Starbucks Paid 2.8% Effective U.K. Tax Last Year, FT Reports

(Bloomberg) -- The European business of coffee chain Starbucks Corp. paid an effective U.K. tax rate of 2.8 percent last year after a payment from another part of the company boosted profits, the Financial Times reported.

The company paid $5.9 million in U.K. taxes on a profit of $213 million in the year ended October 2017, down from earnings of $219 million a year earlier, the newspaper reported. The annual figure was inflated by a $150 million dividend from another Starbucks entity on which tax had already been paid, the FT said. The U.K. corporate tax rate is 19.5 percent.

Starbucks contested the report, saying that its U.K.-headquartered businesses paid 13.7 million pounds ($18 million) of corporate tax for an effective rate of 25.3 percent. The brand’s intellectual property for the Europe, Middle East and Africa region has resided in the U.K. since 2015, and as a result the company is paying more British tax than under its previous structure, Starbucks said.

“Starbucks pays all its taxes and meets all international tax standards and regulations,” the company said in an emailed statement.

Starbucks, with 3,000 stores in 40 countries, and Internet retailing giant Inc. have both been picked out for using tax structures that may give them advantages over smaller rivals. The companies have been seen to engage in “complex international tax planning” that isn’t available to local stores and independent coffee shops, Andrea Coscelli, chief executive officer of the U.K.’s Competition and Markets Authority, said earlier this month.

Starbucks reduced its bill in part by paying employees in shares, according to the report. The company’s accounts for Europe, the Middle East and Africa also cited the “tax effect of expenses that are not deductible in determining taxable profit” for the reduced rate, the FT said.

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