Starbucks Talks with HMRC Might Lead to Change in its UK Tax Approach

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By Industry Leaders Magazine | December 5, 2012 1:58 PM EST

Industry Leaders Magazine

Starbucks Corp. informed that it started talks with the HMRC as the company has been facing growing criticism since it was revealed that the world's most known coffee chain paid only £8.5 million in corporation taxes in 14 years. In addition, Starbucks Corp. might pay more in the near future as it is reviewing its UK tax approach.

Starbucks under pressure

According to a statement, Starbucks Corp. is in discussions with the HMRC and the Treasury. In addition, the company is reviewing its UK tax approach as it has been widely criticized since it was revealed that the company paid no corporation tax in the UK in the last three years.

Back in 1998 Starbucks Corp. launched its first business in the UK and since then it has paid only £8.6 million in corporation tax. These days the company is trying to parry the criticism of its consumers as well as taxman scrutiny. Therefore Starbucks Corp. has underlined that it increased the amount it pays.

However it has not been disclosed how much the company might pay. According to some sources familiar with the matter, it might be even tens of millions of pounds per year. In 2011, Starbucks Corp. made almost £400 million in revenues and paid no tax at all.

The HMRC has been assured by Starbucks Corp. that the company would change the way it balances payments it sends to Dutch and Swiss subsidiaries so that it would pay tax in the UK.

At present Starbucks Corp., who has over 700 outlets in the UK, pays a "royalty fee" to the company based in Holland for the right to use the company's trademark. To date the company claimed that its UK business did not make a profit as a result of high rentals for its outlets.

Even though Starbucks Corp. operated within the rules, the company has lost its UK customers trust. Therefore the company is aware that it needs to take steps to minimize potential losses which it might see because of the whole tax affair. The company underlined in the statement: "Starbucks is committed to the UK for the long term and we have invested more than £200 million in our UK business over the past 12 years."

Tax avoidance

The Chancellor of the Exchequer George Osborne promised money for the UK authorities to stop tax avoidance by multinational companies and at the same time he underlined that he was aware of people's rage. Chancellor George Osborne is due to announce plans to reinforce the Island Revenue team, which will deal with the issue of tax avoidance by multinational companies including Google Inc., Starbucks Corp. and Amazon.com Inc., on the 3rd of December.

He underlined that the UK was ready to change the tax law to make it harder for the companies to transfer their profits around and hide them in so-called tax havens. In addition, those rules are to be discussed on the international level as well.

Industry Leaders Magazine

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