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.

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When a Referendum Impedes Democracy

Exactly why you’d want to set any sort of threshold at no less than 1.985% is beyond me. Eric Pickles, the precise little man that he is, evidently noticed this peculiarity not too long ago and tried to hack off the precise little fraction at the end. Not everyone agreed, though, and so it remains. Personally, I’d much rather he brought it up to 2% – which, after all, would have been much closer to the original. In fact, I wish it was a lot, lot higher.

Perhaps it might be worth explaining what all this is about. At present, a local authority wishing to raise Council Tax beyond a certain upper limit must take the case to the people and hold a referendum to rubber-stamp their grand plan. No prizes for guessing what that ceiling might be.

At first glance, this doesn’t seem like a bad idea. If the voters elect a party on clear taxation pledges which they promptly break at the expense of Joe Public, he’s empowered to foil those dastardly plans with a simple cross in the ballot box. He can fight them in the Council Chamber; he can fight them on the city streets. Consummate democracy in action, you might say. In practice, it’s not that simple.

Naturally, a Labour Council facing pressure from central government would see greater proceeds from Council Tax as a necessary evil under difficult circumstances. However, they just can’t make it happen. The referendum would, almost inevitably, turn out to be an expensive, elaborate folly of rejection and irritation. Joe Public might not have total commonsense, but he does at least possess the illusion of that seemingly rare quality: for him, turkeys voting for an early Christmas are doubtless worthy of their grisly fate.

It’s awfully lucid here in Newcastle, the great Tyneside community of which Jesmond is a leafy suburb. Red-bannered flyers condemn Liberal plans to pour capital down the drain of democracy, all because they’ve got wind of the cash crisis on the horizon. What those leaflets don’t explain are the tricky calculations going on behind the scenes. Essentially, slash-and-burn tactics under the pretence of low taxes just about win elections, costly referendums most certainly don’t. I’m pretty sure they know it’s ultimately suicide: eventually, the local authority won’t be able to offer the services which the law says it must provide, and then they’ll be in real trouble. The problem is that there really isn’t much of a choice.

As rare as this admission may be, it all strikes me as a good example of the Tories backing their Blairite nemesis into a corner with very deliberate political games, hence the unsuccessful attempt to lower the threshold in the first place. Perhaps the rise of Corbyn’s decidedly retro brand of loud and proud Socialism will get things changed, but I doubt it. After all, it’s the left’s own aversion to federalism which is being used against it in Labour heartlands such as Newcastle.

But if we wanted a truly democratic approach, we could just have a simple system through which we vote out the party which breaks promises and gives other schools of thought a chance in their place. We could call it an election.