Starbucks has 'never paid German income tax'

Ubiquitous café chain Starbucks has not paid federal income taxes in Germany since it started operating in the country back in 2002, according a recent report.

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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