Starbucks to move European base to London, pay more UK tax

Wed Apr 16, 2014 12:33pm EDT
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By Tom Bergin

LONDON (Reuters) - Starbucks Corp (SBUX.O: Quote) will move its European headquarters to London from the Netherlands this year and pay more tax in the UK as a result, the company said on Wednesday.

The shift by the world's largest coffee chain comes after its low tax contributions in Britain provoked widespread criticism, including Prime Minister David Cameron telling a meeting in Davos that companies that avoided paying tax needed to "wake up and smell the coffee".

Starbucks was called to testify before a parliamentary hearing about its tax affairs after Reuters reported in 2012 that the company had told the UK tax authority its British arm was a loss-making business while informing investors that the subsidiary was profitable.

The company revealed at the hearing that it had agreed a deal with Dutch tax authorities allowing it to pay "a very low tax rate" there. This agreement meant the group was able to reduce its tax liability by having its European subsidiaries pay large royalties to the Dutch unit for using the Starbucks brand.

That system - slammed by UK lawmakers in a report in 2012 -will now be abandoned and the European businesses will pay fees to a British subsidiary, the group's Europe, Middle East and Africa boss said.

"This means we will pay more tax in the UK," Kris Engskov said in a telephone interview.

Engskov said the criticism the company faced had not, as some business leaders claimed, made Britain a less attractive place to invest.

"The UK is a great place to do business," he said.   Continued...

The sign of a Starbucks store is seen in New York January 24, 2014. REUTERS/Eric Thayer