Tag Archives: starbucks

Tax avoidance: Starbucks caught out by shareholder briefings

Historic claims made by Starbucks executives in little-scrutinised briefings to analysts and shareholders laid the way for the company to be slammed in a report by MPs today. The multinational is accused by the Public Accounts Committee of conniving to avoid corporation tax by pretending to be unprofitable in the UK – ‘exporting’ the real profits to jurisdictions with lower tax rates:

“Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK, but in 2006 it made a small profit.”

Starbucks claimed to the committee that “it has been difficult for us to make a profit in the UK”. Indeed, 2007 was ninth year in ten that the company filed losses in the UK. Strange, then, given that annual reports singled out the UK as one of the company’s cash cows:

“In particular, our Canada, Japan, UK, and China MBUs account for a significant portion of the net revenue and earnings” — Annual Report 2011

“Revenues from countries other than the US consist primarily of revenues from Canada and the UK, which together account for approximately 66% of net revenues” — Annual report 2009

But it was phonecall briefings to analysts from this period in which Starbucks really screwed themselves over:

  • On the release of quarterly earnings figures in 2007, then Chief Operating Officer Martin Coles told analysts that the profits from the UK were being used to pay for expansion in foreign markets
  • CEO Howard Schultz claimed that Starbucks’ UK arm was so successful that he would adapt lessons learned here for the American market
  • Again in 2007, then-Chief Financial Officer Peter Bocian claimed Starbucks UK had pulled in profits margins of nearly 15 percent — almost £50m

Despite that impressive roster of duplicitous statements, it would take something to top claims made in respect of 2011, where Starbucks’ accounts department would have us believe the UK business made losses of £33m. At the time, executive John Culver told investors:

“We are very pleased with the performance in the UK.”

But CFO Troy Alstead told the select committee:

“We are not at all pleased about our financial performance [in the UK].”

Errr … so which is it?

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