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Starbucks: Forum of Private Business supports calls for boycott

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The Forum of Private Business expressed support for a boycott of Starbucks after it emerged that the company reported no profit in the UK and paid no corporation tax for the last three years, despite sales of £1.2bn and company officials regularly describing the UK business as ‘profitable’.

The coffee chain was facing a boycott of its branches, the Daily Mail reported today. Tax Journal has invited Starbucks to comment on the findings published by Reuters following a four-month investigation, but the company has not yet responded.

However, Kris Engskov, managing director of Starbucks Coffee UK, said in a blog on the company’s website: ‘I want to personally assure you that Starbucks pays and will continue to pay our share of taxes in the UK to the letter of the law. We always have and always will.’ He did not address the Reuters report but chose to focus on the company’s commitment to ‘creating an additional 5,000 new jobs in the UK by opening 300 new stores and growing our business’.

The message attracted several unfavourable comments. One respondent said: ‘We don't want banks and large corporations to follow the letter of the law and find every excuse to avoid taxes, we want them to DO what is RIGHT.’

One commenter told Engskov: ‘Your mealy mouthed “everything we do is legal” response doesn't cut any ice.’ Another said Engskov’s words seemed ‘hollow compared to the detail of the accusations’.

Channel 4 News last night quoted a Starbucks spokesman as saying that the company was ‘totally committed to the UK’. He added: ‘We will continue to pay our fair share of taxes to the letter of the law in the UK as we always have. This is in keeping with our values as a business, holding ourselves to the highest ethical standards, be it in the way we source our coffee or pay our taxes.’

Starbucks paid no corporation tax on ‘profitable’ UK business

The Daily Mail report said: ‘Britons on Twitter have started messages about Starbucks with the hashtags #taxdodgers and #boycottstarbucks as thousands pledged to avoid its 735 British outlets … In 2011, [the UK company] paid £26m in royalties and licence fees to let the UK coffee houses serve Starbucks products and use its labelling. It does this by registering the intellectual property rights to another division of the company, which charges hefty royalties of 6% on each cup of coffee.’

The paper added: ‘In another complicated manoeuvre, Starbucks buys its coffee beans for all its European divisions through a firm based in Lausanne in Switzerland. Before the beans reach the UK they are shipped to Amsterdam to be roasted. Experts who have studied the figures say the supply chain is a way of pushing profits around the world.

‘The third way in which Starbucks is thought to shrink its UK tax take is by funding its British division entirely by loans. These are taken out from another part of the group, although the company’s labyrinthine structure means that it is not known where …’

A spokesman for the Forum of Private Business told Tax Journal: ‘We think most people will be shocked to learn Starbucks has paid no corporation tax in the UK for the past three years, the company using clever accounting techniques to dodge its dues. But it’ll be the thousands of owners of independent coffee shops and cafes who’ll feel most aggrieved.’

Starbucks was ‘good for the country’, he added. ‘But the company as a multi-national most certainly are not paying their “fair share”, if you look at what they should be putting in. Companies like Starbucks aren’t going to pull out of a profitable market if they are taxed a little more, so until that starts to happen you can’t blame people for voting with their feet and moving to support an alternative local coffee shop that does pay its dues.’

The Daily Telegraph quoted Margaret Hodge, chairman of the Public Accounts Committee, as saying that HMRC ‘must take a serious look’ into the ‘allegations’. HMRC told the paper earlier this week that while companies like Starbucks were constantly discussed, a high UK turnover ‘did not mean the company was liable for tax in the UK’.

But Hodge added: ‘It is certainly something my committee will expect officials to address when we re-visit the issue of tax avoidance before Christmas. Ordinary people and small businesses, who pay their taxes in full and without question, will rightly be furious that yet again a highly profitable global corporation has wriggled out of paying its fair share. It is just not right. We simply cannot continue with a system that allows a company like Starbucks to get away with paying no tax whatsoever.’

Conservative MP Steve Baker said that Starbucks ‘should face public questions’, the Telegraph’s chief business correspondent Louise Armitstead reported. ‘I am a highly free market person but what I want is simple transparent tax law that is actually obeyed ... there are some serious questions to answer here,’ he said.

The Guardian reported that the UK government was ‘coming under mounting pressure to stop dragging its feet on reforming international tax rules in the wake of revelations that Starbucks and other large companies are shifting profits around the world and paying small tax bills’.

It quoted David Spencer, a US attorney and adviser to the Tax Justice Network, as saying: ‘There is more and more evidence of the fact that multinationals are shifting substantial income from high tax to low tax jurisdictions. This is because the OECD's [rules] are very complex and very difficult to enforce.’

He added that ‘so abused have tax rules become’ that even the best-resourced tax authorities – in OECD countries themselves, including the US – were ‘straining to police the corporate world’.

Len McCluskey, general secretary of Unite, said hard working families were ‘being forced to pay off the deficit while companies like Starbucks laugh all the way to the bank’, according to The Independent.