Starbucks says pays British corporation tax after row

LONDON (AFP) ― U.S.-based coffee giant Starbucks said Sunday it had paid 5 million pounds ($7.7 million) in British corporation tax and will pay another 15 million pounds by next year after facing a backlash from lawmakers and customers over non-payment.

The moved comes despite Starbucks claiming that it remained unprofitable in Britain, and that it was looking at closing its struggling stores in the country.

Corporation tax is levied on a company’s profits and currently stands at a rate of 23 percent in Britain.

The announcement comes after leaders of the G8 major economies last week struck a deal to fight corporate tax avoidance, which while not illegal, robs government coffers of sizeable income at a time of deep cuts to public spending.

Sunday’s statement confirms an announcement by Starbucks last December that it intended to pay 10 million pounds ($15.4 million) in British corporation tax both this year and in 2014. The last time Starbucks paid such tax in Britain was in 2008.

“Six months ago, we felt that our customers should not have to wait for us to become profitable before we started paying U.K. corporation tax,” Starbucks said.

“We listened to our customers in December and so decided to forgo certain deductions which would make us liable to pay 10 million pounds in corporation tax this year and a further 10 million pounds in 2014. We have now paid 5 million pounds and will pay the remaining 5 million pounds later this year,” it said

“We are also undertaking measures to make Starbucks profitable in the U.K., such as relocating unprofitable stores to more cost effective locations, closing them where that is not possible and placing greater reliance on franchised and licensed stores.”

Starbucks last year admitted it had not paid any corporation tax in Britain on sales worth 400 million pounds between 2009 and 2012.

It was able to do so by paying fees to other areas of its business ― such as “royalty payments” for the use of the brand ― which resulted in the company posting a series of losses.