Starbucks caves in to pressure and promises to pay 20m in corporation tax in next 2 years

Starbucks caves in to pressure and promises to hand the taxman 20m after public outcry
The US-owned coffee chain has paid just 8.6 million in corporation tax in the past 14 yearsAfter public pressure, it will pay 20million to the Treasury over the next two years
Campaigners are unhappy with the pledge, and are preparing to protest at cafes on Saturday
There are hopes that Amazon and Google will be next to pay more tax

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UPDATED:

07:50 GMT, 7 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

Anger: Starbucks will pay 20million in corporation tax over the next two years after it
was accused of acting 'immorally' for not paying the levy over the last three years

Starbucks last night caved in to public pressure and agreed to pay millions in corporation tax amid fears of a growing consumer boycott.

The global coffee group struck a deal with Her Majesty’s Revenue and Customs to pay 20million over the next two years, whether or not it reports a profit.

The move will bring valuable money into Treasury coffers and piles pressure on other multi-nationals such as Google and Amazon to restructure their affairs to make contributions.

But critics said the figure was an ‘arbitrary’ contribution to try to quell public anger over Starbucks’ financial affairs and warned it could go back to its ‘immoral’ tax-avoiding ways within 12 months.

The deal, they said, was evidence of Britain running a ‘voluntary’ tax system where companies opt to pay what they like, rather than what they owe.

Starbucks has also agreed to suspend the clever accounting techniques it used to push profits overseas and minimise its tax bill.

It has not paid corporation tax for 14 of the past 15 years of trading in the UK, despite owning more than 700 stores and taking more than 3billion in sales since arriving in Britain.

Last year the coffee giant registered sales of 398million but claimed to make a loss of 33million – giving it a corporation tax bill of zero. But now it will hand over 10million for the year, under the terms of yesterday’s deal.

It will also pay ‘in the region of 10million’ next year, despite not knowing what its sales or profits will be.

Tax accountant Richard Murphy said: ‘The accusation is that we’re now asking for tax on a voluntary basis. This isn’t a church collection – if you owe it, then you should pay it.’ He added: ‘My fear is that Starbucks haven’t changed anything. These payments are token gestures.’

/12/05/article-2243353-165C8EC0000005DC-839_634x423.jpg” width=”634″ height=”423″ alt=”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” class=”blkBorder” />

Freebies: A Starbucks worker hands out hot chocolate to cold shoppers in
London's Oxford Street, but the public are upset about the lack of
tax they have paid

It did this by charging its UK arm royalty fees for using the Starbucks logo and coffee to a sister company in the Netherlands.

Six per cent of the revenue from every
cup of coffee sold in Britain was given to the Netherlands for the
rights to use the name. This will be suspended for 12 months after
yesterday’s deal.

Starbucks’ arrangements, which
critics said were designed specifically to avoid paying corporation tax,
also saw it buying its coffee through Switzerland, even though the
beans never arrived on Swiss soil.

It also took out loans from other
parts of the company, located in lower-tax areas, for which it was
charged large interest rates.

Yesterday UK boss Kris Engskov said the group would put those practices on ice ‘for two years or until we make a profit’.

The Public Accounts Committee chairman Margaret Hodge called on ministers to reveal firms that were not paying their fair share and suggested that the Government should back boycotts

'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

Treasury chief secretary Danny Alexander is backing a boycott

Crackdown plans: Treasury chief secretary Danny Alexander is backing a boycott on Starbucks and other companies accused of avoiding tax

He said ‘doing the right thing is part
of the DNA of our company’, but added ‘we have always organised our tax
affairs according to the letter of the law’.

The company last night could not
offer any firm assurances that it would not reinstate its old methods
for pushing profits to Switzerland and the Netherlands once the period
had ended.

It said the changes were not permanent.

‘Offering to pay some tax if and when
it suits you doesn’t stop you being a tax dodger,’ said Hannah Pearce, a
spokesman for protest group UK Uncut, which is organising
demonstrations in 40 Starbucks outlets this weekend. ‘This announcement
is just a desperate attempt to deflect public pressure . . . it’s a
hollow promise.’

A spokesman for HMRC said:
‘Corporation tax is not a voluntary tax and Parliament sets out the
rules and rates for businesses to follow. The public expects businesses
to pay their fair share and HMRC will challenge, through the courts if
necessary, any structures or tax payments that do not comply with the UK
tax law.’

The move will pile pressure on Google and Amazon to bow to public pressure and contribute to government coffers.

All three were brought before the Public Accounts Committee last month to explain why they paid little or no corporation tax.

Shadow business secretary Chuka Umunna
said: ‘Starbucks have much to do to rebuild trust among their customers
and the public. This is a welcome first step. No doubt other firms will
want to consider following their lead.’