By contrast, Starbucks, which was widely criticised over corporate tax avoidance in 2012 following details of its meagre tax contribution, revealed last week it has paid £8.1m corporation tax this year, nearly as much as it paid in its first 14 years in the UK, after bowing to pressure to scrap its complex tax structures.

It stopped overpaying for leases and thus actually moved into profit.

17 thoughts on “Nonsense”

  1. Mind you, I would combine Starbucks utterly if it was paying royalties to Foundation Property & Capital SARL in Luxembourg.

    But of course it isn’t. Those royalties are being paid by Foundation Property & Capital, the company owned by Joh .Lansman’s family. Yes, thay is the same John.Lansman who founded Momentum. The same Momentum thay acts as Ritchie’s indirect paymaster. So don’t expect this story to appear on the Tax Research UK blog anytime soon.

  2. So would seem a reasonable expectation of business cycle that company makes losses in early years establishing itself in new territory, applies those tax losses once it starts making a profit to reduce its tax liability until they are used up and then at some point it becomes a mature business paying normal tax on normal profits and so on.
    Hardly seems a complicated concept, but I guess calling them tax cheating immoral bastards is catchier

  3. Add in that Starbucks have tended to have a stategy in expanding that they want you to walk past a Starbucks to get to any other coffe shop so will try to bracket competitors and then rationalise once they have reduced local competition (and having much more negotiating power) then suddenly paying tax after 14 years wouldn’t seem that unusual.

  4. So Starbucks tries to set up a monopoly on coffee shops in an area. Once they have removed the competition they close stores reducing their costs to become profitable.

    That they aren’t paying taxes while losing money forcing competitors out a market makes perfect sense. WalMart has been using the same strategy for decades now. I haven’t looked but I wonder if those new Starbucks shop get huge tax breaks for moving in then time leaving an area for just as the tax breaks expire?

  5. Monopoly?

    You’re a spoof right? This isn’t really the sort of shite liberal yanks genuinely say to each other?

    Now I’m off for a Costa. Or perhaps a coffee from Cafe Nero or one of the other multiple coffee shops within eyeline as I right this.

  6. Sadly you are missing the point. I personally don’t drink a lot of coffee so I don’t pay attention to Starbucks specifically. I was attempting to compare the situation to what I’ve seen WalMart do.

    In my experience standard operating procedure for WalMart is to get huge tax breaks to move into an area. Once there they undercut the other local retailers forcing as many as possible out of business. A typical small shopping area will normally have, before WalMart, a grocery store, a lower end department store, with other specialty shops. The first to go is normally the lower end department store and smaller specialty shops that don’t carry unique merchandise. Not long after the grocery store is gone as every has to go into WalMart anyway so why make a second stop for milk and bread. Once the other stores in the area are closed then prices go up. Once the tax credits end then WalMart either moves to the next little town or gets more credits.

    My comparison is that by putting a Starbucks on either side of an existing coffee Starbucks is losing money so they can provide a slightly closer cup of coffee. The entire idea is to remove competitors from the market to gain control of prices therefore making a profit in the long run. Once again I don’t follow Starbucks closely but if this is what they are doing I clearly see why they don’t pay taxes.

  7. In my experience standard operating procedure for WalMart is to get huge tax breaks to move into an area. Once there they undercut the other local retailers

    Remove the government interference from the market, then. It’s not hard.

    At least, it’s not conceptually hard. There are a fair few embedded special interests that will fight you every step of the way.

  8. The town I grow up in got a WalMart in the early 90s with huge tax breaks. When the breaks were about to run out they made and agreement with the county and built a new store just outside of the city limits. Said town couldn’t stand for losing the “jobs” so gave WalMart even bigger stacks of cash to build a new store in the city. The 2 are only a couple miles apart so it’s not like anyone lost the option of shopping at WalMart but the corporation probably made more on the incentives than the profit they will get from the store.

    Just to compare the entire town had 7 lower end department stores before WalMart came in and at last check only 2 of those were still in business. The point is a large corporation can plan to run at a loss to drive out the competition and sadly governments today encourage that.

    So Starbucks hasn’t paid taxes because they don’t make a profit. That will change once they feel they can start gouging. Isn’t the goal of any business to make as much money as they can and if they have to run at a loss in one area to make a lot more later worth it?

  9. So you have stupid politicians. Who will give Walmart whatever they ask for. This is somehow Walmart’s fault.

    I hope you never have charge of a two year old. Or a cat.

  10. The difference is Starbucks don’t have the tax breaks element, but they do try (and I assume the other chains are the same) try to push out the independents and reduce competition where possible, not to achieve a monopoly just reduced competition.
    An entirely reasonable business strategy unless your one of the people who can’t compete or suffers from this in which case they are ruthless capitalist dogs of course. They also make use of franchises to minimise the cost/risk of this strategy to the corporate

  11. So liberal yank thinks that sadly I’ve missed the point. To be fair I do have a habit of missing points that just aren’t there!

    Even Richard Murphy’s big corporate conspiracy requires the business eventually to make a profit once it has driven its competitors out of business. On Ritchieworld the evil corporate raises its price the moment it achieves its monopoly. And yet on this world IT DOESN’T HAPPEN. Walmart still has competitors and its prices haven’t risen. And to use the term ‘monopoly’ when describing Starbucks’ trading environment is simply to embarrass oneself (my little joke; I do realise you liberal yanks have no sense of embarrassment).

    The Ritchieworld great evil tax plan could only theoretically work if CT was so high that to reduce profits would see the CT liability fall to such a degree thay the business model itself was altered. Surreptitious Evil made the same point in a different way. That is just not the case for Starbucks and not what you are telling us is the case for Walmart

  12. Wasn’t Starbucks accused of buying up leases to restrict competion as part of their UK expansion, would fit in with the current talk of reduction in leasing

  13. Buying up leases? Maybe
    Buying g up leases to restrict competition? Take a walk down the high street, take a look at the competition. It seems that any old accusation can be thrown about at corporates and it is automatically true.

  14. And how many of them are Starbucks? as long as they are in the mix and reasonably prominent they have achieved their goal, never claimed they were eliminating competition (which would be impossible), just trying to tweak the odds in their favour. Increasing the costs for competitors and reducing available locations helps them in the long term, maybe restricting competition isn’t the best turn of phrase though.

  15. I will admit that the WalMart comparison goes too far in this case. It was wrong to use two slightly different business models as analogous.

    The only point I was trying to make is that Starbucks spent a lot of money expanding to increase market share. Now that they have a solid presence the expansion costs have dropped significantly. This leads to profits that can be taxed and taxes being paid.

    I apologize for not being as clear in my argument. Keep in mind that most of the people I deal with in real life are the type that voted for John Mccain for president even after he was a key Senator in the “deregulation” bills that lead to both the S&L collapse of 1987 and the banking problems of 2008. In the future I will need to remember this is a far more educated forum than those that I am used to.

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