Starbucks Pays $15.4 Million U.K. Corporation Tax Amid Backlash

Starbucks Corp., (SBUX) the world’s biggest coffee chain, said it will pay 10 million pounds ($15.4 million) of U.K. corporation tax this year and in 2014 in response to criticism of its money-losing British business.

The company has paid 5 million pounds already and will pay the same amount later this year after forgoing unspecified tax deductions, according to an e-mailed statement. Starbucks, based in Seattle, will also pay 10 million pounds of tax next year.

The payments come amid criticism levied at the company by U.K. lawmakers and activist groups such as U.K. Uncut over complex accounting methods used to minimize its British tax burden. At this year’s World Economic Forum, U.K. Prime Minister David Cameron said companies need to “wake up and smell the coffee” on the issue, and tax avoidance was discussed at this month’s Group of Eight summit in Northern Ireland. Politicians have also grilled executives at Google Inc. and Amazon.com Inc. (AMZN)

Starbucks said it will close or relocate unprofitable stores, and rely more on franchised or licensed stores rather than company-owned locations to become profitable in the U.K.

“Six months ago, we felt that our customers should not have to wait for us to become profitable before we started paying U.K. corporation tax,” the company said in the statement. “We listened to our customers in December and so decided to forgo certain deductions which would make us liable to pay 10 million pounds in corporation tax this year and a further 10 million pounds in 2014.”

Starbucks, which has more than 700 stores in the U.K. and more than 18,000 worldwide, said in December that it would pay “a significant amount” of tax in the U.K. in 2013 and 2014. There has been no suggestion that Starbucks has broken any law.

To contact the reporter on this story: Matthew Boyle in London at mboyle20@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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