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Starbucks chief denies tax claims as Costa profits rocket

Starbucks, the under-fire global coffee shop chain left reeling after it emerged that the US company had paid no UK taxes for the past three years - despite sales of £1.2bn – has defended its tax affairs.

Its finance chief Troy Alstead told the Financial Times that the company had signed up to a series of UK property leases that were “way too expensive and that we will never make money on”. A staggering 25% of its UK turnover was gobbled up by property costs, compared with just 9% in the US and 12% in Japan.

He said the percentage of British stores that were losing money every month was higher than any other global location and operational mismanagement had led to further losses.

A Reuters investigation – which broke the story last week - revealed that Starbucks UK had made a loss of £52m in its 2009 accounts field at Companies House despite Alstead telling investors that the UK company was ‘profitable’.

In 2010, it reported a £14m loss despite an upswing in sales, while in the year to September 2011, it filed a £33m loss.

Alstead said HMRC had “heavily scrutinised” its 6% royalty payment to its European headquarters in Holland, a move which enabled it to slash its taxable income, and ultimately create the tax avoidance allegations. He said the UK taxman had restricted the tax deduction to 4.7% of sales since 2003.

He refused to explain how the Dutch operation was taxed, the paper said.

Mr Alstead added:

‘I have been very angry in the last week not because there is scrutiny, but because it has been so misrepresented and inaccurately reported.’

But cynics will remain unconvinced. Whitbread, owners of Starbucks’ coffee rival Costa, has just published its results for the six months ending on 30 August 2012. It showed Costa’s underlying profits had rocketed by a massive 29.9% to £36.1m, compared to £27.8m in 2011/12.

Meanwhile, YouGov’s BrandIndex which measures reputational damage has revealed how damaging the revelations have been for Starbucks.

Its Buzz index – which measures the positive or negative news people hear about specific brands had fallen off a proverbial cliff, plunging from 0 to -25 on Monday.

MP’s, trade unionists and ordinary consumers have already called for a boycott of the chain.

Published 24 October 2012


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