Tax Evasion/Avoidance

In 1998, Starbucks opened its first outlet in the UK. Since then, it has opened over 750 coffee shops across the British Isles. To anybody with even a basic grasp of economics, it may come as a surprise that, despite such growth, Starbucks claims that it has ‘found making a profit in the UK difficult’.1 It is a wonder that a business would continue to operate hundreds of outlets if it were failing to make any money, least of all in a recession. The turnover may suggest differently: in 2012 it was reported that since 1998, Starbucks had recorded sales of over £3 billion in the UK. Tax paid in the same timeframe amounted to £8.6 million, or 0.3% of its turnover. After significant public pressure, not to mention a grilling by MPs, Starbucks has since congratulated itself on deciding not to claim tax deductions for royalties or payments related to intercompany charges for interest and mark-up on the coffee it buys.2 From beneath the warm glow of its halo, it says that the move is ‘unprecedented’, but will allow the chain to ‘contribute more’. Whilst it has chosen to pay around £10 million in corporation tax in 2013 and 2014, its example seriously undermines the clout of revenues collectors and lawmakers.