A recent report from the Centre for International Corporate Tax Accountability and Research (CICTAR) highlights that Starbucks has booked approximately $1.3 billion in profits through its Swiss subsidiary, Starbucks Coffee Trading Company (SCTC), over the past decade. This strategy appears to have enabled the coffee giant to minimize its tax liabilities in countries with higher tax rates, including the United States.
SCTC, based in the Swiss Canton of Vaud, is responsible for sourcing unroasted coffee beans from various countries and managing Starbucks' ethical coffee sourcing initiatives. The report indicates that since 2015, SCTC has contributed significantly to shifting profits away from regions where they would face elevated tax burdens.
While Starbucks has not been found to have engaged in illegal activities, the company's approach to using tax havens to reduce its tax obligations contrasts with its public image of social responsibility. Analysts have noted that the profit margins attributed to SCTC have increased without significant changes in underlying business practices or costs. For instance, the markup on unroasted coffee beans sold internally rose sharply from 3% to 18% over several years, raising questions about the justification for such increases.
Starbucks maintains that it complies with tax laws globally, stating that it pays appropriate tax levels and has an effective global tax rate of approximately 24%. The company emphasizes that its Swiss operations are integral to accessing quality coffee trading expertise.
The use of tax havens is not unique to Starbucks; many corporations employ similar strategies to manage tax liabilities. Experts point out that these practices can lead to increased tax burdens for smaller businesses and individuals, generating broader implications for public revenue and government spending.