In the past three years, Starbucks paid no tax on its UK earnings after recording annual losses in company accounts, despite US executives of the Seattle company claiming in telephone calls with investors, transcripts of which have been seen by the news agency, that the UK business was profitable.
The contradictions highlight legal tax-avoidance tactics used by multinational companies by loading UK subsidiaries with debts from other parts of the business based in countries with lower tax thresholds.
In 2007, the chief operating officer, Martin Coles, told analysts in a fourth quarter results presentation that the UK unit’s profits were funding Starbucks’ expansion in overseas markets. The chief finance officer at the time, Peter Bocian, added that the UK division enjoyed operating profit margins of almost 15% that year, equivalent to nearly £50m in profit.
Accounts filed with Companies House, which must be a truthful reflection of the business, according to HM Revenue & Customs (HMRC), showed a 10th consecutive annual loss.
A year later, after filing a £26m loss in the UK, Starbucks’ chief executive, Howard Schultz, told investors the business here was so successful he planned to apply the lessons to the company’s biggest market in the US.