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Starbucks set to pay tax - at last: Coffee giant bows to pressure from angry consumers and MPs

// UK
  • Global coffee giant attempts to ward off backlash over accounting methods
  • Paid just £8.6m corporation tax in 14 years, despite £3bn in sales
  • Firm has 'met with taxman to discuss paying more'
  • Starbucks has only posted a profit from UK business once in 15 years

By Sam Webb

PUBLISHED: 05:49 EST, 2 December 2012 | UPDATED: 06:51 EST, 2 December 2012

Coffee giant Starbucks has bowed to mounting pressure and will start paying tax in the UK.

The company, which has paid just £8.6million in corporation tax in the UK over 14 years - and none in the last three - is seeking to deflect a consumer boycott and increased taxman scrutiny by voluntarily increasing the amount it pays.

The move comes amid a storm of anger surrounding the low levels of UK tax paid by Google, Amazon and other major international corporations.

Starbucks has been trading welll but it has posted a profit from its UK business only once in 15 years

Starbucks has been trading well but pays little in UK tax because of legal accounting techniques

Parliament's public accounts committee will soon release a report blasting the tax avoidance schemes US multinational use.

Starbucks, which has more than 700 outlets in Britain, has met with HM Revenue & Customs officials to discuss increasing the amount of tax it pays.

Currently it pays a 'royalty fee' to a sister company in Holland for the right to use the Starbucks brand and recipe, allowing it to benefit from the country's tax regime. This legal accounting tactic helped Starbucks sidestep an estimated £5m corporation tax bill last year.

A spokeswoman said: 'Starbucks is committed to the UK for the long term and we  have invested more than £200m in our UK business over the past 12 years. Starbucks has complied with all the tax laws in this country but has regretfully not been as profitable as we would have liked.

'We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more.

'As part of this we are looking at our tax approach in the UK. The company has been in discussions with HMRC for some time and is also in talks with The Treasury. We will release more details later in the week.'

Paid handsomely: UK director John Culver (left) was paid £3.8million over two years and owns £4.7million in shares, while Ex UK boss Cliff Burrows (right) now oversees the firm's Americas operation and has shares worth £7.2million.

Last month it emerged the firm has been able to pay handsome wages to its most senior staff over the past three years.

It was reported that finance chief Troy Alstead, who owns £6.8million of shares, was paid £5.7million, and founder Howard Schultz £33million – he also owns shares, worth £545million.

Ex-UK boss Cliff Burrows who now oversees the firm’s Americas operation and has shares worth £7.2million, earned £6.5million. UK director John Culver was paid £3.8million over two years and owns £4.7million in shares.

Bosses of Google, Amazon and Starbucks were recently grilled by MPs over how they managed to pay little or no corporation tax on their UK operations. All three denied they were engaged in aggressive tax avoidance.

Business secretary Vince Cable yesterday indicated that action can be expected from Chancellor George Osborne, who delivers his Autumn statement on December 5.

Howard Schultz (left) was paid £33million on top of the £545million worth of shares he already has.  Finance chief Troy Alstead (right), who owns £6.8million of shares, was paid £5.7million

At the time, a Starbucks spokesman said: ‘Corporation tax is a tax on profits and although we would very much like to and are moving in the right direction, we just don’t make a profit in the UK yet.

‘Starbucks does however pay a number of other taxes in the UK. For example, we directly contribute more than £25million to £30million per year to the Exchequer in various taxes, including employers’ National Insurance contributions and business rates.’

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