Starbucks UK Tax Allegations Hurting Brand

By Tom Bergin

LONDON, Oct 20 (Reuters) - Starbucks's reputation among consumers in Britain has been hit by wave of criticism of its tax affairs from politicians and the media, pollster YouGov said.

A Reuters report showed the coffee chain paid no tax on 1.2 billion pounds of sales in recent years by telling the taxman it was making no profit, even as it told investors the unit was "profitable".

YouGov said its BrandIndex survey of 2,000 people showed a drop in the its reputation score to -26 from +3.

Starbucks's Buzz score - whether people have heard anything positive or negative about the brand in the media or through word of mouth - is now -9 compared to zero before the Reuters report was published.

"The story exposing Starbucks's tax arrangements has definitely dealt a blow to its brand. We have been monitoring it closely, and each day since the story broke we've seen public perception of Starbucks become more and more negative," said Sarah Murphy, YouGov's director of BrandIndex.

Starbucks Chief Executive Howard Schultz defended the company's tax affairs on Friday, saying it paid no UK tax because it made no profit in Britain, even after 14 years of operations.

Two British parliamentary committees are due to quiz tax officials about Starbucks, and lawmakers have said it undermined public trust in the tax system.

A spokeswoman for UK Uncut, a protest group critical of government austerity measures and tax avoidance, said it had Starbucks "in our sights".

The group has previously protested at stores of mobile phone group Vodafone over its tax affairs. It says it is committed to acting with integrity and transparency in all tax matters.

UK Uncut said it would be participating in a rally on Saturday in which tens of thousands are expected to march through London in what is likely to be the largest demonstration in Britain this year against government austerity measures.

The spokeswoman declined to say if any specific action against Starbucks was planned.

The Seattle-based group, with a market capitalisation of $40 billion, is the second-largest restaurant or cafe chain globally after McDonald's.