avoidance and we employ specialist tax professionals to ensure that multinationals play by the rules."

Anna Walker, a spokesperson for UK Uncut, which attempts to highlight companies that fail to pay their fair share of tax, called on the government to change the law to stop what she called "unfair and unjust behaviour", adding that the organisation had Starbucks "in its sights".

She said: "The government must take action so that this country has a fair tax system ensuring that hugely profitable companies like Starbucks pay the right amount of tax."

There is no suggestion Starbucks has broken the law and the company's worldwide tax rate was 31% last year, compared with an average of 18.5% for multinationals. However, it paid an average of 13% on overseas income, one of the lowest rates in the consumer goods sector.

Starbucks said: "We have paid and will continue to pay our fair share of taxes in full compliance with all UK tax laws, as we always have. There has been no suggestion by any authority that we are anything but compliant and good taxpayers.

"We do this in a way that is consistent with the values that have guided us since we were founded more than 40 years ago: balancing our need to operate a profitable business with a social conscience."


Simon Neville and agencies

The GuardianTramp

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