Published December 07. 2012 4:00AM
Paris - Starbucks offered Wednesday to pay about 10 million pounds a year in corporate taxes in Britain - or 10 million pounds more than it paid last year - in an effort to defuse protests against its lack of contributions to public coffers at a time when ordinary taxpayers were feeling the effects of government spending cuts.
"I am announcing changes which will result in Starbucks paying higher corporation tax in the U.K. - above what is currently required by law," Kris Engskov, managing director of Starbucks in Britain, said during a speech to the London Chamber of Commerce.
Starbucks said in 2013 and 2014 it would refrain from claiming certain tax deductions that helped reduce its tax bill to zero in Britain during the past three years.
The tax practices of Starbucks, along with those of other U.S. multinational companies, including Google and Amazon, have come under intense scrutiny recently in Britain, where the government has announced plans to extend its fiscal discipline for another year.
In its 14 years of doing business in Britain, Starbucks has paid a total of 8.6 million pounds ($13.8 million) in corporate taxes there.
The company has reduced its tax bill in Britain by channeling revenue through the company's other subsidiaries in jurisdictions where tax rates are lower. One unit in the Netherlands, for example, receives royalty payments from Britain.
Because of these strategies and other factors, including high rents, Starbucks says it lost money in Britain last year, even though it generated sales of 398 million pounds from more than 700 stores.
Similar tax-reduction strategies are employed by many multinational companies.
But Engskov said Starbucks would not make the royalty payments and other transfers over the next two years, and he added that if the company remained unprofitable in Britain, it would consider extending this beyond 2014.
Engskov said the proposal had not been discussed with Her Majesty's Revenue and Customs, the British tax collector, which reacted coolly in a statement.
"Corporation tax is not a voluntary tax and Parliament sets out the rules and rates for businesses to follow," the agency said, although it did not comment directly on Starbucks. "The public expects businesses to pay their fair share and HMRC will challenge, through the courts if necessary, any structures or tax payments that do not comply with the U.K. tax law."
U.K. Uncut, a group campaigning against the government's fiscal policies, has called for protests outside Starbucks stores Saturday. The group dismissed the latest announcement from the company as a ploy.
"Offering to pay some tax if and when it suits you doesn't stop you being a tax dodger," Hannah Pearce, a spokeswoman for U.K. Uncut, said in a statement. "Today's announcement is just a desperate attempt to deflect public pressure."