What? This Starbucks tax thing again?

But Labour MP Margaret Hodge, who chairs the influential Public Accounts Committee, urged customers to boycott the company until it changes its ways. She said: ‘I think it’s an insult to ordinary hard-working taxpayers across the country.

‘Hopefully it’s a big enough insult to his customers that they will take their business elsewhere. They will not win back the trust of the public unless they unwind these immoral schemes.’

It doesn’t make a profit. So therefore it doesn’t pay a profits tax on the profits it doesn’t make.

What is so damn difficult to understand about that?

As to paying a royalty for the brand to a non-UK company. The EU says it’s illegal (yes, actually illegal) to try and tax such a royalty being paid to another EU country. given that then it’s very difficult to try to argue that that’s a dodge.

Further, from the EU’s own investigation into the level of that royalty we do actually know that it is correctly calculated, on an arm’s length basis. they actually reported on this: companies not in the group pay the same level of royalties as companies within the group.

And then there’s that 20% margin on the coffee to Switzerland. Those international tax rules, those transfer pricing guidelines, actually insist that there must be a margin on such purchases. For no company outside the group is going to supply beans at no margin, is it? Thus there must be a margin paid by a company inside the group.

Seriously, this entire thing is entirely made up. And yes, we do know by whom.

Accountant Richard Murphy from Tax Justice Network, who worked on the initial investigation exposing Starbucks’ tax affairs, said: ‘Starbucks says it is not making a profit. But it has so far failed to convince anybody else.

‘When it makes its books open on the tablefor everyone to see we might accept what it is saying as the truth.

‘But until then we’re still in the dark and it still isn’t paying any tax.’

But we have looked at it all and they’re still really not making a profit!

24 thoughts on “What? This Starbucks tax thing again?”

  1. You think that these people are concerned with facts & are wrongly interpreting the rules.

    When in actual fact, they are concerned solely with emotion and know full well what the rules are, but feel that they can sway enough Low Information Voters to bully the company into complying.

  2. Boycott?

    I do, but because they put sticky syrups in your ‘coffee’ or serve buckets of beige milk. Disgusting, but whatever turns you on. It’s your life.

    Tax geniuses like Mr. R. Murphy have no understanding of the business strategy of companies like Amazon or Starbucks. They want to create a world-wide monopoly by giving people all over the world what they want.

    And they put their money where their mouth is, reinvesting in expansion rather than giving money away as tax. Very positive for people, job-creation and the long-term creation of wealth. No so good if you are a collectivist wondering vaguely about how you are going to pay for all the promises you need to make to win the next election.

    Can’t really see what is so difficult to understand, but… some people are clearly ‘strategy-challenged’.

  3. What bilbaoboy says. Its enough to make me want to go to Starbucks and buy some of that disgusting stuff they sell just to spite the likes of Hodge.

    As an aside, I don’t drink a lot of coffee but when I do have go to one of those chains am I the only one who has to ask for a double shot of coffee just to get something near a decent taste?

  4. BwaB

    I am fortunate. My office is surrounded by bars which can give you strong, stonger or strongest as your choice with no unnecessary bitterness.

    Traditionally, Bilbao bars used to spend up to 40% more than Madrid or southern bars on their coffee (coffee roaster’s comment).

    At least in one sense, my life is immensely superior to anyone’s in the UK. Starbucks keeps threatening to materialise, but so far nix.

    Remember they are selling a lifestyle not coffee.

  5. Libel – A published false statement damaging to a person’s reputation

    If people are being encouraged to avoid a company’s products because of a false accusation of tax evasion, when are these fuckers going to start receiving letters from the lawyers ?

  6. I am using hovercraft to distribute Japanese Hinoki scented scrotal supports in Africa, funded by Sir Bob and sourced from http://raedwald.blogspot.co.uk/

    These hovercraft are supplied from my factory in East Cheam.

    Naturally, my African based distribution company pays nothing to the East Cheam company for the use of the craft, thus creating tax losses in the UK.

    For some reason, Sir Richard Murphy (Bast.) is refusing to give me a Fair Tax Mark.

    Funny, or what?

  7. @ worzel

    Excellent point. I do get frustrated that corporations still seem pretty spineless in defending their corner. I expect it comes from their corporate PR departments traditionally being inwardly focused on investor relations.

    Frankly if I were a Starbucks shareholder I’d be demanding that my company stick up for itself.

  8. @Vir Cantium

    I would imagine that Hypocrhodge, given her propensity to threaten legals against anybody suggesting anything inappropriate about Stemcor’s transfer pricing arrangements, would appreciate a legal challenge, especially given that she’s endangering british jobs FFS.

  9. @VC/worzel

    ‘Excellent point. I do get frustrated that corporations still seem pretty spineless in defending their corner. I expect it comes from their corporate PR departments traditionally being inwardly focused on investor relations.’

    It has recently become harder for companies to sue for defamation (generally a good thing). Starbucks would have to show not only that the statements are defamatory (easy enough) but that they caused serious financial harm (much harder).

    Even if it could show causation, it’d have to get it through in an atmosphere in which people just believe Starbucks is a greedy evil corporation, even if it can prove beyond actual doubt that it is not.

  10. Vir,

    “I do get frustrated that corporations still seem pretty spineless in defending their corner.”

    They’d have nothing to gain from doing so.

    They know it’s just theatre, that Hodge and all the others are in no way serious about this. If they were, Hodge would be down in parliament with an Early Day Motion to change the law, if necessary by leaving the EU (I’d love any journalist to ask why she isn’t doing so, and is acting like a protestor rather than a parliamentarian).

    From Starbucks’ point of view, this just reinforces in people’s minds that they’re a serious company. There’s a weird effect of companies appearing on the news, or programmes like Watchdog, that it can actually boost sales, even if it makes you look bad. It raises the brand profile, puts the name in people’s minds. People associate a company that gets on these shows with a minor complaint as the sort of company they can trust, because if they were fly-by-nights, they wouldn’t get on there.

    Look at Ryanair – Michael O’Leary constantly gets dragged onto the media for Ryanair doing what it said it would. He won’t even back down when the media tries to bully him into refunding charges that were spelt out to people. And still, everyone flies with them.

  11. Bloke in Germany in Hong Kong

    The main reason it’s obvious this isn’t a tax dodge is that Starbucks don’t actually use any coffee, as far as I can tell.

  12. Stigler,

    > Look at Ryanair – Michael O’Leary constantly gets dragged onto the media for Ryanair doing what it said it would. He won’t even back down when the media tries to bully him into refunding charges that were spelt out to people. And still, everyone flies with them.

    Terrible example. O’Leary’s a cunt who gets dragged into the media not only for enforcing charges that were spelt out to people but also for the many many cases when his company just gratuitously screw people over. One example off the top of my head: the family who turned up to the airport three hours early (Ryanair’s Ts&Cs specify two) and still missed their flight because they spent the whole time standing in Ryanair’s absurdly slow queue. O’Leary’s response: You should have turned up earlier.

    And no, everyone doesn’t fly with them. O’Leary’s business plan is that it doesn’t matter how many people you piss off; there’ll always be more prospective passengers. It seems never to have occurred to him that this cannot work forever: eventually, you piss off so many people that you find your customer base dwindling. Which is what is now happening, which is why O’Leary is now facing opposition from Ryanair’s board. It may have taken a while, but his attitude is finally affecting the bottom line, as it was always bound to.

    There is a popular misconception among people like O’Leary that good customer service is terribly expensive. It isn’t. It’s usually free, in fact — as Easyjet have attested, the huge improvements they’ve made to their customer service have cost them absolutely nothing, and in return they get customer loyalty and the attendant profit. The reason people like O’Leary like to think that customer service is expensive is that they’re cunts anyway, and they enjoy being cunts. If there were well-known cast-iron proof that providing good customer service is cheaper than not doing so, they’d latch on to some other excuse.

    I used to have some business dealings with Ryanair. Absurd. The top brass were all so dedicated to being bastards that it undermined their own business. They didn’t care. Being bastards was their thing.

  13. “The EU says it’s illegal (yes, actually illegal) to try and tax such a royalty being paid to another EU country”

    Does anybody have a reference text for this? Either the actual name of the legislation, or case examples?

  14. Bloke in Costa Rica

    When Starbucks opened in Costa Rica there was a definite air of coals to Newcastle about the whole thing. However, since they use local beans, don’t over-roast them, and are quite happy not to put frothy milk in your coffee if you ask them not to, they turn out a very, very good cup of black coffee. Starbucks elsewhere can be horrible (Starbucks La Jolla Boulevard, I’m looking at you) but here it’s excellent. However, given the price differential I’m still surprised to see how busy they are.

  15. To quote a bit more of that directive:

    “…royalty payments [arising in a State] shall be exempt from any taxes in that State provided that the beneficial owner of the payment is a company or permanent establishment in another Member State”

  16. Note that if the royalty is exempt from tax when received, the directive does allow you to subject it too withholding tax when paid.

    I’m not sure the directive explicitly guarantees that the payer will get a deduction for the royalty payment; but given that it is trying to ensure single taxation, a situation where a royalty is taxable on receipt in country B but not deductible on payment in country A would seem to be inconsistent.

    So if someone wanted to argue that the UK should deny a deduction for a royalty payment on the grounds that (although properly arm’s length) it served to reduce the UK company’s taxable profits, then I don’t know that the EU has made such a position “illegal”. At least, not in this directive – there may be a freedom of establishment or free movement of capital issue, of course.

  17. I was quite careful to distinguish there. It’s the not paying a margin to Switzerland that would be illegal. One the royalty across intra-EU boundaries don’t forget what Ritchie’s claim about tax abuse is. Using the tax laws in a manner not intended by those who wrote them. And if they’ve got a rule like this then quite obviously they do intend that people be able to pay royalties across intra-EU boundaries. So it ain’t abuse, is it?

  18. I attended a talk by a couple of lawyers expert in these various tax minimisation structures.

    They said, yes, a bunch of these structures, particularly the sandwich hybrid structures that run on incompatibilites between systems, are a bit silly.

    However, they claimed that while people froth at the mouth about these tax reduction / elimination structures, there is still far more international double taxation. Which, if you want to talk about tax morality, is just as unjust as using some complex structure to avoid tax entirely.

  19. As hard-working taxpayer myself, I’d like to ask what Ms Hodge intends to spend this imaginary tax she’d be extorting from Starbuck’s employees and customers (which is where it will eventually come from). Seeing as her government have already put my kids in hock for the best part of their lives with it’s own hair-brained immoral economic mismanagement in the first place, the last thing I’d want is anyone else handing over any more cash to her merry band of thieves and blackguards.

    Starbuck’s pays tax, it just doesn’t pay it to Ms Hodge and her cronies, hopefully it will be paying to someone who can spend it in a more proper and considerate manner.

  20. I see Murphy claims he has a letter in the Standard asking for proof that Starbucks made no profit. Despite HMRC & their equivalents and the EU have approved their tax position.

    Why do people believe that anyone should prove anything to this idiot?

    (I’m banned from his site as I asked him what rules Amazon had broken – his, apparently)

  21. “They will not win back the trust of the public unless they unwind these immoral schemes.”

    What a windbag. It’s just coffee.

Leave a Reply

Your email address will not be published. Required fields are marked *