Tax Evasion/Avoidance

Abstract

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.