Well done to the tax campaigners!

Starbucks has made its first corporation tax payment to HMRC since 2008, paying £5m for the first six months of the year despite the business making a loss of £30m in the UK.

Extorting money from a company that doesn\’t actually owe any tax.

No doubt you\’re all very proud of yourselves.

35 thoughts on “Well done to the tax campaigners!”

  1. As one successful tax campaign completes, perhaps it’s time to start another. A campaign to pressure Ritchie to pay Business Rates on his home office. (I got him to at least pay Council Tax on it!)

  2. I’m considering ringing up HMRC, to say that although the regulations say I owe them some tax, in a more general moral sense that just doesn’t seem, you know, quite right, and they ought to waive these “letter of the law” taxes.

    I mean, this thing does work both ways, right?

  3. What are the Starbucks shareholders to make of this? The board would seem to be failing in its fiduciary duty.
    Or, are they going to try to claim it as a charity donation and claim the tax back on it?

  4. Nick L, assuming the co is a UK subsidiary governed by laws of England Wales, directors have a wider duty than enriching shareholders, so they are not under a fiduciary duty to minimise tax at all costs (especially if doing so would trash the reputation of the company). Their duties are wider – interests of employees, community etc etc. –

    http://www.johnkay.com/2013/06/05/directors-have-a-duty-beyond-just-enriching-shareholders

    And what would the shareholders say if takings were down 50%?

    I’m afraid I can’t share the outrage of either side. It’s just business. They don’t *have* to pay what someone thinks they should pay in tax. No one has to buy their coffee.

  5. Luke is right.

    Those opposing the tax campaigning industry need to drop this line about companies having a duty to pay as little tax as possible. It was bollocks *before* your tax policies could ignite a PR disaster, and it’s even more bollocks now.

    Any voluntary ‘tax’ paid by Starbucks is, in essence, a marketing cost (even though they’ll presumably find a way to ensure they don’t account for it as such). I assume they’ll need to create some transactions to give rise to an actual tax charge so that a) HMRC can cash the cheque, and b) the appropriate picture is painted in the accounts.

    A company like Starbucks, which is in an open and competitive market for ordinary consumers, will spend terrific amounts of money building and maintaining a brand. Paying enough tax to avoid that all being torn down by bad press is, absolutely, the duty of the directors.

    There’s a reason that Starbucks have done this, but Google and Amazon have not. Starbucks are vulnerable to boycotts and direct action.

  6. @The Thought Gang: are you saying that a company that indulged in the same tax practices that Starbucks do, but was not vulnerable to public opinion (an international steel trading company perhaps?) could make a ‘voluntary’ tax payment and not be liable for a suit brought by disgruntled shareholders (the trustees of family trusts for example who definitely do have a duty to maximise returns from the assets in the trust for benefit of the beneficiaries)?

  7. Edward, Companies Act 2006, section 172:

    (1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—
    (a) the likely consequences of any decision in the long term,
    (b) the interests of the company’s employees,
    (c) the need to foster the company’s business relationships with suppliers, customers and others,
    (d) the impact of the company’s operations on the community and the environment,
    (e) the desirability of the company maintaining a reputation for high standards of business conduct, and
    (f) the need to act fairly as between members.

    Translation – don’t be a wanker just to save a few quid this year. Or as that known communist Warren Buffet said, roughly, ” Ask yourself if your neighbours and family would approve of what you’re doing.” (And if they’d buy your coffee once they knew.)

  8. The answer to how Starbucks will end up paying corp tax is this – “unprofitable stores would be closed or relocated and there would be a ‘greater reliance on franchised and licensed stores'”, as mentioned at the bottom of this BBC item http://www.bbc.co.uk/news/uk-politics-23019514

    So no voluntary paying of tax, more a “lets stop growing and keep our core profitable shops. Let someone else, franchisees, handle the tax disaster”.

  9. Tim, “tax campaigners” will be delighted until they decide Starbucks should be paying more. They’d equally be delighted if the government nationalised food and forced Daily Mail readers to work in collectivised farms. “Tax campaigners” are just new front groups for the usual SWP cultists and assorted useful idiots.

  10. SBML, I am hazy on the details, but my recollection is that part of the fuss was whether SB were taking the piss in the prices charged for licencing/brand etc. if they have licencees, won’t we actually see what the arm’s length price is ie what some franchisee will actually pay?

  11. @ Edward

    Because of the law (as per Luke) and because any vaguely competent director would realise that aggressive tax avoidance could, if highlighted, be a problem.

    @ Jim

    A company that is not especially concerned with ‘public opinion’ may still find itself compromised as a result of tax avoidance. The most obvious example, perhaps, would be one which deals with the public sector. Further, the more aggressive the policy, the more likely it is that a scheme will be challenged by HMRC.. and the financial costs of that possibility need to be measured against the financial benefits of the scheme.

    In your eerily-familiar sounding hypothesis, I’d say that there would be a case for challenging the actions of the company.

    Just as many of those involved in the tax campaigning have no great knowledge or experience of tax, many of those trotting the opposing line seem to have no great knowledge of experience of being part of the relevant decision making process inside companies. I have.. and maybe you have too.. but if you have then you’ll appreciate that it is simply not as black and white as it tends to be represented.

  12. Jim, sounds like you’re talking about Oppenheimer, or whatever Margeret Hodge’s family company is. To suggest it has ever overpaid tax is an outrageous suggestion, and the various Cayman island trusts that control it would never let it do so…

  13. @Luke at 1:14 pm

    I don’t think we will see what the figures are as they will be in the accounts of the individual licensees. So the tax campaigners have actually made it harder to check in future as rather than have the figures in one place at SB, they are now scattered around in many different companies. The unintended consequence of attempts to control something that can’t be controlled or planned.

  14. “…you’ll appreciate that it is simply not as black and white as it tends to be represented.”
    Seems black & white to me. After their paying tax which they did not owe, I for one will be boycotting Starbucks whenever I’m UK side. I would urge others to do the same. I do not wish to be a customer of a company that trades unethically..

  15. Picking up on John Barrett’s point, surely unless Starbucks submit a tax comp that says that they owe this money, then HMRC will repay it in due course. Of course, it is not beyond the wit of tax accountants to conjure up numbers to justify this liability but, in that case, they would have to do it in such a way that it does not invalidate prior year computations/assessments. That is, unless Starbucks have simply made a voluntay donation to HMRC, which might in turn be subject to shareholder scrutiny.

  16. @ Diogenes

    I presume they will ‘create’ a liability somehow. For example, they could reduce the royalty payment. Actually, I hope they do that.. just to see if there’s a Dutch Richard Murphy who can get angry about it.

    Maybe future tax return forms will include a ‘morality adjustment’ which, as per Ian B, could be either positive or negative.

    @ BIS

    And I shall also continue my boycott of them.. because I don’t wish to be a customer of a company that sells overpriced brown-flavoured weak piss and calls it ‘coffee’.

  17. @TTG
    “overpriced brown-flavoured weak piss” is the product called by the amusing name of coffee in the UK.
    Please note the username & consider the reason therefore.

  18. The French have brilliantly named stewed, nasty, weak reheated coffee as “Americano.” Another reason to admire the French. I’m told in Brazil the word is something like Tchoffee, a mixture of tea and coffee, while the Mexicans call American coffee “sock water.”

  19. So Much For Subtlety

    Luke

    I’m afraid I can’t share the outrage of either side. It’s just business. They don’t *have* to pay what someone thinks they should pay in tax. No one has to buy their coffee.

    We have this whole rule of law thing so that outcomes are not determined by the whims of the mob. These campaigners have managed to bring the mob into tax law. Now maybe the law is badly drawn up. Maybe not. Either way business costs should be certain. They should not be subject to the whims of the mob.

    Starbucks may not have lost much of importance this time around. But no doubt the loons will be back for a second bite. In the meantime the rest of us have lost something very important – the idea of certainty and impartiality in the law. Instead it seems what we owe is determined by the fancies of public outrage. This is the tax equivalent of a Daily Mail incited mob turning up at the house of a pediatrician.

  20. So Much For Subtlety

    The Thought Gang

    A company like Starbucks, which is in an open and competitive market for ordinary consumers, will spend terrific amounts of money building and maintaining a brand. Paying enough tax to avoid that all being torn down by bad press is, absolutely, the duty of the directors.

    You are looking at this from the wrong end. Starbucks may well decide that common sense determines they need to pay whatever the mob wants. But from the perspective of the rest of us this is bad. We want a tax system that has certainty and operates under the rule of law. Starbucks obeyed the law. They did what they were allowed to do. Instead of their right to do so being defended, the mob has had its say and they have been shaken down for a lot more.

    We have seen this before in European history. When Kings needed more cash they would incite the mob against the Jews. The Jews usually decided discretion was the better part of valour and they paid up. We do not want to live in a society where that is common. If the tax system is broken, fix it. Do not go around randomly extorting money from businesses who happen to be unpopular.

  21. I started boycotting Starbucks when they caved in to the cunts demanding that they pay tax they weren’t liable for.

  22. I will be using SB more often to make up for those boycotting for what I think are frivilous reasons.
    They do a lovely Strawberry & cream frappachino. Have no idea about their coffee, cannot stand the taste of any coffee. Still, whatever they sell they seem to have been doing successfully for some time, providing what people want and using the proceeds to amongst other things expand operations.
    Pretty much like many other companies. Just now they’ve been shaken down, and would not be suprised if in some future year demands this payment be offset against tax as it was on account!

  23. Luke/TTG, well swipe me, McRuin passed a law telling shareholders where their best interest lay! I mean, what?! I mean, if I’m a shareholder and I want my profits maximised for the day after tomorrow, and my managers are worrying about fostering relationships with suppliers and wotnot…sorry, I’m just boggling. I shouldn’t be surprised.

    In any event, you’re obviously both right as a matter of law – from the point where the Companies Act came into force. And yet, were I a shareholder I wouldn’t rate these government mandated priorities. I grant that I wouldn’t want my managers to walk into a PR disaster, but in the circumstances we’re talking about, that disaster only occurs because of the capturing of the narrative by the tax campaigners: in a sane world, people would rejoice in the financial success of corporations and in their ability to minimise the burdens placed upon them the better to advance the interests of their owners. It only becomes a PR minefield when the populace is persuaded that others should build their own suttee pyres.

  24. It really does seem morally identical to saying, “give me £1000 or I’ll tell everyone you’re a paedo” or similar.

    I mean, it’s blackmail, isn’t it?

  25. @ SMSF

    I appreciate that, and make no defence of the mob. I was trying to put down the myth that directors have an obligation to avoid tax. That there exists a mob.. and, indeed, that mob is a valued customer, is something that they have to consider.

    I think that all of Starbucks’ coffee is fairtrade. So they pay more than they strictly need to pay for their coffee. They do it because there is money to be made selling to the people who think that buying fairtrade coffee is important. It’s the same thing with tax.

    Much as it is for parliament to change the tax code, it is for ‘society’ to change the mob. The directors of Starbucks can change neither, they must just navigate the minefield as they find it.

  26. Offshore Observer

    Luke, TTG, Edward Lud, I think section 172 is a bit more complex that on first glance it seems. Firstly the directors are under a primary obligation to “promote the success of the company for the benefit of the members as a whole”. That is simply restating the old common law duty and it the one which is often interpreted as being an obligation to maximise returns to shareholders. It is not an absolute duty to maximise profits (and it never has been imho).

    Parliament has seen fit to require directors to have regard to a range of matters when considering how they go about promoting the success, some of which look fair enough, while others seem a bit strange to me.

    I still think that it definitely iffy for the directors of SB to conclude that giving money away to HMT was promoting the success of the company, even considering all the other rubbish that they are required to consider.

    The company was not profitable, and giving money to HMT, when the company is trading at a loss is probably not the best course of action. Thier job is to make the company profitable, that is thier overriding duty. If they cannot make it profitable whilst also considering all the other touchy feely stuff that 172 requires them to consider then they should wind the company up rather than continuing down a path which will end up with them trading whilst insolvent.

    I am pretty confident that if a director was being sued for trading whilst insolvent the court would not be interested in arguments about “impact on the community and environment” in his or her defence.

    Companies do owe a duty to maximise profit, but they have to consider a whole bunch of other stuff in how they go about do that. I don’t think very much has really changed under 172. But then again I am a bit of a hack when it comes to this legal stuff.

  27. Ok, can someone explain to me in laymens terms what actually happened.

    I can’t imagine the government simply demanded this money, or that star-bucks voluntarily gave up money they legally didn’t owe.

    So what’s the truth?

  28. IIRC, Starbucks are paying the extra tax in two ways:

    1) They are reducing their capital allowance claims, which means they’re paying tax in advance, rather than tax which would not be due at all at some point.

    2) They are adjusting the charges for the royalties, which (again, IIRC) effectively means shifting money back from a higher tax jurisdiction (Netherlands or Switzerland or someplace) to the UK, thus reducing their global tax bill.

    So, a rescuing of a PR situation not of their making, but at virtually nil cost. Oh, and the tax campaigners are now at sixes and sevens because Starbucks are ‘choosing how much to pay’.

    Starbucks have played a blinder. And they do a nice shortbread choc-chip thingy.

  29. @ fake

    They have paid money they don’t owe or, we suspect, have intentionally arranged their tax affairs so as to create a higher liability than they need to.

    Why? Because they’ve decided that the PR impact will be better for them (ultimately, financially) than the cost of the tax.

    Also, as per Vir Cantium, it is even entirely possible that their overall tax charge won’t increase.. although a change in the royalty payment to the Netherlands might have wider implications if jurisdictions in which they do pay tax cry foul and demand the royalty be reduced there as well.

  30. Presumably there is a Dutch version of RM who is now doing his nut about the immoral way Starbucks are avoiding Dutch tax on their royalty payments…………………………….

  31. Declining to give buy coffee from a company one dislikes is not extortion. Nor is it mob rule for several people to choose to take their custom elsewhere. Get a grip.

  32. So Much For Subtlety

    PaulB

    Declining to give buy coffee from a company one dislikes is not extortion. Nor is it mob rule for several people to choose to take their custom elsewhere. Get a grip.

    But it is extortion to say that until Starbucks gives my friends lots of money I am going to put poison in their special blend.

    It is not that several people have chosen to take their custom elsewhere. It is that they have organised a massive public campaign of lies and distortion in order to cost Starbucks a lot of money and they will not stop until Starbucks pays up. This looks a lot like extortion to me. Just legal extortion. For some reason.

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