Starbucks makes £20m tax donation

The American coffee chain has agreed to pay some extra 'corporation tax' in the UK after public outcry surrounding how little it pays already.

by Michael Northcott
Last Updated: 19 Aug 2013

The high street coffee chain has rolled out a nice little PR exercise this afternoon, having agreed a deal with tax authorities to pay an extra £20m into the exchequer. 

This is despite the fact that it has spent the last two weeks denying any wrongdoing in its existing tax arrangements, saying that it paid exactly what the tax system required it to pay. Incidentally, it paid no corporation tax whatsoever in 2011, and says that its UK operation has been a loss-maker for the last 14 out of 15 years.

The firm’s chief financial officer, Troy Alstead, said that he appreciates that being compliant with UK legislation ‘isn’t enough’. He said: ‘So the changes you’ll hear about – that will come in more depth – are about recognising that we need to do more than [is] required today.’ 

Managing director Kris Engskov further explained that the firm would pay ‘a significant amount of tax during 2013 and 2014, regardless of whether the company is profitable during these years.’ He said that the additional tax could total around £20m over the period. 

In essence, this means that Starbucks’ contribution will be a sort of charitable donation rather than a tax payment. Presumably it's aimed at tackling some of the backlash that it earned when tax figures came to light showing that Starbucks has paid barely any corporation tax in the last 15 years despite taking billions in revenue.

As Conservative MP Richard Bacon  - a member of the Public Accounts Committee – pointed out: ‘They have recognised the public outrage at the fact that a company as large as Starbucks would not be paying any corporation tax.

‘They have realised that it is a PR problem and it is a PR response. It is nice for the exchequer to have a bit more money but it is not a long term solution to the problem that we face’

Engskov also suggested that Starbucks had not really seen such public outrage coming. He said: ‘Since we started doing business here, we have always organised our tax affairs according to the letter of the law. [But] with the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more.’

Too right, they do.

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