Criticism of Starbucks

Starbucks, an American coffee company and coffeehouse chain, is the subject of multiple controversies. Public and employee criticism against the company has come from around the world, including a wide range issues from tax avoidance in Europe, anti-competitive practices in the United States, human rights issues in multiple countries and labor issues involving union busting, questions about pay equity and ethics in partnerships in Africa.

European tax evasion

In October 2012, Starbucks faced criticism after a Reuters investigation found that the company reportedly paid only £8.6 million in corporation tax in the UK over 14 years, despite generating over £3 billion in sales—this included no tax payments on £1.3 billion of sales in the three years prior to 2012. It is alleged that Starbucks was able to do this by charging high licensing fees to the UK branch of the business, allowing them to declare a £33 million loss in 2011. The UK subsidiary pays patent fees to the US subsidiary, purchases coffee beans from the Netherlands subsidiary (where corporation tax is lower than in the UK), and uses the Swiss subsidiary for other "miscellaneous services". A YouGov survey suggested that Starbucks' brand image was substantially weakened by the controversy surrounding how much tax it pays in the UK several weeks after the allegations surfaced.

Starbucks' chief financial officer (CFO) appeared before the Public Accounts Committee in November 2012 and admitted that the Dutch government granted a special tax rate to their European headquarters, which the UK business pays royalties to. Dutch law permits companies to transfer royalties collected from other countries to tax havens without incurring taxes, unlike in the rest of the EU. The CFO denied that they chose the Netherlands as their European headquarters to avoid tax, explaining that the company's Dutch coffee roasting plant was the reason for the decision. Until 2009, the royalty rate was 6% of UK sales, but after being challenged by UK tax authorities it was reduced to 4.7%. The CFO told the committee this reflected costs such as designing new stores and products, but admitted that there was no detailed analysis by which the rate is decided.