The UK arm of US coffee chain Starbucks Corporation (Nasdaq:SBUX) announced today that it would pay more tax and change its current practice of claiming tax deductions for payments made to sister companies overseas.
Responding to criticism of its tax affairs in the UK, the company said that it was making a commitment to pay a significant amount of tax in 2013 and 2014, regardless of whether the company is profitable in those two years.
Starbucks is one of a number of multinational corporations, along with Amazon and Google, that have been accused of tax avoidance in relation to their operations in the United Kingdom.
The coffee company has been trading in the UK for 14 years and has more than 750 outlets across the country. However, it emerged recently that in all that time it has paid just GBP8.6m in corporation tax, and nothing at all in the last three years. Starbucks insists that it has complied with all UK tax laws but the company has faced a backlash from customers, as well as from MPs, the media and tax campaigners, over its position.
Its UK managing director, Kris Engskov, said that changes announced by the company today will result in Starbucks paying higher corporation tax in the UK. In particular, the company will not claim tax deductions for royalties and intercompany charges.
Starbucks estimates that the changes will cost around GBP10m in extra tax annually over the next two years, in addition to the other taxes it already pays.