UK corporations were shaken last year when a series of reports detailed the lengths some businesses operating within the country were going to in order to avoid paying tax. One of the most highly criticized was coffee chain Starbucks which, despite a growing customer base and rising profits, paid only £8.6 million in UK corporate tax between 1998 and 2012.
Perhaps in a bid to restore its reputation and coax back disillusioned customers, Starbucks Corp has now announced that it will be moving its European Headquarters from Amsterdam to London – a move which, it claims, will pave the way for a clearer system in which to fairly judge the amount of tax owed.
The move is expected to be completed by the end of 2014, although as yet no commercial property acquisition has been announced.
In defence of Starbucks, the corporation did indeed make several losses in the UK in the years between 1998 and 2012, largely due to the number of unaffordable leases it took out in central London in order to fuel its rapid pace of expansion. However, by declaring the business profitable to investors, it faced a high degree of criticism and has thus pledged to pay £20 million in tax during 2013 and 2014 even if those years happen to be loss-making.
Yet Starbucks denies that tax implications are the primary reason for shifting its European Headquarters to London, with the corporation claiming that the new location will “be better able to oversee the UK market in which over half of our European stores… are located.”
President of Starbucks Europe, Middle East and Africa, Kris Engskov, continues; “This move speaks for itself.
“London is the perfect place to grow our European business.”
Although the corporation’s roasting and distribution operations will continue in Amsterdam, where around 200 people are employed, the majority of corporate operations will be focused in London and some senior executives will be transferred as a result. This, it hopes, will allow for growth in other European markets in which strong penetration has not yet been achieved.
However, the largest growth will be focused in the UK, where Starbucks hopes to open a further 100 new outlets nationwide. This is expected to create up to 1,000 new permanent jobs, adding to Starbucks’ existing employee total of around 7,500 workers.
Now certainly seems to be an opportune time for the business to transfer its headquarters from the Netherlands, as a European Commission investigation into tax authority practices is taking place there at present. This has seen a flood of multinationals abandon ship for locations such as London and Berlin, causing some concern for the Dutch government regarding the stability of the country’s economic future.
With the price of milk and coffee beans rising, it seems that Starbucks may be strongly seeking ways in which to save costs. By relocating to the UK, with its recent series of reforms into the tax system to increase competition, Starbucks may have made a very clever business move despite the high level of tax it will be paying this year.
Previous Post
Tesco Annual Profits fall by Six Per Cent
