Coffee chain Starbucks has agreed to pay more UK corporation tax, after a public outcry over how little it pays Kris Engskov, managing director of Starbucks UK, announced that the company would pay "a significant amount of tax during 2013 and 2014, regardless of whether the company is profitable".One tax expert described the move as "unprecedented".HM Revenue and Customs reacted by saying that corporation tax "is not a voluntary tax".
"The public expects businesses to pay their fair share," the tax authorites added, "and HMRC will challenge, through the courts if necessary, any structures or tax payments that do not comply with the UK tax law."But Amazon and Google, also under fire for paying little UK tax, held firm.The extra tax could amount to £20m over the next two years, Mr Engskov said.
Bill Dodwell, head of tax policy at the accountants Deloitte, told the BBC that he suspected the figure was a "sensible number taking account of the scale of the business and their history of past losses".
"This is an unprecedented move for a company to announce this sort of change," he said.
'Joke'
Starbucks' announcement comes after much public anger over the revelation of how little corporation tax it pays in the UK, with some people saying they would boycott its outlets.The company has paid just £8.6m in corporation tax in its 14 years of trading in the UK, and nothing in the last three years, despite UK sales of nearly £400m in 2011.Starbucks has reported a taxable profit only once in its 15 years of operating in the UK, often reporting losses.
"It is extraordinary," Stephen Williams, Treasury spokesman for the Liberal Democrats, told the BBC. "People have been joking that some of these multinationals seem to think that paying tax is voluntary. Well Starbucks have just confirmed the joke really.
"Tax is something that is a legal obligation that you should pay according to the tax rules of a particular country. It's not a charitable donation in order to gain sort of brand value. But that seems to be what Starbucks are doing.Conservative MP Richard Bacon, who is a member of the Public Accounts Committee, expressed surprise at the move."They have recognised the public outrage at the fact that a company as large as Starbucks would... not be paying any corporation tax.
"They have realised that it is a PR problem and it is a PR response. It is nice for the exchequer to have a bit more money, but it is not a long-term solution to the problem that we face."Starbucks admitted that the degree of hostility and emotion surrounding the tax issue had "taken us a bit by surprise" and that the move was an attempt to rebuild trust with its customers.
"Since we started doing business here, we have always organised our tax affairs according to the letter of the law," said Mr Engskov."[But] with the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more," he said.
Mr Engskov added that the company had found it difficult to make profits in the UK, which has "the most competitive espresso market in the world", despite "two million customers visiting us each week in hundreds of stores across the UK".The extra tax payments will be funded by not claiming "tax deductions for royalties or payments related to our intercompany charges", Mr Engskov said. Mr Dodwell said he thought the coffee chain would not claim some of the deductions they may otherwise have been allowed to claim.
"We don't know the details - that will be between the company and HM Revenue and Customs," he said.
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