The coffee giant reported to U.K. authorities a big bump in pretax profits for fiscal 2015 — $51.4 million, versus about $3 million last year. It’s the company’s best results ever for the British Isles.
Starbucks’ U.K. operations are finally bringing home some serious bacon — and the taxes that go with it.
The coffee giant reported to U.K. authorities Monday a big bump in pretax profits for fiscal 2015 — $51.4 million, versus about $3 million last year. They’re the company’s best results ever for the British Isles.
Starbucks’ tax bill was $12.21 million. That’s less than the $17.14 million it paid the United Kingdom last year, but there’s a significant difference: Most of the money disbursed last year represented deductions that Starbucks decided to forgo after being publicly grilled for not paying enough taxes despite growing sales.
This year it’s the profits that pay the Crown. Starbucks touted its tax payment in a statement released in the United Kingdom on Tuesday, a sign of how paying taxes in local markets outside the United States has become quite the story not only for the Seattle coffee titan, but for other U.S. companies operating in the Old World.
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“Before and after tax profits are both up by more than £30 million as we have invested in the store experience while managing our costs. As a result our corporation tax payments also increased,” said Kris Engskov, the Starbucks executive in charge of Europe, the Middle East and Africa.
European regulators in October said that a tax deal between Starbucks and the Netherlands was too sweet to be legal, arguing that it allowed a Dutch Starbucks unit to artificially lower its profits by paying another of its subsidiaries for “coffee-roasting know how.”
The decision, which both the Netherlands and Starbucks plan to contest, is part of a wider European Union campaign against tax deals between member countries such as Ireland, Luxembourg and the Netherlands and multinationals like Fiat and Amazon.
Starbucks’ U.K. operations still pay a lot of royalties and fees to another Starbucks subsidiary that’s also based in London — $41 million, slightly above what it paid last year, according to documents posted on the company’s U.K. website.
So most of this year’s bump in profit came from lower costs, pointing to the success of the company’s recent European strategy of letting franchisees run an increasing number of stores instead of managing them on its own. The strategy began yielding significant results last year after a long struggle to increase sales, especially in Continental markets.
During fiscal 2015, the company closed down 17 stores and transferred 74 stores to franchisees.