Unlike some large international companies such as Apple, Google and Amazon who have chosen to outsource their management in low-tax country, Starbuck’s took the floor against announcing the relocation of its headquarters in London.
No tax between 2009 and 2013
It is true that the group was put under the spotlight and pushed by parliamentarians and UK consumers to pay more taxes in the country where their profits are very important. Indeed, their headquarters were relocated to Amsterdam, there are few years, in order to pay the least possible taxes. And the result was impressive. As a result of this tax gymnastics, the group had managed to pay no taxes at all between 2009 and 2013 in the UK, while its overall profit was around 390 million euros.
But by a simple set of charge transfer, the Group’s result for the UK was close to zero. Starbuck’s actually deducted, from his income, charges on coffee purchases and interest on intercompany loans. In addition, they took advantage of prior years’ losses that they could pass on the following exercises. Most income was therefore returned to the Netherlands where taxation is much more advantageous for the company. The Labour MP who chairs the public accounts committee of the municipalities and who was also responsible of fiscal practices of other major groups, wondered then how could Starbuk’s declare losses while the UK market was its cheapest market of Europe and the most profitable.
Tax logic to business logic
In relocating its head office in London, the group will therefore cease to transfer income to its subsidiaries in other countries and therefore should pay around € 24 million in additional taxes. However, this fiscal logic, even if it must get the group to pay more, was calculated and anticipated. So in order to look good, Kris Engskov, President Europe, Middle East and Africa group, announced back in London in which he renounced the practice of tax optimization, but in reality, it is well the business logic that takes over. For the group, because of the good profitability and exceptional market that brings him the UK, is expected to continue to grow in this country by opening a hundred more shops in the first place. And mea culpa helps restore a tarnished with consumers picture.
And it is a political choice as these new stores will increase their market share, which already represents more than half of those they have in Europe. However, only a few leaders will move to London, most of them still remaining in Amsterdam. It only remains to know what results will be posted from this year and see the amount of taxes that the group will settle to see if Starbuck’s has kept its promises.