Starbucks volunteers to pay more taxes

Police form a line outside a Starbucks coffee shop as demostrators participate in a protest against the government's austerity measures targeting several businesses on October 20, 2012 in London, England.

The U.S. coffee chain Starbucks has bowed to pressure in the UK and has volunteered to pay more than $30 million in taxes over the next two years. The company is one of a number of big U.S. businesses accused of not paying a fair share of tax on their British operations.

Starbucks sold more than $600 million worth of coffee in Britain last year, and yet the company reported a loss, so it didn’t pay  any corporate tax. The coffee giant hasn’t paid any corporate for fourteeen of the fifteen years that it’s operated very profitably in the UK. Starbucks has -- quite legally -- funneled its profits into other low tax jurisdictions. But in a time of austerity, when the British government is cutting public services and reducing welfare benefits, this tax strategy is not popular.

Starbucks has come under a hail of criticism in Parliament and in the press. The company’s UK boss, Kris Engskov, now says the company will voluntarily pay at least $32 million into the British government’s coffers:

“We are taking  action to pay corporate tax here in the UK,” says Engskov, "We’re going to go beyond what’s required by the law  and we’re going to do it whether we make a profit over the next two years.  And frankly we’ve done it because we’ve listened to customers."

His customers were beginning to boycott the chain. Protests are still planned at 40 Starbucks stores this weekend. Starbucks is not the only company in the firing line. Amazon, Google, Facebook and Apple have also been heavily criticized for their tax policies. 

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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