Starbucks won’t pay tax in UK, By Elizabeth McLoughlin, for myretailmedia.com
Starbucks boss Mark Fox has sparked outrage by suggesting that the brand will not be paying ordinary levels of UK tax for three years, saying it needed to get “its mojo back” before it will make a profit in Britain. His words have been described as insulting, and customers are continuing to boycott the coffee chain which has been under scrutiny since revelations that it has only paid £8.6 million corporation tax since 1998 when it made the move to Britain, by reporting financial losses through the alleged cost of high street outlets. The firm has also been called immoral for moving revenue out of the UK into Switzerland and the Netherlands, though Fox said this “didn’t bother me at all” and regarding the tax scandal stated:
“Fundamentally, the piece that was aerating was around royalties – the fact a brand is paying a royalty to an entity outside the UK, and to me that’s very, very ordinary.” He continued “It happens across the sector and therefore it didn’t bother me at all. There was nothing abnormal about the way Starbucks is run in the UK. What is abnormal is that we haven’t been making a profit.”
Starbucks has embarked on a five-year plan to it profitable in the UK, of which it is two years into. Labour MP Margaret Hodge is critical of the brand and encourages consumers to boycott it “I think it’s an insult to ordinary hard-working taxpayers across the country. Hopefully it’s a big enough insult to his customers that they will take their business elsewhere. They will not win back the trust of the public unless they unwind these immoral schemes.”
The coffee chain use a variety of practises to keep the profitability of the UK sector low, and has therefore not reported a profit since the launch here in 1998. It has registered brand and logo rights to a Dutch holding company, and therefore pays 6 per cent in royalties for every cup sold to its Netherlands arm. It also buys coffee beans from a firm in Switzerland, where tax is extremely low, meaning all coffee sold in the UK is at a large premium. These two methods make it harder to turn a profit and help keep UK revenues low.
Starbucks offered to pay £20 million in taxes following the scandal two years ago, and have recently finished the series of payments. However, critics are still dissatisfied, chief executive of the TaxPayers’ Alliance Jonathan Isaby said “It’s quite understandable that taxpayers don’t feel everyone pays their fair share. But the power to fix that lies in the hands of politicians, who add complex loopholes and reliefs to the tax system year after year.”
Company website: www.directmarkettouch.com