Starbucks plays down claims of tax threats

COFFEE chain Starbucks yesterday insisted it is “absolutely committed” to a massive expansion in the UK, despite reports its chief executive raised doubts about the investment with Downing Street following recent allegations of tax avoidance.

A Starbucks spokesman confirmed to City A.M. that last Friday UK managing director Kris Engskov met with Number 10 officials and the topics discussed included negative comments made by both David Cameron and Treasury minister Danny Alexander about the company’s tax affairs.

But Starbucks insists the issue will not delay its plans to open 300 new stores and create 5,000 new jobs by 2016.

“We had a very constructive meeting which was long-scheduled,” the spokesman said yesterday.

Last week the Prime Minister used his speech to the World Economic Forum at Davos to take a stand against companies who use aggressive tactics to minimise their tax bills, saying they should “wake up and smell the coffee”.

This was widely interpreted as a reference to Starbucks’ tax arrangements, which saw it pay just £8.5m in UK corporation tax since launching in the country 15 years ago.

Following a public outcry at the end of last year the company has voluntarily agreed to forgo legal tax deductions, guaranteeing the Treasury an additional £20m in revenue over the next two years.

The company is keen to make it clear that it is paying the full amount of corporation tax that is due after dropping the controversial arrangements, as opposed to simply making a donation to fend off criticism.

Meanwhile criticism of tax avoidance schemes will continue on Thursday when the Big Four accountancy firms appear in front of the House of Commons public accounts committee. MPs are expected to demand details of which large companies they advised on tax planning.