Ethics of Tax Avoidance by Starbucks Uk Essay

277 WordsMay 4, 20152 Pages
Starbucks Media coverage of Starbucks not paying corporation tax in the United Kingdom in the last four years has shocked and angered many members of the British public. Since 1998, it has paid £8.6 million corporation tax while sales for the same period totaled £3 billion (Reuters 2012). Starbucks argues that no profits were made in the UK for 14 years, with only a small profits being recorded in 2006 The lack of profits could in part be explained by the movement of funds to other Starbuck’s subsidiaries. Starbucks in the UK pays royalties to a Dutch subsidiary for intellectual property rights at a rate agreed with the UK tax au - thorities; in 2003, the rate was negotiated down from 6% of sales to 4.7% of sales. Starbucks has negotiated a preferential tax arrangement that it says the Dutch authorities want kept confidential (UK Committee of Public Accounts 2012). To address the adverse media reaction, the Managing Director of Star - bucks UK, posted a memo on the Starbuck website to assure its customers that “Starbucks pays and will continue to pay our share of taxes in the UK to the letter of the law.” 19 This posting only served to increase negative public reaction. One week later, Starbucks CEO addressed the increasing negative comments and posted a memo on its website stating: “Starbucks has never avoided paying taxes in the UK.” 20 However, a few months later Starbucks chief financial officer said that Starbucks recognized that complying with the UK law “isn’t enough right now.” 21 Starbucks has committed to paying £10 million of corporation tax in both the 2013 / 2014 corporation tax

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