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Starbucks reports UK loss, pays no tax for 2012

A man looks at his phone in a Starbucks store in New York June 25, 2013. REUTERS/Brendan McDermid
A man looks at his phone in a Starbucks store in New York June 25, 2013. REUTERS/Brendan McDermid

By Tom Bergin

LONDON (Reuters) - Starbucks, whose thin tax payments in Britain provoked a backlash against corporate tax avoidance when revealed by Reuters, paid no tax for the year to September 30, 2012.

The coffee giant's main UK subsidiary reported its 15th straight annual loss at its UK stores in accounts filed on Friday.

Reuters revealed in October that Starbucks reported consistent UK losses while telling investors the British unit was profitable and promoting managers of the unit within the group.

Friday's accounts showed a UK loss of 30 million pounds ($46 million), down from the 32 million pounds loss it reported for the previous year, helped by a 4 percent rise in turnover to 413 million pounds.

The company cited challenging economic conditions and a competitive UK coffee market, although the accounts show profits were also undermined by a royalty for the use of the Starbucks brand of 26 million pounds.

This is paid to an affiliate in the Netherlands, where Starbucks has negotiated what it said was a very low tax rate.

The UK unit also paid 2 million pounds in interest to affiliated companies, the accounts showed.

Following widespread criticism from politicians and the picketing of stores, Starbucks said it would pay or pre-pay around 10 million pounds a year in taxes in 2013 and 2014.

The company said it would not take tax deductions for certain intercompany payments such as the royalty fee, interest payments and the 25 percent mark up on coffee beans that is paid to a Swiss-based Starbucks coffee purchasing unit.

Starbucks recently paid 5 million pounds to the UK tax authority as the first installment of its 2013 tax bill, British media reported earlier this month.

Starbucks declined immediate comment.

($1 = 0.6593 British pounds)

(Reporting by Tom Bergin; Editing by Ruth Pitchford)

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