- Starbucks reserved $ 1.3 billion in profits in a Swiss subsidiary over a decade, a new report said.
- This decision seemed to reduce Starbucks’ tax bill in other countries.
- This is the latest example of companies using tax havens to avoid tax rates in the United States and elsewhere.
An little -known subsidiary of Starbucks in Switzerland seems to have played a big role since the coffee chain has paid taxes over the past decade, according to a new report.
On paper, Starbucks Coffee Trading Company, or SCTC, based in the Swiss canton of Vaud, is responsible for supplying non -delighted coffee of countries like Colombia and Rwanda before it is used in drinks in Starbucks cafes. He also supervises the program of practices in terms of equity of Starbucks cafes and farmers for the ethical supply of coffee.
According to a report published on Saturday by the Center for International Corporate Tax Accountability and Research, or Cictar, there has also been evidence that since 2015, the subsidiary has contributed to around $ 1.3 billion in Starbucks profits to other countries where they have been subjected to higher tax rates.
The chain is hardly the only large company that reserves profits outside the United States, and the authors of the report found no evidence that the company was doing anything illegal. But the reputation of Starbucks to be aware of his role in the company contrasts with his use of tax gaps, said Jason Ward, principal analyst at Cictar based in Australia.
“Starbucks is different in that it really does a bank on its image of social responsibility,” Ward told Business Insider.
Starbucks uses Switzerland SCTC to reserve the cost of non -roasted coffee beans, even if the grains do not seem to move across Switzerland, according to the report.
SCTC “then sells exactly the same green coffee beans at a higher price to other entities in the structure of Starbucks companies,” said the report. This markup was around 3% between 2005 and 2010, then increased to 18% between 2011 and 2014, according to the Cictar report.
Cictar could not find “a significant change in commercial practices or underlying costs” which would justify the leap in profits, indicates the report.
“It is not like they were doing coffee or research on different types of grains or anything,” said Ward. “There is nothing like it happens there.”
In Switzerland, the profits of these increases are taxed at “a significantly lower tax rate” than they had been reserved in the United States or another country, depending on the report.
Although the exact tax rate that Starbucks pays in Switzerland is not publicly known, American companies paid an average rate of 3.9% in the country, according to an IRS data analysis by the Institute on Taxation and Economic Policy, or ITEP. The tax rate of American companies is 21%.
More recently, SCTC paid between $ 125 and $ 150 million in dividends per year to another subsidiary of Starbucks, Starbucks Coffee Emea BV, based in the Netherlands. These payments do not seem to be taxed or leaving Switzerland or entering the Netherlands.
The report examined the financial deposits of Starbucks subsidiaries in Europe to trace the profits reserved for SCTC.
In an answer that Cictar included on page 4 of the report, a Starbucks spokesperson said that the report allegations “do not precisely reflect our business model and how different parts of our company contribute to the success of the company”.
“Starbucks pays the appropriate and correct tax levels in all the courts in which it works and operates proactively with the tax authorities to inform them of its business model and related tax implications,” said the spokesperson.
Starbucks did not answer questions from Business Insider on SCTC, its tax strategy and other problems raised in the report.
Starbucks is not the only company looking abroad to minimize its tax obligations. A 2021 Cictar report examined the use by Uber of screens companies in the Netherlands to limit its tax bill, for example.
Large companies and rich individuals store money in a variety of tax haves countries, such as the Cayman islands, because they charge less in taxes than their country of origin – or not at all.
Cictar’s conclusions on Starbucks are not surprising, said Matthew Gardner, principal researcher at ITEP.
“This is one thing that each company or each industry, companies in each industry that have a lot of intangible assets are currently doing,” he told Business Insider.
Companies storing profits in tax havens – and the American government’s responses to the strategy – go back in decades, he said.
A 2004 fiscal day, for example, allowed companies to make profits in the United States from abroad to a very reduced tax rate. The 2017 law on tax reductions and jobs was adopted during the first term of President Donald Trump, also contained provisions to bring more profits to businesses to the United States.
But many companies have continued to use offshore tax haven, said Gardner. An ITEP analysis of IRS data from 2020 revealed that companies belonging to the United States have declared $ 390 billion in profits in 15 probable tax havens, including the Cayman islands, Ireland and Switzerland.
The tax avoidance of large companies ultimately increases the tax burden of other taxpayers, including individuals and small businesses, said Gardner. This can also lead governments to reduce spending and reduce programs, he said.
“Any way in which the loss of income for these offshore benefits can be paid to hurt us,” he said.
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