Why I Admire Starbucks’ Tax Avoidance

Essentially, GCSE Business Studies is a trouble-free guide to advanced commonsense. If you know the difference between interest rates and inflation, you can probably get through the first test with ease and emerge with a pretty good grade at the end. Part of that’s due to the simple fact that inflation isn’t actually mentioned, but the content of that particular paper is probably the predominant factor – it’s bursting with multiple choice questions, and ‘x’ marks the spot.

The second test is a bit more difficult, largely because it requires a certain mastery of the other twenty-five letters in the English alphabet. Indeed, some business decisions may consist of little more than a choice between seemingly lucid options, but the depth and complexities of each require a bit of explanation from time to time. In fact, this year’s Unit Three paper was out to prove it with an especially taxing question on the American high street giant that is Starbucks. Therein we find a carefully placed adjective which might be applied in every sense of the word.

Starbucks seems to have taken something of a battering recently, particularly in the UK. Once, a coffee shop stood proudly on every corner, trumpeting the joys of Tony Blair’s ‘Café Society.’ For a few glorious years, it was a favourite haunt for the ethically-minded hipsters of Jesmond and all the other outposts of decidedly middle-class tyranny. But now, things have changed: each new drive towards a happier, glossier world finds itself at the receiving end of a savage bombardment from the press and social media. Even the lovely Victoria Coren Mitchell took to the BBC and set her sights on Starbucks Coffee. In the middle of a hilarious tirade, she deviated from the matter in hand to make a serious (but spectacularly irrelevant) point. Oddly, it was about tax.

Perhaps it may be useful to quantify this. It all started with a Reuters investigation which unveiled its findings in October 2012. Reportedly, Starbucks paid just £8.6 million in corporation tax in the UK over a fourteen year period. This provides a stark contrast to sales figures, which stood at over £3 billion. It didn’t impress Members of Parliament when the powers that be were put before the Public Accounts Committee. It didn’t impress Britain’s youth democracy circuit – this I discovered as I first became involved when the story broke. It didn’t impress pressure group UK Uncut, who staged huge demonstrations in December to express their vehement disapproval. Most prominently, it didn’t impress the great British public, and a YouGov survey suggested that Starbucks’ brand image had been damaged pretty badly. As a result, the world’s largest coffeehouse company is still picking up the pieces.

But all of those groups, none of them amused, seemed to be forgetting one crucial aspect of the equation: legality. Unlike tax evasion, tax avoidance is very much above board, although it’s not abundantly clear to everyone. Loopholes in the system are difficult to locate and even more difficult to close. Seeking them out is, therefore, a tactical matter, and whether to go ahead with the whole operation is nothing more than a calculated risk. The golden coffers will prosper if it pays off, but the brand might get well and truly roasted if it doesn’t.

In the case of Starbucks, it didn’t go to plan, hence the aforementioned media crusade against the most good-natured of attempts to embrace multiculturalism and spread the Christmas spirit. But that backlash should never have happened, and it certainly doesn’t make any boardroom judgments morally reprehensible. They merely saw an opportunity and grabbed it, which shouldn’t be considered an offence. In other words, Starbucks should never have been laid out on the rack for a crime it didn’t commit. And now, through the wonders of what GCSE English Language would doubtless refer to as a ‘topic loop,’ I’ll get back to the point from which I started.

As that Unit Three paper implied, it’s all a matter of business decisions. Exploiting those loopholes was a business decision. Announcing plans to pay more tax was also a business decision, as the brand needed rescuing and the option was open. That doesn’t make the presence of that option any less of an error on the part of the Government, but making use of the opportunity might be considered resourceful, even admirable. Now some people are tasked with closing the loopholes, others are tasked with finding more, and we can all return to our Caramel Frappuccinos without the fear of getting mobbed by angry protestors. Assuming, that is, they see sense.

Ask Joe Public whether he’d like to utilise a legitimate method of paying less tax, and you can imagine the answer. As my last article on this subject spelled out in no uncertain terms, turkeys don’t vote for an early Christmas. The sitting ducks of multinational chains wouldn’t think twice either.

This entry was posted in Taxation and tagged , , , , , by neilkotre. Bookmark the permalink.

About neilkotre

Remarkably, Neil Kotre was born with the answer to just about every political problem in the world firmly implanted in his head. It was highly unfortunate, therefore, that he forgot this vital information soon before he learned to speak or write, forcing him to take the slow road to power. Somehow, this ended with him agreeing to chair three meetings for the Second Newcastle Youth Council, soon extending to seven and giving him a pretty good chance of becoming one of the city's Members of the UK Youth Parliament. This election he promptly won, the glorious victor from a field of literally one candidate. He now writes this blog and wonders exactly how much his memoirs would sell for when he finally puts pen to paper.

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