...So why does Starbucks get away with paying so little of its profits to taxman?
STARBUCKS was hit by a fresh row yesterday over the level of tax it pays in Britain.
The US coffee chain faced claims that a key European division, which is based in the UK, paid as little as £4.5million to the taxman on profits of £1 2million.
The Financial Times reported that this is an effective rate of around 2.8 per cent – when the corporation tax rate is 19 per cent.
Starbucks has been hit by repeated criticism over its UK tax affairs and the latest controversy will embarrass the Church of England, which counts Starbucks among its top investments.
The Archbishop of Canterbury Justin Welby was ridiculed last week for lambasting Amazon over its tax arrangements, when the Church has invested tens of millions in the online retailer.
Starbucks’ tax affairs came under the spotlight yesterday amid growing scrutiny of big businesses and major concerns they are paying too little.
Rob Palmer, from the Tax Justice Network, said: ‘It’s really difficult to know what is going on in big companies’ accounts as we don’t have access to all the information. The Government has slashed corporate tax rates – even business groups are saying it does not need to be that low.’
Starbucks Emea Ltd is based in the UK and collects royalties from branches in Britain and across Europe, the Middle East and Africa. Starbucks said the division’s profits had been boosted by a
multi-million dividend from another part of the group which had already been taxed.
Without the dividend, the European division paid a tax rate of 9.4 per cent. And the company claimed that if its wider business is considered it pays an effective rate of 21 per cent.
A spokesman said: ‘Starbucks pays all its taxes and meets all international tax standards and regulations.
‘Starbucks’ UK headquartered businesses paid £13.7million of corporation tax in the year to October 2017, an effective tax rate of 25.3 per cent.
‘The intellectual property of the Starbucks brand in Emea has resided in the UK since 2015, enabling the local collection of royalties for the region.
‘This collection of royalty income is subject to UK corporation tax.
‘As a result we are now paying more tax to the UK exchequer than under our previous structure.’
The Church of England said last night : ‘We recognise concerns about the levels of corporate tax paid by some companies. We also engage with all companies to encourage them to disclose the tax that they have paid on a country by country basis.’
ON the day the Prime Minister warns all households to expect ‘balanced and fair’ tax rises, it is claimed that Starbucks effectively paid the Treasury as little as 2.8 per cent on UK profits of £162million last year.
Leave aside this latest embarrassment to that scourge of tax-dodgers, the Archbishop of Canterbury – whose church happens to own a chunk of the American coffee chain.
This paper understands Mrs May’s need to finance the extra £20billion she has promised the NHS. But Britain is already on course for the heaviest tax burden since Harold Wilson’s government in 1969-70.
How can she claim she is forced to sting us for more, while Starbucks and other multinationals exploit loopholes – or fix sweetheart deals with HMRC – to avoid paying anything like their due?
That’s not to mention the £13billion a year ministers squander on aid to countries including mega-rich China.
As a Tory, Mrs May should remember that excessive tax rates can yield lower returns for the Treasury. Before increasing the burden on the Just About Managing, she should tell the Chancellor to focus on closing those loopholes and cutting the waste.