back to article That enough, folks? Starbucks tosses £5m into UK taxman's coffers

Starbucks, one of the three firms - along with Amazon and Google - that have been hauled over the coals because of their teeny tax bills in Blighty, has handed over £5m to HMRC to please its customers. The payment, the first the multinational firm has made in corporation tax in the UK for five years, said that it would make …

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  1. Anonymous Coward
    Anonymous Coward

    Giving the government free money is like handing a Crack addict twenty pounds and expecting him to leave you alone in the future.

    You will be disappointed.

    1. CaptainHook
      Stop

      False Analogy

      This isn't giving the government money in the hopes the government will leave the alone.

      This is trying to buy a bit of good will from their customers, I bet it's even come right out of the marketing budget.

    2. Ian 62

      At least the crack addict

      Would spend 20 quid.. and get 20quid worth of crack.

      The government will take the 5mil quid, spent it on something that ends up costing 50mil and is then scrapped because they calculate its cheaper to scrap it than finish the project.

    3. Anonymous Coward
      Anonymous Coward

      Just because you don't like what the government does with your money doesn't give you the right to set up trickery to dodge paying it.

      Starbucks sells coffee in the UK and makes money from it. By claiming they didn't make any money because every coffee sale requires a royalty payment so the cup can have the Starbucks logo on it is just devious.

      Any shortfall in taxation is dumped on the PAYE employee.

  2. Pete 2 Silver badge

    So: basically it's a protection racket

    > to become profitable before we started paying UK corporation tax

    Well, err ... actually - yes. Isn't that what corporation tax is supposed to be? <FX: scratches head, looks mystified>

    However it does appear that the tax climate has changed for multinationals in the UK. In recognition that the accountants who work for companies will always be better (i.e. higher pay attracts talent, civil service pay grades not so much) than those who work for HMRC and the government - and therefore will always find ways of keeping their employers' taxes in the low single figures, the tax position has shifted to a public-opinion based assessment rather than a financial one.

    So now, instead of reporting profits, costs & turnover, each company will just bung a wad of it's own discretion at the treasury. In return they won't get the PM making snarky comments about them to the press.

    1. David Hicks
      Meh

      Re: So: basically it's a protection racket

      "Well, err ... actually - yes. Isn't that what corporation tax is supposed to be? <FX: scratches head, looks mystified>"

      Therein lies the problem, what is profitable? What does that mean?

      Would there have been profit if not for poorly defined "brand services" charged to the UK corp from a tax haven?

      Conversely, are brand services (international marketing? trans-national supply negotiation?) actually quite a legitimate expense?

      There's no doubt in my mind that a lot of dodges are used to make it look like there's no profit where there might be tax, and that's the bit I'd like to see pinned down.

    2. Godwhacker

      Re: So: basically it's a protection racket

      Well, there's accountants being 'good', and then there's accountants creating an corporate structure that makes profit vanish as far as the tax man is concerned but still somehow be around for the shareholders.

      Personally I like the idea of a government capable of paying for hospitals, roads, schools, police, and so on. I'm also coming round to the idea of adding the guillotine to that list.

      1. Anonymous Coward
        Anonymous Coward

        Re: So: basically it's a protection racket

        Not to mention the people who help companies "dodge" tax are all millionaires themselves. People getting filthy rich helping other wealthy people get even richer while everyone else gets lumbered with higher taxes (some of which are used to bail out the casino banks).

      2. Pete 2 Silver badge

        Re: So: basically it's a protection racket

        > Personally I like the idea of a government capable of paying for hospitals, roads, schools, police, and so on. I'm also coming round to the idea of adding the guillotine to that list

        Yes. The problem is that this method of wringing money out of companies is political and it's corrupt. Who says which companies should be hauled through the pit of public opinion? There may be some tax-minimising companies that a particular government "likes" (whether due to patronage, political donations, employing in marginal constituencies or the old-boys network) and therefore chooses not to lambast. It also means that decisions about the amount of slagging-off that a particular company gets, to "persuade" it back to the path of righteousness is arbitrary and non-transparent: bad properties for a tax regime.

        Finally, it may persuade the companies in question to play dirty, too. What happens if Starbucks starts printing political slogans on its coffee cups? Or if banks start giving preferential treatment to customers living in post-codes that have proven sympathetic to the goals of big-business?

        While this sounds like a good idea - and probably will work as a one-off (or warning), it could come back to bite the politicians in the bum if used as a blunt instrument (though how a blunt instrument could bite your arse, I don't know)

      3. h3

        Re: So: basically it's a protection racket

        What I want to know is why they let Vodafone off 6 billion fairly recently. (Or some huge sum in exchange for a billion right now). At least this site said so didn't bother checking the facts but either way 5 million is peanuts in comparison.

      4. Tim Almond
        Stop

        Re: So: basically it's a protection racket

        "Personally I like the idea of a government capable of paying for hospitals, roads, schools, police, and so on. I'm also coming round to the idea of adding the guillotine to that list."

        If that was all government was, and was all done in an efficient manner, we'd have 20% tax.

        Education costs £99bn. That's just over a grand each.

        Health costs £130bn. Around a grand and a half each.

        Roads? Well, the road fund license more than covers that.

        Policing? £40bn at most. And a lot of that comes from your council tax.

        So, that's around 1/3rd of the total government expenditure of 722bn. And a lot of that is badly run. Thanks, but the state can burn someone else's money before mine.

  3. Anonymous Coward
    Windows

    I doubt

    very much Starbucks have done this on a whim. No doubt expensive lawyers will no doubt have managed someway to circumvent some "law", legally, of course....Therefore diverting funds away from the inland revenue...

    Mega corporations are mega for a reason....

  4. Anonymous Coward
    Anonymous Coward

    starbucks start paying tax

    whatever next ... starts making (half-)decent coffee ??

    1. dogged

      Re: starbucks start paying tax

      Don't go mad, anon.

      1. Spoonsinger

        Re: starbucks start paying tax

        They pay the tax they have to pay, (until proven otherwise). Nothing more and nothing less - as both those circumstances would allow HMRC to fine them. It's not rocket science. No idea why they would actually want to give money away thought, other than for the aforementioned marketing reason.

  5. Anonymous Coward
    Anonymous Coward

    This is just an effort to get the customers back in the door.

    I know one person who admits to using starbucks everyone else skips them.

  6. Yet Another Anonymous coward Silver badge

    I never pay at Starbucks

    By also having a pee every time I go in I make a net loss and so don't have to pay for the coffee.

    Shoplifiting is illegal but "advantageous purchase planning" is all part of my duty as a Yorkshireman to pay nowt.

    1. Khaptain Silver badge
      Coat

      Re: I never pay at Starbucks

      What, you pee in your coffee everytime you go into Starbucks ?

      That's not coffee steam coming out of your goblet is it ......

      1. Yet Another Anonymous coward Silver badge

        Re: I never pay at Starbucks

        They claim a net outflow of money from the country - I claim a net outflow of liquid at Starbucks.

        The amount I take in from a cup is less than the amount I flush down their toilet.

  7. Anonymous Coward
    Anonymous Coward

    Would you believe a chain with so many branches everywhere you look and they're still not making any profit??? surely that just means, the more they open, the more debt they get into???

    Starbucks cranking the bullshit meter up to 11.

    1. Anonymous Coward
      Anonymous Coward

      I have a shop that sells bananas.

      I also has a tiny office, registered somewhere with a favourable tax policy, that sells bananas, to my shop.

      My shop makes a small loss because the bananas are very expensive - so the shop pays no tax.

      My office makes a large profit because it buys bananas cheap and sells them at a very large mark-up.

      1. Anonymous Coward
        Anonymous Coward

        vertical marketing

        Isn't that how petrol and natural gas prices are calculated (less extrotion tax obviously)

      2. Mark 78
        Thumb Up

        That's a simpler desciption than I managed when trying to summorise what they were doing. Thanks, I'll try remembering that one.

        1. Justicesays

          Transfer Pricing

          Is the basic form of this dodge, but most governments can have adopted policies that allow them to assess the costs being charged for the good or service if they fall outside an allowed range (so the "very expensive" bananas would be assessed at a little above their actual cheap price and you would have to pay tax on your profits as if that was the case).

          Obviously this depends on the government having a good idea of what a good or service is actually worth

          I guess what Starbucks is arguing is that without the very expensive use of their corporate branding, they would be just another, barely-breaks-even coffee shop.

          So the branding must be worth all the profits, right?

      3. Yet Another Anonymous coward Silver badge

        The shop in the Caymans doesn't even need to sell you the bananas - it can just hold the trademark on your greengrocer's misuse of the apostrophe.

      4. Danny 14 Silver badge
        Stop

        better still with your bananas you could have a logo. Simply import the bananas into the UK at a nice favourable rate and put a sticker on your bananas. your sticker needs royalty payments though so your wifes company in switzerland gets royalty payments equal to your would-be-tax. That way at least your business can operate in the UK with normal cashflow without needing to move money about (after paying your wages of course). Your would-be-tax sits in switzerland as a pension fund.

        Run at a slight loss to increase your offset just in case you accidentally make a profit.

    2. Alan Brown Silver badge

      Simples:

      It's a franchise model. See http://www.starbucks.co.uk/business/franchised-stores

      Franchisees have to buy the product from starbucks and pay royalties, etc. they are also responsible for their own tax affairs - it also means that boycotting the shops hurts those local businesses far more than the corporate backoffice. Things are far more complicated than a few soundbites might suggest.

      (Starbucks in the USA is not a franchise op)

      It appears that starbucks USA business model has been to beat everyone else in a given area out by attrition (there are places in the usa where there's a starbucks on all 4 corners of an intersection), and then reduce the number of stores plus jack up prices. Such activities would be actively curtailed in the EU.

  8. ukgnome

    Hard to get excited

    This is just a PR stunt, as they have already said that they will now have to close or move stores in areas that make little or no money. So they are going to close stores and claim that it's the governments fault as they had to pay tax.

    "A spokeswoman said the company was now "undertaking measures to make Starbucks profitable in the UK".

    She added unprofitable stores would be closed or relocated and there would be a "greater reliance on franchised and licensed stores". (http://www.bbc.co.uk/news/uk-politics-23019514)

    1. LPF
      Thumb Up

      Re: Hard to get excited

      Starbucks is very profitable in the UK and said so in their US annual statement. If they are making no money, then I suggest for the good of the company that we close down those shops and sell themoff to rivals, so that we don't take starbucks down and allow that great company to continue in more profitable countries.

      1. Yet Another Anonymous coward Silver badge

        Re: Hard to get excited

        Since they are vital to the nation's economy ( the city would grind to a halt if people couldn't get their espresso) and yet they lose money they should be nationalised

    2. JeeBee
      Thumb Up

      Re: Hard to get excited

      Great, closing down stores out of pettiness will leave space for local, tax-paying, businesses to move in offering the same service.

      But with better coffee and less austere surroundings.

      Win win.

      1. BorkedAgain
        Thumb Up

        Re: Hard to get excited

        They may have to shut down some of their stores? Say it ain't so! That'll have absolutely no negative effect on anyone's life*, and might expose some folks to decent coffee sourced from smaller, tax-paying local companies...

        What's the downside, exactly?

        * Okay, maybe a few folks will need to swap their Starbucks name badge for a Costa / Greggs / Whatever name badge...

  9. SMabille
    WTF?

    PR cost £5m

    So basically Starbucks did some market research to see at which point they will see less public support for the campaign against them and picked up the most profitable amount?

    "We listened to our customers in December and so decided to forgo certain deductions", really sounds to me, we decide how much we are ready to pay, it's nothing about stopping using tax optimisation tactics but balancing it with PR.

    Amazing how large corporation just decide how much they are going to pay.. ummm I'll give your £10m this year if you promise to shut up and stop moaning.

    Still well below what tax should be on their pseudo-non existent profit is (ie: Total of sales - Cost (minimum wages, rent, cost of coffee)), not license (etc...) fees from Irish/Virgin Island/Cayman Island subsidiaries.

  10. Ralph B
    FAIL

    Expensive Lesson Learnt

    Maybe it would have been cheaper to keep up the political donations after all, eh, Starbucks?

  11. BoldMan

    If I were Starbucks shareholders I'd now be looking into a class action against them for giving money away rather than funnelling it back into shareholder profit!

    1. Peter Gathercole Silver badge

      And therein lies the problem.

      'Nuff said.

    2. David Hicks
      FAIL

      Why? 5 mil is pretty cheap if it expands your market or un-tarnishes your reputation in the UK.

  12. All names Taken
    Paris Hilton

    No! Don't do it!

    Dear Starbucks

    Please make sizeable donations to UK charities of equivalent amount and cancel the cheque to HMRC immediately.

  13. Fink-Nottle

    In other news ...

    Starbucks' Swiss parent company declares 12 million loss for the next two years due to non-payment of transfer cost items by the UK subsidiary.

  14. Aldous
    Facepalm

    Pot meet Kettle

    "while firms like Starbucks, Amazon and Google haven’t illegally evaded tax, they’ve behaved "immorally" by employing tactics designed to see their profits end up in countries and regions with low tax rates."

    I look forward to this being applied by the government everywhere:

    * Whilst not technically guilty of fraud, Party X have not kept their election promises so should be jailed (bye Clegg!)

    * Blair being banged up for conspiracy to commit (mass)murder and fraud. Sure technically it was a police action against WMD but it was "immoral"

    * Various politico's who got busted on expenses claiming they have done nothing wrong, guess we can nab them now?

    Or is it a token PR move to get the facebook boycotter's to come back which should not be too hard as most people can't seem to function without a large paper cup in hand!

  15. MJI Silver badge

    Never been in one

    None locally, we have at least 8 Costas, 3 in supermarkets and 1 next to one of those. Even have a Costa in a school.

    But they pay tax.

  16. JeeBee
    Angel

    Starbucks have had £3,000,000,000 sales in the UK apparently. And paid very very little tax on that.

    Let's assume a 30% profit margin (on extremely overpriced coffee, so I think I am being generous to Starbucks here), that's almost a billion profit in that time.

    Corporation tax is what? 20%? So Starbucks SHOULD have paid some £200,000,000 in tax to date.

    So, in my opinion, retail (B2C) outlets based abroad should have the option to not pay corporation tax at all (as they will just avoid it). Instead, their sales would attract a higher rate of VAT. Either consumers will move to cheaper home-grown retail outlets as they're cheaper (lower VAT rate, pay corporation tax), or the UK government will rake in the extra VAT. And the companies can't shift profit and loss and costs around to make "0 profit" to avoid tax. VAT has been raised already, partially because of shifting tax from corporations (ever decreasing corporation tax rates) to consumers, so let's take it a bit further and stick two middle fingers up at these corporations.

    B2B, needs some thought.

    Maybe we need some physical beatdown on the corporations, directors and accountants that screw society over with their actions.

    1. Spoonsinger
      Unhappy

      Re :- Maybe we need some physical beatdown on the.....

      you missed lawyers, school teachers, doctors, that bloke down the road who doesn't seem to do anything but drives a better car than you. Yeh!, just go for it. Better for you, better for society. Don't worry about the fact that all their nefarious stuff might actually be within the law.

      1. johnnytruant

        Re: Re :- Maybe we need some physical beatdown on the.....

        Just because something is within the law doesn't guarantee un-nefariousness.

        Just ask GCHQ's gigantic, entirely legal, wiretap department.

        1. Spoonsinger

          Re: Just because something is within the law doesn't guarantee un-nefariousness.

          Good point but why go after the people/companies complying to the law as it stands. Surely attacking the cause rather than the symptom is the more efficient route.

          (Yes I understand that generally you need a bad guy figure to throw the virtual tomatoes at, but it really only worked when the bad guy was in the same village you lived in, and also they never left it).

        2. Anonymous Coward
          Anonymous Coward

          --- Yes, it is entirely legal. You don't need to ask us, we already know.

          Regards,

          GCHQ

  17. Anonymous Coward
    Anonymous Coward

    Margaret Hodge

    A paragraph paraphrase:

    While Margaret Hodge, head of the committee, hasn't illegally evaded tax, she's’ behaved "immorally" by employing tactics designed to see her profits end up in countries and regions with low tax rates.

  18. Captain Scarlet Silver badge
    Coat

    Not making money

    I've seen hundreds of them, why expand if you arent making money >_<

  19. Evil Graham

    Five Meeeelion Pounds

    Wow. All our financial troubles are now over.

  20. Rick Giles
    Pirate

    All politicians and government employees

    Need to be on a pay-for-performance scale. The public decides if they are doing their job and they get compensated accordingly. Just like the rest of us that they think they are better than.

  21. LOL123
    Facepalm

    Hang on...

    If they aren't supposed to pay, then what is this payment?

    If they aren't due any tax legally, won't this just be an overpayment that has to be credited against losses or refunded by HMRC with interest?

    Assuming Starbucks knows their demographic well, are Starbuck customers going to actually fall for this?

  22. 27escape
    Thumb Up

    If they have not made a profit

    And are giving £5M that they do not have to pay to the government, then surely this is some sort of payment offset.

    And hence they can claim tax back on it.

    Brilliant!

  23. Flashy Red
    Trollface

    Hmmm

    Their coffee is shite. I think I'll order a grande chai tea latte (with soya) and offer to pay 50p. Think it'll work?

    1. Danny 14 Silver badge

      Re: Hmmm

      you could always ask for a cup without a logo on it, that way they dont have to pay royalty so it should be cheaper.

  24. Anonymous Coward
    Anonymous Coward

    WHAT I DONT GET IS WHY CANT BRITAIN BECOME A LOW TAX HAVEN? THAT WOULD BE AWESOME!

  25. Great Bu
    Black Helicopters

    Am I the only one that smells a rat in all this ?

    I don't really think the tresury gives a rat's arse about a few million (or even billion) in 'lost' corporation tax.

    Is this whole foo-fara not just a way to push for a global taxation system which greatly advantages already developed nations with substantial GDP (i.e. the UK, US, Northern Europe etc.) so they can stop all the less powerful small nations from getting their hands on all the filthy lucre.

    Setting a low corporate tax rate is a very common way for an otherwise tiny nation (geographically or financially) to get far more tax income than it would otherwise get from international corporations and thus advance themselves in the world. Preventing that from happening means that already wealthy nations get to keep the inhabitants of those countries beavering away for slave labour rates so we can maintain our cheap jeans and electronics habits without anhilating our own economies.

    It's more about preventing free market globalisation (whereby all countries have to set a competitive corporate tax rate or risk losing international corporation income) in order to hold on to our historical dominance of the world.......

    1. Danny 14 Silver badge

      Re: Am I the only one that smells a rat in all this ?

      Switzerland has a top 5 GDP BTW. I would hardly call them a backwater. Ireland and Holland may only be top 15 but still pretty high.

  26. Anomalous Cowshed

    Starbucks business model

    1. Exploit workers by paying minimum wages.

    2. Exploit store managers by keeping worker pay low and constantly setting harder labour targets.

    3. Exploit customers by feeding them drinks that are basically variations on popular but cheap and unhealthy combinations of sugar and milk with a bit of alleged coffee to add flavour.

    4. Exploit tax loopholes to pay zero tax.

    5. Open thousands of stores to maximise brand saturation and crowd out the competition

    6. ...

    7. => profit!

  27. Starkadder

    Yes, but

    “The amount of corporation tax a company pays should be a fair and accurate reflection of the profits it is making in the countries where it does business.” -

    If UK companies with international subsidiaries all did that Margaret the profits remitted to the UK would decrease drastically. Is that what Margaret Hodge wants?

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