Starbucks to donate tax to UK coffers

Tim Wallace
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STARBUCKS is seeking to voluntarily pay more UK corporation tax, the coffee chain said yesterday, in a victory for angry MPs and activists.

But experts warned that a tax system based on public pressure on a few high-profile firms, rather than one that relies on actual changes to tax law, risks undermining investors’ faith in the stability of the system.

Starbucks stressed it had complied with UK rules, paying no corporation tax last year as it posted no UK profit.

“We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more,” said a spokesperson. “The company has been in discussions with HMRC for some time.”

But making firms pay more tax on an arbitrary basis could backfire.

“It is important that we have stability and simplicity in the tax regime if the UK is to attract foreign firms – if there is uncertainty in the system that is concerning,” said tax partner Alex Henderson from PwC. “That said, there is more to the tax regime than the simple letter of the law – firms must exercise judgement around allocation of profits to individual countries’ operations, for example, while directors must also consider how their contribution to the UK is being appreciated.”

Meanwhile today the government announces a £77m crackdown on tax evasion, which seeks to raise £2bn per year for the next two years. It will focus on off shore accounts and transfer pricing, and is set to be followed on Wednesday with a new general anti-avoidance rule, aimed at collecting taxes in line with the spirit, not the letter, of the law.