Starbucks bows to UK tax pressure

Last updated 08:39 07/12/2012

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Starbucks bowed to mounting pressure over its tax affairs in Britain and will pay about £10 million (NZ$19m) in each of the next two years.

Having been slammed by the country's lawmakers of "immorally" avoiding tax, Starbucks' UK managing director Kris Engskov said the firm had agreed to pay more than required by law.

"With the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more," he told the London Chamber of Commerce.

The Seattle-based coffee company has 700 British outlets, but has paid just 8.6 million pounds in corporation tax in 14 years. Starbucks Corp. says this is due to a process involving paying royalties to its European headquarters in the Netherlands.

The company hasn't done anything illegal. Companies operating in Europe can base themselves in any of the 27 European Union nations, allowing them to take advantage of a particular country's low tax rates.

Earlier this week, Parliament's Public Accounts Committee criticised multinationals such as Starbucks, Amazon and Google for "using the letter of tax laws both nationally and internationally to immorally minimise their tax obligations."

Starbucks, which also has been the target of demonstrations by the protest group UK Uncut, announced this week that it was reviewing its tax approach.

Engskov said the company was proposing "to pay a significant amount of corporation tax during 2013 and 2014 regardless of whether our company is profitable during these years."

He estimated that would amount to "somewhere in the range of £10m in each of the next two years."

Labour lawmaker Margaret Hodge, who chaired the parliamentary committee, said Starbucks' change of heart was proof that "people power works."

Earlier this week, UK Treasury chief George Osborne earmarked an extra £77m to clamp down on "offshore evasion and avoidance by wealthy individuals and by multinationals."

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- AP

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