Starbucks says it has made a profit in the UK for the first time.
And it is implying that it has paid the £20 million of tax that it said it would voluntarily pay when the subject of enquiry by the Public Accounts Committee in 2012.
But no one knows whether to believe them. and there is good reason for that: they have not published the data to prove their case.
I wonder how long it will be before business realises that there is no point them saying something without the evidence to back it up? The only evidence that would work in this case is full country-by-country accounts. Nothing less will do.
Publish the UK alone and we will just, quite reasonably, assume that some profit shifting from elsewhere has gone on.
Publish anything less than data for every country and the same would be true.
If business wants to be believed it has to publish its accounts, in full, for every place where it trades.
Starbucks is not doing that, by a very long way. In that case why should anyone believe what they are saying?
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“But no one knows whether to believe them. and there is good reason for that: they have not published the data to prove their case.”
Starbucks will have given their full UK trading details to HMRC. HMRC is staffed with experts who know far more about tax than you. HMRC will determine whether Starbucks should be paying UK tax.
It is HMRC that Starbucks have to convince over their tax affairs, not a self-appointed rabble rouser.
Do you pay the right amount of tax? We don’t know because you refuse to publish your personal tax return.
Why not set Starbucks a good example by publishing it and challenge them to do the same?
I publish my limited liability accounts in full when not required to do so by law
I am a very long way head of Starbucks
And Starbucks is not only responsible to HMRC – it is responsible to stakeholders too
And you conveniently ignore that
HMRC do not need country-by-country reporting. To my knowledge they have never even called for its adoption.
As PaulB suggests, Starbucks will be required to prepare accounts for its UK permanent establishment which will cover all its UK operations. This is what is already required under UK tax law, and Starbucks will have a taxable profit or tax loss based on those accounts. Given that those accounts are the starting point for the purposes of computing UK corporation tax, how will country-by-country reporting help HMRC collect more tax. HMRC can already enquire as to the destination of any payment going through the permanent establishment’s accounts, so how will requiring them to produce accounts for France, US, Switzerland produce a better tax result for the UK.
It is the job of HMRC, as the proper authorities, to ensure that Starbucks are paying the correct amount of UK tax. Country-by-country reporting will give simplistic results with little or no context which will be used by people who have little, no or less knowledge than they think they have, to accuse companies of avoiding tax, when the proper responsibility for that actually lies with HMRC and the Courts.
HMRC are going to get CBC
The UK is the first country to adopt it
Precisely in the form HMRC asked for it
Which happens to be close to the way I designed it
Wrong again
Just go and read all the discussion on the issue and OECD report in September last year on action point 13 of BEPS and stop writing nonsense
So no-one can know for sure if you or Starbucks pay the right amount of tax because neither you nor they put enough in the public domain for that to be known for sure. Who knows what country-by-country reporting might reveal. Who knows what your personal tax return might reveal.
I guess we must put our trust in HMRC as they have all the relevant facts.
I trust them. They are the experts.
But if you don’t trust them over Starbucks’ tax affairs, why should we trust them over yours?
It’s not a question of trusting HMRC
It’s a question of trusting Starbucks and its choices – which impact a wide range of tax authorities not all of whom get the same story, as a matter of fact
That’s why country-by-country reporting is essential
And why we have no reason to trust without it
it is responsible to stakeholders too
This is a useful concept that could benefit from being further defined.
Stakeholders must include not only the owners of the business but the people employed in it. Perhaps customers of Starbucks should be included too.
Clearly you are an interested party as well, Richard, although not in the last category by your own avowal since you think their product ‘crap’. So you must also be a stakeholder.
HMRC are presumably also stakeholders since they maintain a dialogue with Starbucks and since we all have an interest in the public purse, we could all be said to be stakeholders.
In fact by that measure, are we not all universally stakeholders in every aspect of our fellow creatures’ lives?
Legally the answer is here
http://www.legislation.gov.uk/ukpga/2006/46/section/172
We are indeed all stakeholders
All you are revealing is your lack of awareness of that fact, for fact it is
In that case you’re obscuring your meaning with the word ‘stakeholder’, aren’t you? If you mean everyone, why not say everyone, thus:
“Starbucks is responsible to everyone”.
I have given the statutory link
You have given a link but there’s no mention of ‘stakeholders’ there that I can see.
Clarity is everything – in language as in tax – so if Stabucks is answerable in your view to the whole of humanity why not say so?
If you cannot see that the list of people to be taken into0 account is a stakeholder list then you are not trying very hard
Right, so the term, ‘stakeholders’, applies to a list somewhere else of disparate supposed interested parties which you agree is the equivalent of ‘everyone’.
The problem with jargon is its tendency to obfuscate so it’s better avoided in the interests of clarity.
The problem with clarity is that it opens one up to challenge.
Everyone is, of course, potentially a stakeholder
Isn’t that obvious?
That is why data is required on public record
If everyone is a stakeholder in Starbucks, then are we all not stakeholders in Tax Research UK LLP?
After all, two points from the Companies Act you refer to are:
“the impact of the company’s operations on the community and the environment”
and
“the desirability of the company maintaining a reputation for high standards of business conduct”
Given that you actively seek to have an impact on the community, and “quis custodet custodes ipsos” means the your reputation should be unimpeachable… 😉
I personally have no interest in your tax affairs, as I’m sure they’re in order. But if sauce for the goose is sauce for the gander, you might want to explain why you’re not anserine 🙂
Because I pay my tax as a member of TR LLP personally
And there is no proposal that I know of that individuals should publish their tax affairs
As you well know
What I do, voluntarily, is publish full accounts
Do you think the PAC can call for a country-by-country reporting of profits and taxes paid for the preceding years and action be taken by the PAC if any avoidance or evasive tax structuring was found? I believe there is no other way to prevent shifting of profits because transfer pricing has been reduced to an arithmetical exercise.
They cannot demand what the law does not require
The law has to be changed
“But no one knows whether to believe them. and there is good reason for that: they have not published the data to prove their case.”
http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-reportsannual
Seems like Starbucks do publish their annual reports – an even break down their stores and accounts by region.
Region is not country
Does quite clearly how much tax they have paid globally though.
In 2014 they made a pre-tax profit of 3160m USD. On this, they paid taxes of 1092m USD. Which works out to an average tax rate of 34.5%.
If they were avoiding tax on a large scale, wouldn’t they have managed to shift all of that into lower tax jurisdictions? After all, this overall tax rate is higher than UK corporation tax rates?
A disproportionate part in the US, of course
Implying significant understatement elsewhere
Why let facts bother you?
Please do not waste my time again: I am bored with your continually mis-stated evidence and will now delete your comments
Keep the comments online Richard, we all need a good laugh now and then.
🙂
I fear that unless we keep up public pressure on Starbucks, people will be increasingly interested in their lattes than whether of not Starbucks pays a fair tax on its operations.
I for one never use Starbucks since the tax issue broke, and will even go without a coffee if they are the only provider around. But we need more of us to do this.
A courageous state would name and shame company’s who didn’t pay their tax and then the consumer could decide whetehr or not to use their products?
I agree with the last point
I also avoid Starbucks like the plague
It’s always been crap coffee
Crap and overpriced.
The last time, I went to a Starbucks, I dropped a stemming hot cup of their product in my lap. Entirely my own fault. I went into the shop to ask if they had a first aider, the no doubt well meaning, employee, explained they didn’t have a first aider, but offered me another coffee. I politely explained i was kind of off their coffee.
Not long after that, news of their contrived tax affairs broke.
I thought this neo-liberal economic theory meant that costs would reduce. Not the case with Starbucks. As i understand it they pay royalties to some other low tax jurisdiction on sales in the UK (is it Luxembourg)
There can’t be any sensible. legal case for a royalty on a cup of coffee. It is ground beans, hot water and whatever flavouring you put in it.
Mark
Do you also check out the tax compliance of every newsagent, curry house, garage, plumber, dentist and every other service you might use before using them?
Or is it just coffee shops?
All limited companies should have full accounts on public record, in my opinion
Richard
That would not help if said newsagent etc were a sole trader or in a partnership. Whilst it is to be expected that people comply with tax obligations, It would be somewhat invidious if those operating as companies were expected to reveal more than those who were not – espcially if they were then judged on it by an ill-informed public.
It’s quite conceivable (especially among smaller businesses) that a compnay could operate for decades without making a corporation taxable profit by the simple expediant of the owner paying him/her self a bonus every year of all profits.
What then if said business owner wakes to find protesters outside his/her business because “SmallCo Limited hasn’t paid any corporation tax for years”?
Publicity is the price of limited liability
If you really are daft enough for me to have to point that out your days here are over
Don’t bother calling again
Although there seems to be a fair dose of sarcasm in your comment, you may have unwittingly raised a very valid point.
Firstly, I think that avoiding tax or not paying the fair amount is a damaging phenomenan that has become too common and feeds into other issues within society.
Secondly, if I had that information, I would probably not use the service because they are not contributing to the fabric of what enables them to be here in the first place. And they also leave me and other tax payers paying the bills for things that help to keep them in business.
It seems to be an acceptable practice in some segments of the economy to not pay tax. It has become cool to avoid tax (but also then moan about the state of country or that you can’t find an NHS dentist in your area).
If the market delivers choice of products (via information) it can also deliver information about corporate behaviours that damage society so that it is the consumer who modifies company behaviour by choosing not to use products and services if it finds that businesses’ behaviour objectionable. The threat to company turnover and reputation should be enough for them to reconsider their actions. That is a positive form of consumerism in my opinion and it also addresses an imbalances of power between society and business.
In a town where I work for example, the owner of a shop was convicted of sexual abuse of young people. Once word got out into the community about the nature of his conviction, people stopped using his shop and he went out of business. This was because people know that such abuse is wrong and exercise a judgement through information.
Local restaurants have been found to have dirty kitchens and closed down; what if they have fiddled their tax returns or have not been paying the minimum wage? I would not use them on that basis. Perhaps you would – but that is your choice Paul.
Such consumer behaviour can act as a brake on the bad behaviour of business and is a underdeveloped idea in my opinion as I do believe that the lack of regulation and accountability shown by all levels of business is a constant problem.
It’s not likely to be the company’s themselves that tell consumers the bad stuff they get up is it Paul so someone external has to. That should be local Governmnet and central Government or a regulator. But doing this is not new is it Paul?
If you put as much effort into reflecting on what is actually going on around you as you do about being ‘clever’ you’d remember that Rotheram City Council has just been outed as a failing authority; Ofsted declares schools as failed and NHS hospitals have ratings for mortality rates in big operations – all cheered on by Government. But how often does business get made accountable for its failures to do the right thing?
Answer: not very often.
That’s because in the neo-lib world, the public sector is always crap (like Starbuck’s coffee) and the private sector is a shining beacon of propriety.
You may also believe Paul in another neo-lib mantra – that markets (business) is ‘value free’ and such judgements by consumers have no place in transactions.
But you are wrong Paul. Some like you may not give a damn; others like me will. So we need a world that reflects that. Don’t we Paul? Now, be a good fellow and run along now huh………………
But Starbucks have paid what was legally due to the satisfaction of HMRC, have they not? The ‘fair share’ is just a number you and others think it should be.
If HMRC had the staff and funding it needs we may be sure this is true
So Max if we call Starbucks UK operation “starbucks UK” were a listed stand alone company, do you think it is likely that it would still be trading after 17 years of losses?
“But Starbucks have paid what was legally due to the satisfaction of HMRC, have they not?”
Clearly not… they may have, per their self assessment, paid as little as the black letter of the law would allow after whatever contrived circumstances they had executed in order to make their interpretation of the law fit – but it’s evident they hadn’t paid enough to the satisfaction of HMRC.
For goodness sake, they agreed to a “deductions holiday” and stumped up £20m in… well, they would probably categorise it as a goodwill payment to the UK. In actual fact it’s a fraction of the corporation tax they would have been due to pay on their profits had those contrived cirmustances not been executed.
And yes, there were profits before anyone starts that rubbish about losses again – they wouldn’t continue to operate in a market if they weren’t making a profit.
If they had paid tax “to the satisfaction of HMRC”, then presumably HMRC would not have accepted the proposed deductions holiday? Remember, it’s not HMRC’s job to screw as much out of the taxpayer as possible, it’s their job to collect the right tax, at the right time, from the right people and in the right place. They take that obligation seriously.
So, by agreeing not to claim deductions they had contrived, it’s reasonable to conclude that EVEN STARBUCKS are acknowledging (tacitly) that they’ve taken far too much of the p**s and they’d better put the brakes on before the Great British Public finally tell them to shove their “coffee” where the beans don’t grind and start using small, local coffee shops who actually add something to their community.
“Implying significant understatement elsewhere”
What exactly do you mean by this? That something illegal is going on.
You haven’t actually answered Tyler’s point. If Starbucks wanted to minimise the amount of taxes it pays worldwide, it isn’t doing a very good job of it.
It appears to be proportionately underpaying outside the US
Without country-by-country reporting we cannot tell where
And that is the nub of this issue
The nub of the issue, surely is that you, and others, have decided that Starbucks are evading their fair share of tax (Whatever that is, avoidance being legal) This really is poor stuff.
No one has for a moment suggested evasion
We are suggesting abuse of international tax
I’m amused at the coverage of the Starbuck’s profits announcement. The Guardian headline, and first line of its report states that the profit is the first one Starbucks has reported in 17 years.
Pull. The. Other. One.
The question no one seems to be asking, is why Starbucks has persisted with this loss making enterprise for so long. Even now, when it has finally turned the corner, and made a profit, that profit is just over a million pounds. Why is it worth Starbuck’s while to continue the UK operations if they are really this marginal. Wouldn’t the capital have been put to better use expanding operations in more profitable markets? Why are shareholders so happy to continue the loss making UK operations?
The truth, of course, is that the operations are actually clearly profitable, as I think Starbucks have told investors privately, but UK taxable profits have been reduced through transfer pricing and payments to related companies, in other low tax jurisdictions (hello Switzerland, Netherlands and who knows where else) such that taxable profits, rather than showing up in the UK and being subject to UK corporation tax, show up instead in Switzerland, Netherlands or elsewhere taxed at a much lower amount.
This is the problem that BEPS is intended to try and solve. Genuine companies, under pressure from shareholders, cease loss making operations abroad – witness Tesco pulling the plug on Fresh and Easy after six years – but we’re supposed to believe Starbucks has been patiently plugging away, in a highly competitive environment (competing with Costa, Cafe Nero and the rest), making losses, paying inflated rents in city centre locations, despite the 16 consecutive years of losses.
Its not plausible, and indicates just how problematic the treatment of intergroup payments can be – as an economist, I genuinely do not understand why tax authorities accept, as tax deductible, payments for use of a brand from one group company to another. Likewise, why they accept payments at anything other than cost, for products from one group company to another – though others may know the reasoning – but it looks, and smells, and quacks like the duck that is profit shifting.
My submission to the OECD on some of these issues will be published very soon
‘Abuse of International tax’ so is that legal? If not it must be evasion. There is no definition of abuse in UK tax law -it’s just fair share type argument. I.e I think it’s wrong, so it must be. Not a very strong argument in debate really.
Useless
Until it becomes the basis of anti-avoidance laws
As it is becoming
“‘Abuse of International tax’ so is that legal? If not it must be evasion.”
The law surrounding transfer pricing is demonstrably subjective – it relies heavily upon phrases such as “just and reasonable”. These concepts are bound in statute, but are not measurable in the black and white way that you suggest. In oter words, unless there’s a clear definition of “just” and “reasoonable”, then the right answer will always come down to an interpretation of the law, on a case by case basis, after all relevant facts have been considered.
In other words, Max, you can’t say what is and isn’t legal. It’s not that simple. It’s not black and white. That’s why cases are taken before tribunals.
You don’t appear to have grasped the importance of nuance. I’m afraid that’s rather too simplistic and childish an approach to the problem to be taken seriously.
Max
As ever the ‘value free’ or ‘markets are neutral’ mantra of neo-lib economics blinds you to just how broad and deep this issue is.
So get this for goodness sake:
Starbucks is not just a legal issue. It is also a moral issue and raises questions of fairness (or ‘justice’ – those scales you see are not just their to look good – they mean something) which is also why (guess what)- it is a legal issue.
Laws do change if they are not effective (or if there is a will to change them – lord knows how many regulations and laws the neo-libs have dismantled over the years). Again, as economist Steve Keen points out neo-lib orthodoxy is very static in its view when in fact markets and legal systems are vey dynamic and the systems around them need to change and adapt to keep up with them. Neo-lib thinking calls it and calls it once and assumes that things remain the same. For ever.
The morality of tax reporting, trading, pricing etc., has been called into question because so many ordinary people are actually suffering hardship as the result of austerity. So this is not just a moral issue either – it’s one based on experience – many are feeling the pinch and are actively seeking answers.
What may have been OK before 2008 is not OK anymore. Do you get it? And this includes hiding funds that by rights should be taxes.
Plainly the morality and effectiveness of markets has been exposed to scrutiny once more by the 2008 crash which only actually proved what people like Richard, Keen, Krugman, Marx (and others) had warned of all along.
So its not just a question of ‘it’s wrong because I think so’; it’s wrong because WE now have the evidence to KNOW so. And plenty of people (not just Richard) know this too.
If you wish to ignore facts then please state clearly in future which ones you are ignoring.
The facts as I understand them are that Starbucks tax position was entirely legal, and confirmed as such by HMRC.
Whether this is ‘moral’ or not depends on both individual morality and the collective will via Parliament to change the law to reflect the change in view from when the original law was passed.
I’ve not commented on whether I think the law is right or wrong, nor the morality of the position, merely the legality of the position.
Terms like ‘fair share’ and ‘tax abuse’ aren’t helpful to serious debate, in my view.
HMRC never offer such confirmations
What do you know that we do not?
Or are you just making stuff up?
“If HMRC had the staff and funding it needs we may be sure this is true”
If HMRC feel something is wrong with Starbucks’ UK tax returns then they are at liberty to open an enquiry. For all we know they may have done – on more than one occasion.
If HMRC had greater staff and funding this will not change one iota my knowledge as to whether or not Starbucks is complying with its tax obligations.
These things are a matter for HMRC and the courts. They are not a matter for self-appointed experts who actually know very little about the company’s affairs.
But HMRC does not have the staff and resources it needs
So your argument makes no sense at all
Government fails to do its basic job = the left’s tax problem.
Bigger Government = the left’s tax solution.
Einstein’s definition of madness, anyone?
Increase minimum wage and do away with corporation tax, money goes straight to the poorest without a Government middle man – let’s see Starbucks profit transfer their barista wages off to the Caymens. There are solutions that can tilt the market that don’t require anything other than rule changes – not an army of inspectors and lawyers being paid with tax money to close their own loopholes.
I leave others to comment
‘HMRC never confirm etc’
True -I they are not allowed to discuss individual tax payers. However:
From reading the PAC report ‘There is no suggestion of any wrongdoing by Starbucks’ and ‘ HMRC confirmed that multinational companies were applying the law on tax as it stands today’
I think the nuanced interpretation might be that HMRC said all was legal.
No that is legal arse covering