Isn\’t this just wonderful?

After you strip out the royalties, the interest to the US top company, Starbucks still doesn\’t make a profit in the UK.

They\’ve not been doing any tax dodging at all.

12 thoughts on “Isn\’t this just wonderful?”

  1. In which case if Starbucks was really trying to minimise tax surely it should reduce its royalty payments from the UK to Holland, thus reducing UK losses (but still not paying any UK corporation tax) and therefore also reduce Dutch profits and thus pay less Dutch corporation tax.

  2. IanB, they are trading at a loss probably because they are building the company up. They are still expanding and new stores are not cheap and don’t make money from day 1.

  3. Cashflow will pay for expansion, but expansion costs and therefore taxable profit is down.
    Not made a profit in 15 years – how big was starbucks UK 15 years ago and how big now?

  4. I’m not at all convinced. Two things:
    – Starbucks’ annual report for 2011 says “our Canada, Japan, UK, and China MBUs account for a significant portion of the net revenue and earnings of our international operations”
    – the numbers reported by FT Alphaville (which come directly from Starbucks’ financial statement; you can download it from sites that offer the service) don’t make much sense. The charges listed as contributing to the operating loss bear no obvious relation to either the “cost of sales” or the “administrative expenses” used in calculating the operating loss – the charges listed are substantially smaller in 2011 than 2010, but the costs deducted from gross profit are substantially larger, and no reason is given for that.

  5. The protests are clearly coming from people who have never run a real business, don’t understand the inbred desire in companies for long-term sustainability, don’t understand the creation of wealth and, unfortunately for the rest of us, know how to self-publicise, emote and manipulate, whilst knowing nothing about tax either.

    And the Starbucks’ management crew are a bunch of wimps for not standing up for themselves. Did you obey the rule guys? Then defend your position.

  6. There is clearly a strategic question here and I am sure that Starbucks are going for market domination. Expansion over everything. Even if they make no profit, I bet the masters back in Seattle or wherever are happy.

    They could, I am sure, stop and make pots of money from their current network but I am sure they feel that they have a better chance of survival and building value by continuing to grow.

    Why should a politician (or worse, some tax-ignorant poseur) dictate corporate strategy.

  7. Oh and I can’t stand their shops and coffee is never flavoured by anything other than a dash of milk or cream for the perverts.

    But hey, I’m not a shareholder directly or indirectly. My pension funds don’t hold Starbucks

  8. Three things:

    1) it is cash flow that matters, not profits

    2) the investment costs are now sunk therefore the proper decision today is whether the cash flow from the business would be lower by winding down the business (thus perhaps even incurring certain additional costs) or to continue trading

    3) what SadButMadLad, Martin Davies and bilbaoboy said

  9. Is it possible that some of these companies are lying to their investors, rather than dodging taxes?

    So they tell investors that “UK is generating revenues” , pay large salaries to management, but don’t pay out much dividend as it’s all being “reinvested’?

    (“Dodging” here is a technical term of art for “not paying taxes despite being successful”. It includes evasion, avoidance, “good” avoidance”, “bad” avoidance, Murphean avoidance, reinvesting etc.)

  10. Or are taxable profits and investment profits different? So tell HMRC one thing, tell investors another, and both be accurate?

  11. Or the statements made to investors could have been EBITDA under US GAAP. That may explain US investor profits statements versus UK statutory account losses.

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