Over the past three years, Starbucks has paid absolutely nothing in corporation tax. This is despite turning over £1.2bn across the period. By comparison, McDonald's made £3.6bn in revenue, paying £80m in tax, and Starbucks’ nearest UK rival Costa, owned by Whitbread, turned over £377m last year and handed £15m to HMRC.
MT took a look at Starbucks’ latest filing at Companies House and found the root cause of the loss. Starbucks puts its ‘cost of sales’ at £319m for the last financial year. This includes £124m of staff costs, an undisclosed sum paid in rent, and an £8.9m tax credit from 2010. It also pays its Seattle parent company 6% royalties – more than most franchisees pay. That left a gross profit of £78.4m, which is when Starbucks whacks on £107.2m in ‘administrative expenses’. That takes the company to an operating loss of £28.8m and a loss before tax of £32.9m.
That’s one expensive administrative function…
Of course, Starbucks has done nothing illegal. It is complying wholly with UK tax law. But it is interesting to look at Costa, which turns over a very similar figure and – you would think – has similar overheads and expenses. Its last filing shows £101m of sales costs against £377m of 2011 revenue. Costa also pays administrative expenses, but these are half the size of Starbucks’ at £36.3m. This left taxable profits of £49.7m.
The UK will not make a bean from the coffee powerhouse as long as profit can be routed back into the company as expenses and tax regulations remain unchanged. Will the taxman don his bowler and take a closer look at the taxation rules? That’s the multi-million pound question.