Starbucks. They don’t need any form of introduction. If you drink coffee, there’s a good chance you’ve had one of theirs at some point. And then some time later you’ve probably crossed the road to enjoy another moderately priced beverage at the store opposite.
Based in Seattle, the company has stores all over the globe. With a dominant market share overall estimating £25bn, they are second only to McDonalds in the food retail trade. Which is precisely why you can’t avoid the story that they have been telling their shareholders one story and the British tax office something very different.
The Taxman Cometh
It seems that since 2009, the company has made around £1.2bn. An impressive amount, which surely comes with an impressive tax bill. Or not, as the case may be. Starbucks have only not paid any tax in these three years, and only £8.6 million queen heads in taxes over a fourteen year period. Which isn’t as impressive as the fact that they have done this completely within the realms of the law.
Considering that other brands such as KFC, who had more than twice the sales, yet paid almost 8 times the amount of tax, the question arises. How did they do it? Without going into too much detail, Starbucks allegedly charged higher licencing fees in the UK, which allowed them to declare loses amassing to a staggering £35 million green queens. The tax office was able to disallow some deductions and there you have it, tax nirvana.
Don’t ask, don’t tell.
Because large companies do not generally break down their payments and taxes by individual country, it was largely swept under the carpet when it came to telling their (American majority) investors the news. Transferring profits to low-tax areas, which is legal, but discouraged by the tax authorities, seems to be one of the methods employed by the coffee juggernaut.
Although technically, Starbucks have not done anything illegal, many people believe it’s a short bus stop away between ‘illegal’ and ‘immoral’. Although it seems that no legal ramifications will occur, the company will certainly suffer from public opinion fallout.
Avoiding the problem
The UK is certainly no stranger to the tax fiasco, with a similar story earlier in the year regarding comedian Jimmy Carr, which is why, it seems, many businesses should be ensuring their finances are kept under strict observations.
It’s amazing that these days, it seems like we’re sometimes on the side of the taxman.
Bio: Nixon Williams has been a leading agency since 1995, providing accountants for Interim Managers, freelance contractors and consultants all over the UK.