Starbucks caves in and agrees to pay up to 10m tax this year – but it may not stop the boycott caused by its 'immoral' financial dealings
Deal done with HMRC after huge pressure from the public and MPsThe US-owned coffee chain has not paid corporation tax for 14 yearsIt recorded no taxable profits despite enjoying a 31 per cent market shareStarbucks maintains its British business has not been profitableBut confirms it will reveal result of talks with HMRC tomorrow
The chain is in grip of boycott, backed by the Treasury chief secretaryThere are hopes that Amazon and Google will be next to pay more tax
16:55 GMT, 5 December 2012
Outcry: Starbucks will pay about 10million in tax this year after it was accused of acting 'immorally' when it emerged that it has paid no corporation tax in 14 of the past 15 years
After paying no tax at all for 14 of the last 15 years Starbucks has finally caved in to pressure and will now hand over 10million to the Treasury.
The US-owned coffee chain, with annual sales of 400million in Britain, has been accused by MPs of acting ‘immorally’ after it emerged that it has hardly paid corporation tax since opening its first shop in the UK.
But its decision, after it admitted 'it needed to do more' on tax in the UK, may not placate boycotting consumers unhappy about its financial position.
The company grips one third of the UK coffee market but recorded no taxable profits last year and so did not have to pay any corporation tax. Since 1998 the company has enjoyed 3billion in sales.
Although their new payment of up to 10million will be seen as a victory for the Government, it is only a tiny proportion of the amount of cash Starbucks generates in the UK.
It is understood that the coffee shop has based its proposed tax bill on rival Costa.
Two years ago Costa paid around 15million on profits from its 1,500 shops, and this will probably rise by another 3million this year.
Starbucks has nearly 750 stores so is likely to confirm later this week that it will pay around half or slightly more what Costa paid.
It is also certain that if the business continues to thrive, they will pay tax every year going forward, it has emerged.
Starbucks say no deal has been done and maintains its business has not been profitable.
'We have invested more than 200million 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,' a spokesman said.
'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 tomorrow'.
Other multinationals with large operations in Britain, including Amazon and Google, have faced intense criticism in recent weeks over their minuscule UK tax bills.They could be next to agree a deal.
Freebies: A Starbucks worker hands out hot chocolate to cold shoppers in London's Oxford street today but the public are upset about the lack of tax they have paid
The Commons Public Accounts Committee said it found Starbucks' figures ‘difficult to believe’.
The chain is still facing a boycott, which was backed by the Treasury chief secretary Danny Alexander.
and the Chancellor have now announced plans for a 10billion crackdown
on tax-dodging by corporations and wealthy individuals.
On Sunday Starbucks confirmed it had opened talks with HM Revenue and Customs on its tax affairs, saying it ‘needed to do more’ on tax in the UK.
'Name and shame': MP Margaret Hodge called on ministers to reveal firms that were not paying their fair share and suggested that the Government should back boycotts like the one facing Starbucks
It also emerged that the company is preparing to change a controversial arrangement under which it sends 4.7 per cent of its turnover to the Netherlands, where it enjoys a special low tax rate.
The move is expected to result in the firm recording taxable profits in this country.
Crackdown plans: Treasury chief secretary Danny Alexander is backing a boycott on Starbucks and other companies accused of avoiding tax
Starbucks is expected to make a detailed statement on the changes later this week.
The news emerged as the Public Accounts
Committee released a devastating report on HMRC’s handling of the tax
affairs of major corporations.
MPs said Starbucks and fellow major
multinationals Amazon and Google have contributed to a 32billion tax
gap between the amount HMRC is due and the amount it receives, thanks to
legal ruses that slash their tax liability in this country.
The committee’s Labour chairman
Margaret Hodge called on ministers to ‘name and shame’ firms that are
not paying their fair share, and suggested that the Government should
corporation tax was in danger of ‘becoming voluntary’, she said: ‘At
the moment it’s a bit like David and Goliath, with the companies being
supported by very experienced, highly-paid accountants and lawyers.
want to up the game from HMRC. I think they can take more cases to
She added: ‘We can say we won’t buy from companies. I think it’s good citizenship.’
Alexander dismissed the idea of naming and shaming tax dodgers, saying
confidentiality remained ‘a very important part of our tax system’.
joint announcement, he and Chancellor George Osborne said HMRC will
receive an extra 154million over the next two years to clamp down on
tax dodging by major corporations and the super-rich.
forecasts the money will claw back 10billion over the next five years.
resources will be used to target so-called transfer pricing
arrangements, which critics say allow firms to shift profits to tax
HMRC’s ‘affluence unit’ will also recruit 100 more