Starbucks Corporation (NASDAQ:SBUX), the largest coffee chain worldwide, will relocate its headquarters in the European region to London by the end of the year amid controversies regarding corporate tax avoidance. Its European headquarters is currently located in Amsterdam.
Starbucks paying more taxes
According to the coffee company, its decision to move its headquarters in the region will mean paying more taxes in the United Kingdom. Starbucks Corporation (NASDAQ:SBUX) said the relocation will include a “modest number of senior executives” in its operation in London.
In addition, Starbuck Corporation (NASDAQ:SBUX) emphasized that its senior executives will be able to “better oversee the UK market” from London. The coffee company added that the United Kingdom is its largest market in Europe.
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First corporate tax payment in UK
Starbucks Corporation (NASDAQ:SBUX) paid its corporate tax of £5 million in the United Kingdom for the first time last year since 2009. The coffee company was compelled to pay corporate tax in the country due pressure from activists and politicians.
The coffee company managed to avoid paying corporate taxes in the United Kingdom by transferring money to its subsidiary company in Amsterdam in royalty payments. In 2012, the chief financial officer of Starbucks Corporation (NASDAQ:SBUX) testified in a committee of MPs that its tax agreement with Dutch authorities had been an attractive reason for establishing its headquarters in Amsterdam.
Complicated issue for governments
The collection of corporate taxes from global companies is a complicated issue for governments. Heather Self, director of tax at Pinsent Masons, a law firm explained it is reasonable for governments to expect companies pay taxes somewhere. However, she emphasized that companies should not be taxed twice for the same profit.
Self said, “The question is not necessarily what’s moral and what’s not, but is the tax following the real economic activities?”
With regard to Starbucks Corporation (NASDAQ:SBUX), she opined that the company may pay more taxes in the United Kingdom, but it means it will be paying less tax in other countries. “They’re not going to create a bigger tax bill for the group as a whole,” said Self.