In its 14 years of operation in Britain, coffee chain Starbucks sales tax has been just £8.6 million, on a reported £3 billion sales in the UK since 1998, having opened 735 outlets since then.
An investigation into Starbucks tax rate showed that the coffee chain has paid no tax on its UK earnings in the past three years after posting annual losses in company accounts, despite claims of Starbucks’ Seattle officials that the company has been profitable.
Starbucks UK’s accounts revealed that Starbucks sales tax burden had been reduced by officially posting losses of millions year after year. However, in its briefings to stock market investors and analysts over the past 12 years, Starbucks has maintained that its UK unit is “profitable”, and three years ago even promoted its UK head, Cliff Burrows, to head its large-scale US operation.
It has emerged that the coffee chain has used complicated measures to minimise its profits and reduce Starbucks tax rate. One such measure includes paying large royalties to another unit of Starbucks for using the brand name.
During 2011, which is the most recent year for which figures are available, Starbucks posted a loss of £33 million on UK sales of £398 million. Starbucks paid no corporation tax owing to these losses.
Another complicated manipulation done by Starbucks is that, Starbucks buys its coffee beans for all its European divisions from a firm based in Lausanne in Switzerland. Before the beans reach the UK they are transported to Amsterdam to be roasted. Experts who have studied the figures say that the supply chain is a way of distributing profits across the world.
Has Starbucks, the second largest restaurant or café chain in the world, violated the UK taxation law?