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Starbucks Makes Conciliatory Move to UK

  • Apr 17, 2014 | Gail Cole

 Will moving execs to Britain improve Starbucks' shattered reputation?

It has been said that the American Revolution was incited by Britain’s tax on tea. America won that war and became a nation of coffee drinkers.

Now history has come full circle. The British government and the American-owned coffee company Starbucks are again fighting about taxes—specifically Starbuck’s avoidance of them. But this time, Britain is the victor.

Starbuck settled in the Netherlands when it crossed the Atlantic, for tax reasons, not for the bicycles. In 2012, Starbucks’ chief financial officer admitted to a committee of MPs “that a tax deal struck with Dutch authorities had been ‘an attractive reason’ for basing operations there.”As a result, it has avoided paying many British taxes.

Starbucks' presence in Britain has been growing steadily since it invaded the market in 1998. But the British infatuation with lattees waned when it was revealed in 2013 that the Seattle, Washington-based company had not paid corporation taxes to the UK since 2009. Starbucks coughed up a £5m corporation tax payment to appease the coffee-drinking populace, which was protesting in front of several cafes. It offered to pay more, but critics claimed the company was making a “mockery of the British tax system” and the move backfired.

Perhaps because the United Kingdom is its largest market (British coffee being notoriously, well, British), or perhaps because Prime Minister David Cameron has made it his mission to “fight the scourge of tax evasion,” Starbucks has decided to create a small but distinct headquarters in England. To underscore the significance of the move, the company is making a somewhat curious boast: “This move will mean we pay more tax in the UK.”

Will this mean the coffee giant ends up paying more taxes than it does now? Heather Self, director of tax the legal firm Pinsent Masons, doesn’t think so. Rather, the more tax Starbucks pays in the UK, the less tax it will pay elsewhere.

photo credit: Todd Huffman via photopin cc

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.