The European division of Starbucks paid 2.8% UK tax last year

AP Photo/Gene J. Puskar

• The European division of Starbucks paid an effective tax rate of 2.8% in the year ending October 2017, after fund transfers between other parts of the business were accounted for, its accounts show.
• The company which has faced criticism in the UK for tax avoidance paid just $5.9 million in tax, from UK profits of $213 million, the Financial Times reported.
• Company profits in the UK before tax more than halved last year to £4.5 million ($5.9 million), which Starbucks said was because of “challenging” conditions and reduced consumer confidence.

The European division of Starbucks paid an effective tax rate of 2.8% in the year ending October 2017, after taking into account payment transfers from other parts of the business, the Financial Times reported.

The coffee brand which has faced criticism in the past for the amount of tax it pays revealed that its largest European operation paid just $5.9 million in tax, from UK profits of $213 million.

The profit in the operation was increased by a $150 million dividend from another group entity on which Starbucks had already paid tax. Without the dividend, the tax rate of the European business was 9.4%, while UK corporation tax is 19.5%.

According to the accounts for Europe, the Middle East and Africa region, the tax bill was reduced thanks to tax breaks which were related to employees being paid in shares, with another reduction coming from the “tax effect of expenses that are not deductible in determining taxable profit.” 

Company profits in the UK before tax more than halved last year to £4.5 million ($5.9 million), which it said was because of “challenging” conditions and reduced consumer confidence. Starbucks uses five main entities in the UK which have all published their 2017 results.

The UK is challenging but the company says it will continue to invest, Martin Brok, president of Starbucks’ EMEA, told the FT.

Starbucks has been repeatedly hit by bad publicity in the UK for its tax affairs.

The Independent reported in 2017 that Starbucks saw public opinion for the company’s ethics, fairness and transparency turn 11% more negative between 2016 and 2017, although it scored highly on its products and services.

Paul Monaghan, Chief executive of the Fair Tax Mark, a group that lobbies against corporate tax avoidance told the FT: “It may be that Starbucks’ approach to tax is now more responsible, but it’s all but impossible to discern given their corporate complexity, staggered filings at Companies House and absence of true country-by-country reporting.”

“All governments should require public country-by-country reporting for all companies, so it is clearer if they are paying their dues. The UK is well placed to act sooner — it should not delay implementing legislation passed in 2016 that would require large multinationals in Britain to do this,” Oxfam’s head of inequality, Rebecca Gowland told newspaper.