Starbucks Is Relocating Its HQ To The UK: Hurrah!
OR at least Starbucks is going to be relocating it’s European HQ to the UK. Which, after all that fuss about how much tax Starbucks was or was not paying in this country is a bit of a turnaround.
The basic background for those who need a refresher: Starbucks was noted not to be paying any corporation tax in the UK. On the grounds that it wasn’t making any profit so why should it? Then in the details people noted that it was sending royalties, tax free, to Holland, and paying a margin on coffee it bought from lower tax Switzerland. Aha! so, tax avoidance! Except, when those were added back in then Starbucks was still making a loss. And then decided to cough up some tax anyway in order to get the loons from UKUncut off its premises.
So, what’s happened now? Essentially, Osborne has changed the tax laws so that profits that Starbucks makes elsewhere in Europe from royalties (that stuff that used to go to Holland) aren’t taxed in the UK at all. So it makes sense to put the HQ here to make those profits tax free: EU rules expressly state that they can’t be taxed in the countries that they come from. There are those that don’t seem very happy about this:
The real reason, I’m sure, why Starbucks moving is because George Osborne has changed the UK from having a corporation tax system that charged UK-based companies to tax on their worldwide profits to one where he only charges UK companies to tax on the profits that they earn in this country. This is the so-called territorial basis for taxation. This has enormous advantage to a company like Starbucks. That is firstly because one of the major functions of its European head office is to route the royalties earned on the use of the Starbucks name from each operating country through to Starbucks in the USA. Because of the UK’s new territorial tax system all the royalties now received in London from every country in Europe will now be entirely tax-free in the UK because of George Osborne’s largesse.
Yup, ain’t it great? Cut tax rates and people will come and set up in business in your country. Meaning that you’ll get a little bit of money from them instead of nothing. All sounds like a really great idea, eh?