Starbucks’ UK Tax Avoidance

Starbucks’ UK Tax Avoidance

As Chancellor of the Exchequer George Osborne announces new tax measures and slashes welfare bills, Starbucks are recording multimillion pound profits.

Inside Starbucks Coffee at the Trafford Centre, Manchester.

The autumn statement delivered more dismal news for Britain’s economy on December 5th, however it has recently been made public that the US coffee giant is flourishing by avoiding paying UK corporation tax.

In April 2012, Starbucks UK Vice President of Marketing Ian Cranna revealed that they had 607 stores across Britain and Ireland, that is 693 less than its competitor Costa Coffee. However, in 2011 Costa Coffee recorded sales of £377m and paid £15m in tax, but Starbucks paid no corporation tax on revenues of £398m.

This graph shows the difference in revenue and tax paid between Starbucks and Costa Coffee (Source: Brand Republic)

In total, since the doors first opened to a British Starbucks coffee shop in 1998 the company has only paid £8.6m in tax. Whilst many people across the nation are feeling the wrath of George Osborne’s purse strings tightening, surely seeing the global coffee giant prosper by tax avoidance would leave a sour taste; this does not seem to be the case.

If you walk by any branch of Starbucks you will still see a long queue, you will still hear the chatter of satisfied customers and you will notice that the mug is very much half full rather than half empty for the US coffeehouse chain.

A barista who is employed by Starbucks at their Trafford Centre, Manchester branch, but wished to remain unnamed said: “I have worked here for a year and a half now and I have not noticed a change in popularity over the last few weeks.

“The story about Starbucks not paying tax broke coincided with the launch of our festive range of drinks, which are always very popular with our customers, so it did not seem to have an affect on how busy we are.”

Despite their brand image seeming to have escaped unscathed Starbucks hierarchy have released a statement to acknowledge that they need to do more. The company has agreed to review its accounting and finance system and pay more tax in Britain. 

It has employed the services of RLM Finsbury for tax guidance, a Starbucks spokesperson told PR Week: "RLM Finsbury has been engaged to advise Starbucks on specific issues in relation to tax and associated reputation matters."

The coffeehouse chain has since agreed to pay £20m in tax over the next two years, however whilst the company have been managing this crisis their close rivals Costa Coffee have seen sales rise by 7% as a direct affect of Starbucks' tax scandal.

The voxpop below was taken in Preston, asking members of the public whether Starbucks' recent tax scandal would affect their custom.