Starbucks to start paying more UK tax: Kris Engskov speech in full And frankly, doing the right thing at Starbucks doesn't mean only doing what is right by our shareholders. It also means doing the right thing and building trust with our partners, with our customers and for the many communities we operate in all across the country. We've also recognized over many years that acting responsibly is also good for the bottom line. There is no doubt that tax has become an important subject of debate over the past several weeks and I think it's important to share that the emotion of the issue has taken us a bit by surprise. Since we started doing business here, we have always organised our tax affairs according to the letter of the law - always. We have used existing and agreed-upon measures to pay what is expected of us, but not more -- just as most companies do and I am sure many of the people here today run their businesses in similar ways. We have also built a strong relationship with HMRC to ensure we always comply with the requirements set by UK tax law. And to be clear, I am not surprised that there is a great deal of interest in how we pay taxes. With some 760 retail stores across the country - employing 1,000"s of people in many communities, with a quickly growing food service, vending and grocery business, we've built a significant presence in Britain. Annually, we inject nearly £300m into the UK economy and are always exploring additional initiatives to expand our growth. We are committed to the UK for the long-term and will continue to invest here - providing jobs and training for the over 8,500 partners and growing, and investing in the experience we provide to our customers - whether that is through our new and refurbished stores (we invested £8m in the renovation of 70 stores across the capital in time for this summer's Olympic games; some of these are among the best designs we've created anywhere in the world), or developing new and exciting products both unique in the UK and Europe and some created in countries far from our own. And now, about our coffee. The UK is one of the most innovative and competitive espresso markets in the world, and the world's eyes remain on our coffee business here, particularly in London. I am proud of the innovation taking place around coffee here in Britain - and am particularly proud Starbucks has played and is continuing to play such an important role in making our capital such an important part of global coffee culture. Our profitability But, as I've talked about at some length previously, we've haven't been as successful as we would have hoped over the past 14 years of doing business here. And, some have questioned the claim that we're not profitable here. With 2 million customers visiting us each week in hundreds of stores across the UK, you'd think we would find it difficult not to make healthy profits each year. In fact, the story is much more complex. Although our company is 40 years old, we are still relatively young in the UK. This has meant the last decade involved a high degree of ongoing investment. As I said, by any measure, the UK remains the most competitive espresso market in the world and we have not performed to our expectations over the many years we've been in business here. Given we tend to locate in places with the highest footfall, usually on high streets and in prime locations, our rents have traditionally been very high, and we have in the past made decisions during a period of rapid expansion that continue to prove challenging. In the early days of our development here, the lion's-share of our business was in London, where rents were particularly high. It's why we're now focusing on the way we grow our business - for example with drive-thru locations, a concept still in its infancy here in the UK and a vital part of our strategy to achieve greater profitability as we grow across different parts of the country. This is just one of many ways we are looking to grow, and to become more profitable over time. We know, given how our recent store openings and drive-thrus are performing, that we are making the right decisions. And, the good news for customers is that they can now get a great cup of Starbucks coffee wherever they are - whether that is in supermarkets, on the road, in airports, in motorway service stations, and on planes and trains. But the fact that customers have so much choice wherever they are means that we have to work harder than ever to give them reasons to choose Starbucks. That said, I have never been more optimistic about our opportunities as a business here in the UK. And, while we have challenges to work through as we bring this business to sustained profitability, we're well on our way - having made a great deal of progress just over these last 18 months. And, as we know, higher profits generate more tax receipts. And, if I can, let me talk about Starbucks and tax for a few minutes. Tax announcement We've learned it is vital to listen closely to our customers - and that acting responsibly makes good business sense. We're experiencing one of the most difficult macro-economic periods in many years, and our customers are under a great deal of financial pressure. With the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more. It's why I am standing before you today - not justifying the status quo, but to tell you that we are going to take action and do something about it. Today, I am announcing changes which will result in Starbucks paying higher corporation tax in the UK - above what is currently required by law. Specifically, in 2013 and 2014 Starbucks will not claim tax deductions for royalties or payments related to our intercompany charges. In addition, we are making a commitment that we will propose to pay a significant amount of corporation tax during 2013 and 2014 regardless of whether our company is profitable during these years. We are still working through some of the calculations, but we believe we could pay or prepay somewhere in the range of £10m in each of the next two years in addition to the variety of taxes we already pay. This is an unprecedented commitment. It hasn't been done before. So there is no procedural guideline for how to do it. As such, I want to clarify something that has been the subject of inaccurate reports this past week: despite the fact that we have a consistent and ongoing dialogue with the tax authorities over our business affairs here in the UK, we have not yet shared this particular proposal with HMRC. Looking ahead, if we are not able to generate substantial profits in the years ahead (meaning beyond 2013 and 2014), we will consider extending this commitment until we are paying corporation tax at a material rate. I'd like to highlight a few details behind these commitments. To be clear, Starbucks UK will not claim deductions: For the royalties it pays For the coffee it purchases For interest paid on intercompany loans For capital allowance deductions nor our carry-forward losses For two years or until we make a profit. I am confident these actions, when taken together, will position us as a company to make a larger contribution to the Exchequer and most importantly to the communities we serve while we make the moves necessary to achieve a sustainable level of profitability. These decisions are the right things for us to do. We've heard that loud and clear from our customers. And, today, we're taking the actions necessary to pay more corporation tax in the UK. Investing in the UK for the long-term Over and above these commitments we're making today, we will continue investing in the UK in a number of other ways - growing our store portfolio in many places across the country, and creating jobs in the communities we serve - especially for young people. And we will do even more. We announced last year that we plan to open 300 new stores and create another 5,000 new jobs in this country over the course of 5 years, and we remain on track to meet that commitment. We are one of the most active companies in this country in regards to offering young people apprenticeships. Back in September, we committed to employ 1,000 apprentices over the next two years, with 700 of those offered in London stores alone. This will give young people a chance to get a foot on the ladder of a promising retail career at a time when they most need it. I have never been more optimistic about the opportunities we have in the UK. But I know that trust is not something that is earned back overnight. Delivering on the actions we have announced today is fundamental to reassuring the millions of customers who pass through our doors every year and the thousands of partners who rely upon Starbucks that their faith in our company is justified. I'd like to take a moment to thank the eight and a half thousand Starbucks partners all over the UK who continue to look after our customers in such a remarkable way. And I want to take a moment to thank the London Chamber once again. During difficult times, it is important to remind people of the vital role that business plays in their communities. I would now be delighted to take your questions. And thank you for your time and attention today.