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Starbucks succumbs to tax avoidance pressure

by Dylan Lobo on Dec 03, 2012 at 07:59

Starbucks succumbs to tax avoidance pressure

Starbucks has agreed to review its accounting practices amid controversy over its UK tax affairs.

The coffee giant has accepted it ‘needs to do more’ as the public and politicians described the £25 billion firm’s avoidance of tax as ‘immoral’ and ‘outrageous’.

According to reports, the discussions centre on the firm’s 4.7% ‘royalty fee’ to a sister company in Holland for the right to use the Starbucks brand and recipe. This effectively enables the company to benefit from the more favourable tax regime in Holland and is estimated to have cut its tax bill by around £5 million last year.

Since it launched in the UK 14 years ago, Starbucks, which now has more than 700 outlets, has paid £8.6 million in corporation tax despite registering over £3 billion in sales.

A spokesperson for Starbucks said on Sunday: 'Starbucks is committed to the UK for the long term. [We have] complied with all the tax laws in this country but have regretfully not been as profitable as we would have liked.

‘We have listened to feedback from customers and employees, and understand that to maintain and further build public trust we need to do more. As part of this, we are looking at our tax approach in the UK.'

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