Starbucks’ tax bill drops to zero after $2.7bn payout to Kraft

Starbucks' latest income tax bill has been cut to zero by a $2.7 billion (€2 billion) compensation charge it was ordered to pay Kraft Foods over a contract dispute.

In restated accounts released yesterday, Starbucks said a global tax bill of $832 million that it had expected for the year to September 29 2013 would instead become a tax credit of $239 million.

On Tuesday Starbucks said an arbitrator had ordered it to pay Kraft compensation for deciding in 2010 to terminate a contract under which the food group had marketed and distributed Starbucks packaged coffee to supermarkets.

Starbucks is booking the compensation payment in the year to the end of September, but because of the tax change it will wipe considerably less than $2.7 billion from its net income for the period.

Starbucks’ previously reported net income of $1.7 billion for the year shrank to net income of only $8 million in its restated accounts.

The company said: “Starbucks does not have any pre-tax income as a result of the arbitration award, therefore we do not have a tax obligation this year. For tax purposes, the payment is deductible. We are still evaluating the ruling to determine the time period for deductibility.” -(Copyright The Financial Times Limited 2013)