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ECONOMY

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.

Published: 5 November 2012 14:32 CET
Starbucks has 'never paid German income tax'
Photo: DPA

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

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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