By Rachel Millard, City Correspondent
Starbucks was hit by a fresh row yesterday over the level of tax it pays in Britain.
The US coffee chain faced claims that its European division, which is based in the UK, paid as little as £4.5million to the taxman on profits of £162million.
The Financial Times reported that this is an effective rate of around 2.8 per cent – when the corporation tax rate is 19 per cent.
Starbucks has been hit by repeated criticism over its UK tax affairs and the latest controversy will embarrass the Church of England, which counts Starbucks among its top investments.
The Archbishop of Canterbury Justin Welby was ridiculed last week for lambasting Amazon over its tax arrangements, when the Church has invested tens of millions in the online retailer.
Pugh cartoon: Starbucks has faced claims its European division has paid as little as £4.5million to the taxman on profits of £162million
Starbucks’ tax affairs came under the spotlight yesterday amid growing scrutiny of big businesses amid major concerns they are paying too little.
Rob Palmer, from the Tax Justice Network, said: ‘It’s really difficult to know what is going on in big companies accounts as we don’t have access to all the information. The Government has slashed corporate tax rates – even business groups are saying it does not need to be that low.’
Starbucks Emea Ltd is based in the UK and collects royalties from branches in Britain and across Europe.
Starbucks said the division’s profits had been boosted by a multi-million dividend from another part of the group which had already been taxed.
Without the dividend, the European division paid a tax rate of 9.4 per cent. And the company claimed that if its wider business is considered it pays an effective rate of 20 per cent.
A spokesman said: ‘Starbucks pays all its taxes and meets all international tax standards and regulations.
‘Starbucks’ UK headquartered businesses paid £13.7million of corporation tax in the year to October 2017, an effective tax rate of 25.3 per cent.
‘Starbucks’ UK headquartered businesses paid £13.7million of corporation tax in the year to October 2017
‘The intellectual property of the Starbucks brand in Emea has resided in the UK since 2015, enabling the local collection of royalties for the region.
‘This collection of royalty income is subject to UK corporation tax.
‘As a result we are now paying more tax to the UK exchequer than under our previous structure.’
The Church of England said: ‘We recognise concerns about the levels of corporate tax paid by some companies.
‘We also engage with all companies to encourage them to disclose the tax that they have paid on a country by country basis.’