PARIS — Starbucks, which has suffered withering criticism in Britain for avoiding taxes, said on Wednesday that it would move its regional headquarters to London from Amsterdam and pay more to the British Treasury.
The company tried to make amends by paying 5 million pounds, or $8.4 million, in taxes last year, after paying no corporate taxes since 2009 in Britain, where it has hundreds of stores. But Starbucks noted that moving senior executives to London from the Netherlands would put them at the heart of what is its biggest and fastest-growing market in Europe. It said the move would occur by the end of the year.
“This move will mean we pay more tax in the U.K,” the company said in a statement. It did not say how much more.
The coffee chain is among a list of multinationals, including Apple, Google, Amazon and Facebook, that have been criticized for paying little or no taxes on billions of dollars of profits by using creative accounting and exploiting national differences in corporate tax rates across Europe.
At parliamentary hearings on tax avoidance in Britain in 2012, executives of Google, Amazon and Starbucks maintained that their tax policies were legal because European Union law lets companies based in one member state operate across the 28-country bloc.
Around that time, Starbucks said it was reviewing its British tax practices after disclosing that it had paid no corporate tax in Britain in 2011 despite generating sales of £398 million, or $668 million. Concerns that corporations were taking advantage of the system prompted Algirdas Semeta, the European Union’s tax commissioner, to call for measures to prevent companies from exploiting tax-rate variations among the countries. Those concerns also led Prime Minister David Cameron of Britain to promise action. Margaret Hodge, a member of Parliament from the opposition Labour Party, called for boycotts of Amazon, Google and Starbucks for what she termed their “immoral” behavior.
Starbucks, a company with a $52 billion market value, became the target of criticism in Britain after an investigation by Reuters in 2012 showed that it had been reporting losses on its British operations to the tax authorities even as it told investors it was profitable.
The company, which has global headquarters in Seattle, used common strategies to reduce its tax bill, the Reuters investigation showed. Starbucks charged licensing fees to its British operations, assigned profits to subsidiaries in other countries, and used intercompany loans to shift profits to low-cost jurisdictions, the investigation showed. Starbucks reported record worldwide sales of $14.9 billion and net profit of $1.7 billion for the 2013 fiscal year. The Europe-Middle East-Africa region accounts for 7.8 percent of the company’s global sales, but only 2.6 percent of its global operating income, according to its annual report.
The 800 British stores represent more than half of Starbucks’ European locations and employ 7,500 people. This year Starbucks plans to add 100 stores and 1,000 workers in Britain, the company said.
Executives from Amsterdam will move to the company’s office in the Chiswick district of London, and some roasting and shipping functions will remain in the Netherlands, said David Henderson, a spokesman for Starbucks.
He said Kris Engskov, a former aide to President Bill Clinton who is now the company’s top executive for Europe, the Middle East and Africa, was not available for an interview.
Despite the move to London, Starbucks does not expect much difference in its total tax bill, Mr. Engskov told The Times of London, which first reported the move.
“Over time we will pay more tax in the U.K. and pay slightly less in the Netherlands,” he told the newspaper. “On a global level, I think it’s relatively neutral. Our global rate is 34 percent, and we don’t expect it to have a significant impact on that.”
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Source: NY Times