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How Starbucks Saves on Taxes Through Its Central Purchasing Department in Switzerland

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A tax optimization scheme that is both efficient and legal is what every businessman dreams to discover. Here, we have the habit of presenting the mechanisms employed by various companies to reduce their taxation. Today, we are going to discuss the strategy developed by Starbucks. A tax optimization scheme that is based on its central purchasing department in Switzerland.

A tax optimization scheme that leads to the payment of taxes in Switzerland

The American giant of take-out coffee relies on its worldwide central purchasing unit installed in Lausanne to optimize its taxes. The central purchasing body known as “Starbucks Coffee Trading Company” benefits from a special tax status that allows it to obtain a low tax rate on its profits.

Results of this tax optimization: a corporate tax rate of 12% against a standard Waldensian rate of 23% and English of 24%.

The central purchasing body buys and resells the coffee used for the preparation of Starbucks brand name products. To take advantage of this favorable tax rate on the profits, a very large commission is charged on the reselling of coffee within the group. In this manner, the benefits are increased for this  fiscally advantageous structure and diminished where the rates of taxation are heavier.

An effective method to optimize taxes

This tax optimization scheme must be very efficient since, according to the estimates of the Swiss news chain RTS, Starbucks would have paid approximately the same sum to the Waldensian tax authorities in 2011 than for the past 15 years of activity in the United Kingdom.

Moreover, the scheme is perfectly legal since tax rules allow this transfer of profits by the increase in charges to the country where taxation is lower, a practice known as “transfer pricing”. However, the G20 is in the process of trying to combat this common practice among multinationals. Will a successful solution be able to be put in place? It’s uncertain …

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