• Germany's news in English
 

Starbucks has 'never paid German income tax'

Published: 05 Nov 2012 14:32 GMT+01:00

The company registered sales worth €117 million in Germany in 2011, but reported losses of €5.3 million, and therefore did not pay income taxes. This has been the case each year since 2002, according to a report by the Reuters news agency published in the business daily Handelsblatt and other German papers.

Sven Giegold, a German Green member of the European Parliament has reportedly said he will take up the issue of Starbucks' tax record with authorities in Bavaria, where the company's Germany subsidiary is based.

A spokesman for the Left Party said it was asking the Finance Ministry to investigate whether the coffee giant had complied with German tax rules, the Handelsblatt said.

The German Finance Ministry has declined to comment on the issue. The report says there is no evidence the company broke any tax laws in its filings.

Starbucks CEO Howard Schultz issued a statement on October 23 saying, "In every country where we do business, Starbucks adheres to both the letter and spirit of the law regarding our business practices..."

The company has said that it did not pay corporation taxes because high labour costs and rent prices made it hard to turn a profit in Germany.

The root of the problem, according to the Reuters research published in Handelsblatt and elsewhere, is that the German Starbucks subsidiary has to pay a licensing fee of six percent of the branch's profits to the headquarters in the Netherlands, and an additional fee of $25,000 for each newly opened café, causing much of the subsidiary's profits to be sent out of the country, and dramatically reducing taxable earnings in Germany.

In Britain, news that the company had paid only £8.6 million on £3.1 billion in sales over 13 years has made headlines and caused members of Parliament to initiate enquiries into the matter.

After the first German Starbucks opened 10 years ago on the Pariser Platz in Berlin, opposite the Brandenburg Gate, some 150 other branches have opened in the country, the Handelsblatt reports.

Last week, the company reported weaker sales in Germany, and fourth quarter sales in Europe, the Middle East, and Africa resulted in an operating loss of $7 million, down from a $3 million profit over the same period the year before.

In Germany, the company says it plans to win back customers with the sale of regionally popular baked goods. Starbucks also plans to open more branches in German train stations to attract customers on their way to work.

DPA/The Local/mbw

The Local (news@thelocal.de)

Your comments about this article

16:18 November 5, 2012 by ChrisRea
Licencing fees are one of the most used tricks to avoid paying taxes in the country where the incomes are made.
16:32 November 5, 2012 by gtappend
So do they pay tax on those payments in the Netherlands, or does that money somehow find its way back to the U.S. instead?
20:16 November 5, 2012 by ChrisRea
Look what Wikipedia says: "Income received by a Dutch company from a foreign branch is exempt from Dutch corporate tax provided such branch is a permanent establishment or representative." So, apparently, no profit tax is paid on those payments.
20:22 November 5, 2012 by bobmarchiano
The company has said that it did not pay corporation taxes because high labor costs and rent prices made it hard to turn a profit in Germany

Rent is high in the locations but HIGH Labor cost that is very hard to .......
00:15 November 6, 2012 by catjones
ChrisRea...it's not a 'trick'. Every foreign country doing business in germany has access to the same tax laws of germany. If germany doesn't think this is best for their bottom line, let them change their law.
07:53 November 6, 2012 by ChrisRea
Of course it is a trick, because it allows camouflaging an economic process in something else (in order to save taxes). Why do you think Netherlands was chosen for "headquarters"?

Of course other companies do the same, not only in Germany but in most of the countries, if not all. Licencing fees are the hardest to be contested by the tax authorities. If the nature of the activity does not allow it (or not in a high proportion), then management and consulting fees are the next trick. However, these are a bit more difficult to be properly documented.

Unfortunately, no solution was found to adjust the law in order to discriminate the just transactions from the other ones. Or do you know of a country that managed to do that?
08:42 November 8, 2012 by bhess
They don't bring it back to the U.S. because it would be taxed at our high corporate tax rate.

I got to say it must be hard for them to beat the baked goods in Germany. I remember getting custard danishes from a bakery there and it is still the best danish I've ever had since. Plus you guys already had good coffee. When I went back to the U.S. I had to get my coffee from a specialty shop because I had become so spoiled.
00:03 November 10, 2012 by Anny One
@bobmarchiano

Not only in Germany apparently

Politicians in the UK, Germany and France have called for investigations into the coffee company following Reuters reports into the firm's tax arrangements.

http://www.guardian.co.uk/business/2012/nov/01/starbucks-dismisses-tax-avoidance-claims
Today's headlines
Pro-Kremlin bikers defy bans on Berlin ride
Photo: DPA

Pro-Kremlin bikers defy bans on Berlin ride

Dozens of bikers from pro-Kremlin gang the Night Wolves on Saturday set off on a ride to Berlin ahead of the anniversary of Soviet victory in World War II, despite Poland and Germany barring the riders. READ  

VW patriarch Piëch resigns
Photo: DPA

VW patriarch Piëch resigns

Volkswagen patriarch Ferdinand Piëch, has resigned as head of the German auto giant's supervisory board with immediate effect, the company announced Saturday. READ  

Schumacher Jr lives up to his name
Schumacher Jr is too young to drink any of that champagne. Photo: DPA

Schumacher Jr lives up to his name

Mick Schumacher Jr did his famous father proud on his Formula Four debut on Saturday by claiming a trophy as the best rookie and finishing ninth, despite starting 19th. READ  

Deutsche Bank to sell Postbank
Deutsche Bank acquired Postbank in 2008. Photo: DPA

Deutsche Bank to sell Postbank

Germany's biggest lender Deutsche Bank announced late Friday it was seeking to sell its Postbank subsidiary as part of a revamp to improve profitability. READ  

Far left activists attack immigration office
Photo: DPA

Far left activists attack immigration office

Far-left extremists attacked an immigration office in Leipzig early on Friday morning. It was the second targeted attack on an official building in the city in recent months. READ  

Steinmeier: Armenia wasn't genocide
Foreign Minister Frank-Walter Steinmeier. Photo:DPA

Steinmeier: Armenia wasn't genocide

Foreign Minister Frank-Walter Steinmeier insisted on Friday that calling Armenian massacres genocide risks belittling the Holocaust, after President Joachim Gauck broke a taboo by using the word on Thursday. READ  

Schumacher Jr launches Formula race career
Mick Schumacher on test day earlier in April. Photo: DPA

Schumacher Jr launches Formula race career

Michael Schumacher's 16-year-old son starts his Formula Four career this weekend, under the pressure of living up to the famous family name of the seven-time Formula One world champion. READ  

Property of the week
In Pictures: The Local's Property of the Week
Photo: Mr Lodge

In Pictures: The Local's Property of the Week

A highly sought-after location, great connection to public transport, and a very stylish interior – Does that sound good to you? Then you’ll love this week’s property! READ  

Germany's most polluted cities
The sun rises behind a coal-burning power station in Lower Saxony. Photo: DPA

Germany's most polluted cities

The Federal Environment Ministry has named the most polluted places around the country, with Stuttgart claiming the undesirable title of Germany's most polluted city. READ  

Göring's daughter fails in bid to win father's assets
Edda Göring photographed in 1942. Photo: Wikimedia Commons

Göring's daughter fails in bid to win father's assets

The Bavarian government rejected on Thursday an attempt by Hermann Göring's daughter to win back her father's assets, which the government seized in 1948. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Gallery
German beer day: take the tour
Features
Off to Norway at 18 km/hour
Shutterstock
Sponsored Article
10 things you didn’t know about Zagreb (and why you should go)
Gallery
The smileys Germans love to text
Sponsored Article
What expat parents should ask before choosing a school
National
Expats face Monday deadline to register to vote for UK election
Politics
A Greek learning politics in Germany
Features
The battle of the "Gates of Berlin"
National
Germany's favourite baby names of 2014
National
Germany's 'very poor' lobbying record
National
VIDEO: Mario Draghi suffers anti-ECB confetti attack
Politics
Merkel's 15 years at the top of German politics
Features
Spice up asparagus season with The Local's serving suggestions
Travel
Lowest of the low: how woman exploited Germanwings crash
Sport
Football and the €30,000 firework
Technology
Why scientists oppose killer robots
National
Germanwings co-pilot 'searched suicide info'
Technology
Electrifying 'Ostalgia'
National
Which city is Germany's worst for drivers?
National
'Cannibal cop' gets 8 years
Can the 'nightmare' of a pilot downing a plane be prevented?
National
LIVE: Co-pilot suspected of crashing plane
Pupils mourn lost classmates
National
Freed after 25 years on death row
National
Cologne Cathedral returns from space
Features
Paddy's Day, Berlin style
Is your workload 'out of control'? You're not alone...
National
Why east Germans are happy to get it on on camera
National
What would you do with a 250-year-old pretzel?
Features
Just why is the German flag Schwarz, Rot, Gold?
Business & Money
Getting German workers and bosses thinking positive
National
Uplifting thoughts to get you through the last week of winter
National
Who wants the Olympics more - Hamburg or Berlin?
National
Last-minute drama of Germany's Eurovision 2015 entry
National
German photographer takes world's top prize
Features
Meet the woman getting Germans to drink more – and better – beer
Gallery
Get inspired for International Women's Day with German heroes
Green party proposes first-ever cannabis legalization plan
Gallery
In pictures: Germany's seven most livable cities
National
Singapore canes Germans for train graffiti
Politics
Surprise! Germans love feeling like they run the EU
Politics
Anger over plan to show women what men earn
Travel
Munich tram fans bicker over new bell
Features
Kafka: puzzling translators 100 years on
Business & Money
France or Germany: Which country really is the best country to work in?
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

7,191
jobs available
Toytown Germany
Germany's English-speaking crowd