CHIEF EXECUTIVE of US coffee house Starbucks has admitted his company will not pay “normal levels” of corporation tax in the UK until at least 2017.
The chain is to continue to make losses for three more years, Mark Fox told the Evening Standard, and will therefore not be liable for corporation tax.
The original controversy – at its height two years ago – centred around 6% royalty fees its UK operation paid to its European headquarters in the Netherlands.
That arrangement saw the company pay lower taxes and could amount to illegal state aid following an ongoing investigation by the European Commission.
Between its arrival on British high streets in 1998 and 2012, it handed just £8.6m over to HM Revenue & Customs. The café minimised its tax liabilities by recording substantial losses in its UK accounts year after year.
It has since decided to move its European headquarters from the Netherlands to London, ending its potential state aid relationship with the country.
However, the European Commission may still take action over the deal.
“Fundamentally, the piece that was aerating was around royalties – the fact a brand is paying a royalty to an entity outside the UK, and to me that’s very, very ordinary. It happens across the sector and therefore it didn’t bother me at all,” said Fox, who joined the company in January.
“There was nothing abnormal about the way Starbucks is run in the UK. What is abnormal is that we haven’t been making a profit.”
That lack of profit, Fox claims, is due to over-expansion and high rents that followed. More selective choices of stores will see the chain return to profit within three years, he said.
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