Starbucks to Pay £20M UK Tax Over Two Years

In December 2012, public and political pressure mounted against Starbucks after it emerged the global coffee chain had paid just £8.6 million in UK corporate tax over 14 years—despite accumulating more than £3 billion in UK sales. The most damning period came in the last three years, during which the company paid nothing at all. This revelation stirred consumer outrage and drew sharp criticism from politicians, who labeled the firm’s practices as unethical.

Starbucks has now committed to paying around £20 million (US$32 million) in UK corporate tax over the next two years, regardless of whether the company is profitable during that time.

How Starbucks Avoided UK Taxes for Years

Starbucks UK minimized its taxable profits through a series of controversial financial arrangements. The company paid substantial “royalty fees” to its Dutch subsidiary for the use of the Starbucks brand and coffee recipes. Additionally, it purchased coffee beans from a Swiss subsidiary at inflated transfer prices. These maneuvers ensured that Starbucks UK consistently reported losses on paper, even as its 760 stores served over two million customers weekly.

Because UK corporate tax is levied on profits—not revenue—shifting earnings to lower-tax jurisdictions allowed Starbucks to legally reduce its UK tax burden. Despite operating in one of the world’s most competitive coffee markets, the company’s financial statements told a different story: chronic unprofitability.

Public Backlash Forces a Change

Initially, Starbucks defended its tax practices by claiming the UK coffee market was too competitive to turn a profit. But with weekly foot traffic exceeding two million across its widespread store network, both consumers and media found the argument unconvincing. Politicians accused the company of acting immorally, and some customers launched personal boycotts. Public pressure intensified, particularly as media investigations exposed the complex tax avoidance structures.

The outcry struck a nerve. In response, Cliff Burrows, then managing director of Starbucks UK, announced that the company would voluntarily pay significant corporate tax in the UK over the next two years—even if that meant paying without being profitable.

What This Means for UK Corporate Tax Policy

Starbucks’ voluntary tax commitment marked a rare moment of corporate accountability amid growing scrutiny of multinational tax practices. While the £20 million payment falls far short of the amount some critics argued the company should have paid, it represented a tangible response to public demands for fairer corporate contributions. The case also fueled broader debates over international tax rules, transparency, and the responsibilities of global businesses operating in the UK.

Frequently Asked Questions

How much has Starbucks paid in UK tax over the past 14 years?

Starbucks has paid approximately £8.6 million in UK corporate tax over the past 14 years, despite generating over £3 billion in sales during that period.

Why didn’t Starbucks pay UK tax in the last three years?

Starbucks avoided UK corporate tax in the last three years by reporting paper losses, achieved through royalty payments to a Dutch subsidiary, high-priced coffee bean purchases from a Swiss subsidiary, and other transfer pricing strategies that shifted profits out of the UK.

How many Starbucks stores are there in the UK?

As of the time of the controversy, Starbucks operated 760 stores in the UK, serving more than two million customers per week.

What did Starbucks promise to do in response to public criticism?

In response to the backlash, Starbucks UK committed to paying around £20 million in UK corporate tax over the next two years, regardless of profitability.

Was Starbucks profitable in the UK according to its financial reports?

Despite its large sales volume and customer base, Starbucks’ UK financial statements showed consistent losses for years, largely due to internal payments and transfer pricing that minimized reported profits.