Starbucks backs down: ‘We’ll pay £10million extra in tax’

By Charles Maggs

Starbucks has agreed to pay £10million more tax this year and next after coming under fire for its tax avoidance policies.

The coffee giant's UK managing director Kris Engskov said they would now be paying more than the minimum necessary.

"Having listened to customers and to the British public, Starbucks in the UK will be making changes which will result in the company paying higher corporation tax in the UK – above what is currently required by law," he said.

"Specifically, in 2013 and 2014 Starbucks will not claim tax deductions for royalties or payments related to our intercompany charges."

MPs on the Common's public finance committee last month tore into the company's global chief financial officer Troy Alstead for their large purchases within the company – meaning they paid little or no corporation tax in every year they have operated in the UK.

The UK arm of the company buys its coffee beans from the Swiss office, with the Swiss arm making a 20% mark up, meaning profits are effectively transferred from the UK to Switzerland.

These measures were condemned as "immoral" by the committee, even though they are not illegal.

Representatives from the company met with members of the Treasury earlier in the week to discuss the current situation, and have now decided to change its arrangements.

"There is no doubt that tax has become an important subject of debate over the past several weeks and I think it’s important to share that the emotion of the issue has taken us a bit by surprise,"  Engskov added.