Caffè Nero is one of the prime examples of tax avoidance – it has not paid corporation tax in the UK since 2007. Owner Gerry Ford took the company off the stock exchange in 2007, borrowing substantially to do so, and loading the company with debts – currently around £300 million. The interest payments on these loans are higher than the profits of the company, meaning that no part of it has had to pay corporation tax since.
How does this compare with some of the other players? Starbucks paid $5.9 million in tax in the year ending October 2017, which does contrast with its previous contributions – in 14 years to 2015, it paid just over $8 billion for all those years combined – despite taking over £3 billion in sales. On the face of it, that’s a definite improvement.
However, the sheer complexity of Starbucks’ filings means that it is nearly impossible to tell whether its approach to tax has actually improved. With staggered filings at Companies House, and an absence of country-by-country reporting, showing exactly where profits have been made, it is very difficult to say.
Pret a Manger is another company to have offset its UK profits against losses from other parts of its business. In 2016, the pre-tax profit for the company in the UK was £86 million. In theory, that would have resulted in it paying around £17 million in corporation tax. Instead, it offset losses elsewhere to result in a payment of just £5 million. Pret was bought earlier this year by Luxembourg-based JAB, which holds Ethical Consumer’s worst rating for likely tax avoidance.
It is difficult to know what will happen to Costa Coffee following its recent takeover by Coca Cola –although its record on tax prior to the takeover was good. Last year it paid £24.7 million in taxes on profits of £103 million – over the headline rate of corporation tax. However, in the same period, Coca Cola in the US was paying 15% below the corporate rate of 35% (admittedly a tax rate above that of the UK’s). Time will tell whether the takeover will move Costa towards the tax avoidance practices seen elsewhere in the industry.
As is always the case, the likes of Starbucks and Caffe Nero will point out that they pay all the tax that they are legally required to in the UK. However, the difference is between aiming to pay the right amount of tax in the right place at the right time – such as AMT Coffee – and having a clear strategy of minimising corporation tax.
How the companies rated
|Muffin Break, Soho Coffee, Greggs, Coffee #1, AMT Coffee, Boston Tea Party
Starbucks, Caffè Nero, Harris + Hoole, Caffè Ritazza, Coffee Republic, Esquires Coffee House, Pret a Manger, McDonald’s and Puccino’s
*Costa received our middle rating although, from January, under Coca-Cola it will be rated worst
As hospitality and catering are industries with traditionally low wages, we marked down companies that were not publicly committing to paying the Real Living Wage. Every company lost half a mark for this.
Every company also lost half a mark under Controversial Technologies for a lack of a clear company wide policy of sourcing entirely GMO free (including animal feed).
Habitats and Resources
Every company except Boston Tea Party lost half a mark here for selling fish that was not certified sustainable.