Partner Article

Taxing Starbucks – but will revenge be sweet?

It’s been a historic week in the continuing debate into large corporates and tax, after Starbucks paid £5m into the public coffers, the first instalment of the £20m corporation tax it has voluntarily agreed to pay over the next two years.

The company published a statement saying that it had listened to its customers, and ‘decided to forgo certain deductions which would make us liable to pay £10m in corporation tax this year and a further £10m in 2014.’

But it was the bit below this that raised eyebrows.

The company added that they would be ‘undertaking measures to make Starbucks profitable in the UK’ and that unprofitable stores would be closed or relocated, and that there would be a ‘greater reliance on franchised and licensed stores’.

Clearly Starbucks is indicating that changes in its structure are afoot, and that it’s likely that later this year we’ll see some of its 640 UK stores close and staff laid off as a result. What will be interesting to see is whether Starbucks directly blames the Public Accounts Committee for having to make this move. Doing this will no doubt help Starbucks avoid any backlash from the public, and speculation that the brand isn’t doing as well as its competitors. It will also help them mitigate any negative press – an issue which I suspect that Starbucks’ PR people will have already flagged to senior management.

It’ll be interesting to see whether other large companies that have recently been found to be avoiding tax now agree to make voluntary payments, and whether a ‘restructure’ of their business follows shortly after.

Starbucks will be keen to get rid of its less busy stores as soon as possible. Their next £5m instalment due later this year is equivalent to two million medium-sized lattes - or four million if you take into account their VAT costs and overheads. And that’s a lot of coffee to shift in six months…

This was posted in Bdaily's Members' News section by George Bull .