Coffee giant chain Starbucks paid £5 million to the Treasury after the company was criticized for allegedly avoiding paying tax in the UK. Customers were asked to boycott the company when it was disclosed that the US company hardly paid any British corporation tax.
Starbucks maintained that it had made a loss for 14 of its 15 years in the UK. This was why it didn’t pay tax on profits. But due to the pressure from the public and politicians, the company said it would shell out £20 million in corporation tax over the next two years.
A spokeswoman from Starbucks said that the company felt that its customers should not wait for the company to be profitable before it started paying corporation tax in the UK. She added that the company listened to its customers and decided to give up some of its deductions that would make it liable to pay £10 million in corporation tax in 2013 and another £10 million next year.
Starbucks has already paid £5 million and said it would pay the remaining balance later this year. The company has undertaken measures to make it profitable in the UK. These include relocating unprofitable stores, closing some that can’t be relocated, and placing greater dependence on franchised and licensed stores.
Starbuck’s global chief financial officer Troy Alstead made an appearance before the Commons’ Public Accounts Committee last year. He claimed that the company acted to a legal and ethical standard. He told the MPs that he can assure that the company didn’t avoid paying taxes. He added that Starbucks has a global tax rate of 33 percent across the globe. The tax rate outside the US is 21 percent, which is higher than most multinationals’ rate. He maintained that Starbucks is a high tax payer and doesn’t manipulate anything to avoid paying taxes.