Friday, December 7, 2012

Starbucks, Hodges and Tax

Before we all get carried away on a victory-tide of people power and a generally euphoric feeling of goodwill and such, consider this.

How much will the 'voluntary' tax that Starbucks is paying, actually cost it?  I suggest that the answer is zero. Why?  Well firstly the taxes that they pay in say the UK, get deducted against the taxes that they must pay in their home base, the USA.  Secondly, once all of the fuss has died down, I suspect that Starbucks will, offset this payment of taxes against future UK Corporate tax bills - so this payment acts as a kind of pre-payment.

In the first instance above, this deductability gets a little convoluted because of the complex corporate structures that companies like Starbucks put in place but fundamentally, when they eventually send these low-taxed profits back to the USA, to, for example pay shareholder dividends, then they get the deduction.

Remember though that Starbucks have done nothing wrong or illegal.  They have simply managed their tax affairs, efficiently.  There are some, that talk of morality and such.  These include politicians, particularly from the left of the spectrum.  Okay, so hold the indignation at those that have themselves so far into the public trough that their snouts can barely be seen.  Think of this.  Where is the morality in taking more than 50% of what someone earns as a tax?  Where is the morality in tax earnings multiple times - once through PAYE, then what's left gets taxed as VAT or fuel duty or idiotic Green taxes or a TV tax?

Consider also that Margaret Hodges the chair-person of the UK Parliament's Public Affairs Committee, has a family firm, in which she is said to have a financial interest, that paid just £163,000 of corporate tax, in 2011, on sales of £2.1 Billion.  To put that into perspective, Starbucks sales in that year were approximately £377 million or 1/6th and they paid 5 times the corporation tax that Stemcor, the company with which Hodges has links, paid.

Again, Stemcor have likely done  nothing wrong or illegal.   Equally, corporate taxes are not levied on sales but on profits but since Ms Hodges feels obliged to regularly and very publicly castigate large corporations on their tax payments, using what can only be described as inflammatory but essentially ignorant language that is designed to feed the mob with soundbites we must put Stemcor out there as a potential 'villain' as well.  Then perhaps we must question the suitability of Ms Hodges to be leading this crusade against business.  Would anyone suggest that the, much-maligned, Fred Goodwin, is a suitable person to lead the attack on excessive pay for bankers?   

So once again, from the 'mother of parliaments' we hear the hypocritical screeching and snorting of politicians complaining because the insatiable beast that they have created needs feeding with ever more taxes.   In one of the great ironies, the Department of Health (lavishly funded by the UK taxpayer) tells the British public that as a nation we need to lose weight and get healthier, all the while itself, feasting and getting fatter on UK tax money!

Don't knock Starbucks, Google and Amazon for being smart.  Remember that they employ thousands of people, in the UK, (far, far more than Stemcor) and all of these employees pay UK taxes and National Insurance and spend their money, in the UK.  Remember also that Starbucks et al also pay employer National Insurance contributions, which is a tax by any other name but one that the lefties chose to ignore.


  1. For the record I love Starbucks. I disagree with what they’ve done on tax, but I love how they’ve listened well in the past (Fairtrade coffee). I think the announcement for them to pay £20m is a step in the right direction- though it doesn’t tackle the moral issue of the last 14 years.

    I wrote a letter to Kris Engskov (the UK boss)

    outlining some ideas and suggestions as to how they could use this focus to do something incredible. Team up with Amazon, Facebook and Google and donate a tangible significant amount between them to impact the poor in our society. Invest it into start up ideas and community initiatives. Outlined my proposal in my letter- and waiting for a response. Love to get more thoughts on it, and to focus the energy somewhere positive for him to consider it.

    1. I too disagree with what they have done on tax but I applaud it and condemn it in equal measure. Applaud, because as said the actual cost to them will be zero. Condemn because they felt the need to assuage public opinion. Remember they were doing NOTHING illegal. When we pander to the mob we end-up throwing people to the lions!!

      Caleb, don't you get it? It isn't about fair taxation. There is no such thing. And please don't mention morality and taxation and politicians in the same breath or sentence. For politicians, morality is a word in the dictionary that comes between ass and moron - and they never really get beyond the latter. Government needs to tax less, far, far less and that applies to the individual and to companies. Cut expenditure and you might balance the books, tax and tax and you NEVER will.