Even an accountant should understand this

As the FT has reported this morning:

Starbucks’ European division paid $175m in dividends to its US parent company last year, despite recording a 99 per cent fall in pre-tax profit as it spent heavily on developing more takeaway and drive-through services.

The company revealed in the latest accounts for its UK and European business that pre-tax profit fell from $99.5m in 2018, to $600,000 in 2019, as it incurred costs restructuring its operations, closing underperforming stores and investing in new formats. Its UK subsidiary reported a loss of £6.6m because of “difficult conditions on the UK high street”, it said.

And as I noted in the same article:

“What these accounts tell us is that there is still remarkably little [we know] about how Starbucks is making profits,” said economist and tax campaigner Richard Murphy. He said that while there was no evidence of tax avoidance there was a “strong tax motivation” in the way Starbucks managed its finances. He suggested the company publish “country by country accounts”.

Well, it isn’t making profits, is it? It’s right there, the UK is making a loss, Europe is just about scraping even.

The $175 million comes from past profits, not current ones….

19 thoughts on “Even an accountant should understand this”

  1. So having a “strong tax motivation” is the new crime. I wonder how strong a motivation it is compared to, say, arranging your income as tax free grants for political activism?

  2. +1 Rob: a strong tax motive is now some kind of sin. Is someone in Ely then going to establish a committee to assign strength of tax motivation rankings to companies, and disallow government work and planning permission to those above a 4 say, which would only lead to clustering around 3.9 say.
    Tax to central gov’t is over 3/10ths of everything we do. I want there to be a tax motivation. And a profits one.
    If tax to the centre was lower the motivation wouldn’t need to be as high.

  3. Tax motive: a Young Thing in my extended family turned to Uncle Dearieme for tax advice when he faced the 60% income tax band. For three years we managed to avoid it. After one year of paying it he pissed off to work abroad.

  4. For those wondering, an effective tax rate of 60% exists in the UK on (non dividend) income between £100k and £125k as their personal tax allowance is withdrawn between these amounts.

    Those who own their own companies and have spouses and adult children can usually manage to stay out of this.

  5. Sometimes I wonder if Spud’s disability is not just that he does not understand the concepts of accounting and economics that he spouts on about, but that he does not understand meanings of individual words.

    Perhaps he’s reached that stage where if one says a word repeatedly and often enough it loses its meaning.

    Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax, Tax.

  6. Bloke in North Dorset

    “It entirely and continually baffles me how such an idiot can be taken in any way at all seriously. Even by the BBC.”

    Even the BBC? They’re prime candidates for being told what they want to hear by charlatans like Spud.

  7. Dennis, Author of the Tay Bridge Tax Return

    “What these accounts tell us is that there is still remarkably little [we know] about how Starbucks is making profits,” said economist and tax campaigner Richard Murphy. He said that while there was no evidence of tax avoidance there was a “strong tax motivation” in the way Starbucks managed its finances. He suggested the company publish “country by country accounts”.

    It would a couple of hours and several thousand words to unpack all of the stupid Richard Murphy manages to shoehorn into three sentences.

    He really is the William Mcgonagall of accounting.

  8. Starbucks sells coffee at a price far exceeding the cost of production. How is really, *really* simple. Why? is the big question – it’s not very good coffee.

  9. People with no understanding of tax or accounting who want to believe someone else is ‘getting away’ with not paying tax will listen to anyone who says they are. That with Spud they are listening to someone with no understanding of tax or accounting won’t be something they are aware of. Wave a few wafty phrases around like “I have no evidence of tax avoidance but I bet they’re up to tax avoidance”and you’re on the BBC.

  10. He said that while there was no evidence of tax avoidance there was a “strong tax motivation” in the way Starbucks managed its finances.

    Looks like careful wording to avoid a libel writ.

  11. “Why? is the big question – it’s not very good coffee.”

    Perhaps you are not familiar with how awful American coffee was before the age of Starbucks?

  12. I reckon a Brit criticising American coffee has to be one for the books. A country where the majority drink very weak instant & enjoy it.

  13. UK would receive more of Starbucks’ global “profit” if we lowered Corporation tax, and more Corporation tax in total

    Sunak, allegedly Conservative – I want to Raise Corporation tax

  14. It entirely and continually baffles me how such an idiot can be taken in any way at all seriously. Even by the BBC.

    Because the BBC and its kind are not looking for explanations and understanding, they are looking for anything they can use to further their agendas. They’ll print even the most economically illiterate argument if it serves their purposes.

  15. Would this be the year in which the US corporate tax system was changed to encourage non-US subsidiaries to repatriate their retained profits?

    Definitely tax-motivated, but motivated by no longer being restricted by a widely-criticised set of US tax rules rather than trying to avoid UK tax.

  16. “I reckon a Brit criticising American coffee has to be one for the books”. There speaks a man who didn’t drink American coffee in the 60s. It was universally awful, unlike in Britain where it was largely awful but there was good stuff to be had too.

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