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How Starbucks avoids UK taxes

Monday, October 15, 2012 - 03:03

Oct.15 - Starbucks's UK accounts are proving as confusing as their coffee menu, according to a special investigation by Reuters' correspondent Tom Bergin

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The brand with a soul and a conscience. That's the mantra of Starbucks CEO Howard Schultz, who in September joined London's Mayor Boris Johnson to reveal plans to hire a thousand new apprentices in the UK. Schultz and Kris Engskov, Managing Director of Starbucks UK, were all smiles for the camera, talking to current apprentices and trying to rustle up a perfect latte. But the coffee giant's big boss was not quite as comfortable talking about Starbucks's British tax bill. SOUNDBITE (English) TOM BERGIN, EUROPEAN CORPORATE STRATEGY CORRESPONDENT, REUTERS AND KRIS ENGSKOV, MD OF STARBUCKS UK AND IRELAND, SAYING: TOM: "Why does Starbucks not pay any income tax in the UK? You just have a simple question." KRIS: Tom, I'll be with you in just a second. I'm really sorry. Just one second. TOM: You will talk to us? You will talk to us? KRIS: Tom, I'm really sorry. Starbucks did grant Reuters a brief telephone interview eventually. Chief Financial Officer Troy Alstead said the company strictly follows international accounting rules and pays the appropriate level of tax in all the countries where it operates. A spokesman added, "Starbucks is committed to both paying our fair share of taxes and to maximizing the value of our shareholders' investment." But tax campaigners like Richard Murphy find it difficult to reconcile the group's values and the way it files it taxes in Britain. Accounts for Starbucks's UK operation show it has paid almost no tax on revenues of $5 billion over the past 13 years. SOUNDBITE (English) RICHARD MURPHY, ACCOUNTANT AND TAX CAMPAIGNER, SAYING: "Starbucks is charging itself a royalty for using its own name. We are seeing profits move from one territory to another one. Why would you move your profits from one territory to another one? Because, at the end of the day, you're trying to change the place where that profit is taxed, and that almost certainly is the motive for what's going on here." PTC Starbucks' ability to avoid taxes on its UK earnings gives it a competitive edge over domestic rivals. Independent cafe owners like David Abrahamovitch can't escape the tax man by shifting profits into offshore tax savings (SOUNDBITE) (English) DAVID ABRAHAMOVITCH, OWNER SHOREDITCH GRIND COFFEE SHOP, SAYING: "We all know that wealthy individuals and big corporations are always going to employ tax consultants to do that kind of thing. But I think there's a moral argument to this debate as well. And I think these ultra-aggressive offshore games perhaps are going too far." Indeed, accounts filed by Starbucks for its UK unit, says it has never made a profit. Meanwhile, management has consistently told investors that the British operation was one of its most profitable. SOUNDBITE (English) RICHARD MURPHY, ACCOUNTANT AND TAX CAMPAIGNER, SAYING: "What we're seeing are large numbers of multinational corporations around the world who are shifting profit. And if you start from their accounts and work downwards, which is exactly the exercise that you've done, you find that they should and do appear to be making profits in the UK and yet aren't paying tax here." Financial analysts say a company's primary responsibility is to its shareholders. And this means, Starbucks has a duty to take advantage of any loophole it can find. Tom Bergin, Reuters.

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How Starbucks avoids UK taxes

Monday, October 15, 2012 - 03:03