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Starbucks pledges voluntary tax payments

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Starbucks has made a public commitment to pay UK corporation ‘above what is currently required by tax law’ for the next two years, in an unprecedented move that has dismayed some tax professionals and appears to have failed to persuade the protest group UK Uncut to call off 40 ‘actions’ planned to take place this weekend.

‘While Starbucks has complied with all UK tax laws, today we are announcing changes that will result in the company paying higher corporation tax in the UK,’ Kris Engskov, managing director at Starbucks UK, wrote in an ‘open letter’ on the company’s website.

‘Specifically, Starbucks will not claim tax deductions for royalties and standard intercompany charges. Furthermore, Starbucks will commit to paying a significant amount of tax during 2013 and 2014 regardless of whether the company is profitable during these years.’

The company will about £10m in UK corporate tax in each of the next two years regardless of profitability, the Financial Times reported. Engskov described as inaccurate reports that the company had been in discussions with HMRC on the matter, the FT’s Vanessa Houlder wrote.

UK Uncut said today’s announcement was ‘a desperate attempt to deflect public pressure’.

An HMRC spokesman told Tax Journal that taxpayer confidentiality prevented comment on a taxpayer’s affairs. He declined to say whether Starbucks had been in discussion with HMRC.

But in a statement issued later, HMRC said: ‘Corporation tax is not a voluntary tax and Parliament sets out the rules and rates for businesses to follow. The public expects businesses to pay their fair share and HMRC will challenge, through the courts if necessary, any structures or tax payments that do not comply with the UK tax law.’

'Where does this end?'

‘Strong arm tactics by Margaret Hodge and the [Commons] public accounts committee appear to be paying off,’ said Conor Delaney, tax lawyer at Milestone International Tax Partners.

‘Google and Amazon will be under pressure to follow suit, but where does this end, and at what cost to the UK’s reputation as an investment destination for multi-nationals? This is symptomatic of a shift in the global tax landscape whereby companies will need to give additional consideration to reputational considerations rather than the strict letter of the law.’

Starbucks’ decision was announced in a speech today at the London Chamber of Commerce, the FT reported.