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June 26, 2013

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Starbucks Begins Paying UK Taxes It Doesn’t Even Owe

Back on June 5th, we posted an article discussing how many of the largest companies in the world were coming under scrutiny in Europe for allegedly not paying their fair share of taxes. One of those companies, Starbucks, began making payments today. The interesting thing is that it does not owe any of the taxes it is paying. In effect, Starbucks is paying more than it legally and fairly needs to.

Why? Starbucks is not profitable in the UK. Corporations only pay taxes on income, not on losses. So why would Starbucks willingly pay taxes when it is technically losing money in the country? “We felt that our customers should not have to wait for us to become profitable before we started paying U.K. corporation tax.” Translation: We were coming under public and political fire so we decided this was the best thing to do.

Thus, Starbucks has pledged to pay “£20 million in additional taxes in 2013 and 2014.” Today, they made their first down payment of £5 million to that end and are the first tax payments the company has made in the country since 2008. They have also stopped claiming any tax deductions or royalties.

Other companies, such as Google and Amazon are also coming under increasing pressure to pay up what they government and public feel are withheld taxes. Thus the British government is stepping up its efforts to close what it perceives are loopholes in its tax laws. It remains to be seen how successful they will be, but if they are, it will be only a matter of time before the rest of Europe (and the United States!) follows suit

Offshore Accounts/International Tax Disputes