This is too good not to listen to (file can't be embedded so opens in separate link).
Bill Dodwell claimed Starbucks makes no profit in the UK on Radio 4 this morning - to Jim Naughtie's bemusement.
The man is naive or......he's Starbuck's tax adviser (yes, his firm is).
And then recall that this is the man who called for me and other NGOs who discuss tax to be regulated to stop us making any suggestion that there's such a thing as organised tax avoidance in future because it was unethical for us to do so.
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Link is broken to the piece on Dodwell calling for regulation.
Will check
To adapt Oscar Wilde’s quote, Bill Dodwell represents the unspeakable defending the indefensible
he says Vince cable and his officials have looked at Starbucks and concluded they dont make a profit, assuming this is correct (which I think it is) then are we saying that non-informed speculation (ie Starbucks have loads of shops and therefore must be generating huge profits – see HMV) is more reliable than a team of treasury officials who have access to the starbucks tax returns and other confidential data?
Im struggling with this to be honest – I thought someone had done some research to show that even if you added back the transfer pricing royalty, they still would be in a loss position (due to staff costs, rent and other normal expenses)?
I do not think Starbucks made a loss
Nor do their management
They’ve said they don’t to their shareholders
I believe them
And as for BIS – it’s not a taxing authority, is it? I suspect the review was done by seconded accountants from Deloittes
Look up the difference between EBITDA under US GAAP and pre-tax profits under UK GAAP (on which the tax is based) and you will find your answer on why the tax figures are different to those reported to analysts who are interested in US GAAP figures.
We know all that
But you see – it makes no sense. The interest was a factor at Starbucks, but not by any means all
All the TP abuse was within EBITDA
So – tell me – how come the figures are so very different?
If you add back the royalty payments and the coffee bean profit you still get a loss. The interest is taxed in the US at 35% so that’s not being shifted to a low tax jurisdiction. Where else is the abuse? You have to show something over an above the items mentioned in the Reuters report to show that and you haven’t.
No one is suggesting that Starbucks has fraudulent filed incorrect accounts at Companies House are wrong.
How do you know the interest is taxed in the US
They did not say that
And show all your numbers
Who has proved they’re right?
Why do you believe them and not the fact that Starbucks says it is profitable – which can only be before profit shifting?
Why assume that they are open and honest with their shareholders, but are ‘economical with the truth’ to the authorities and not vice-versa? Their accounts do show a loss even excluding the impact of royalties and transfer pricing. Are you accusing them of filing inaccurate accounts?
I thought Dodwell did OK this morning. Both the interviewer and Hodge offered nothing other than innuendo. Hodge seemed to think that the voluntary payment offered up by Starbucks was an admission that they were in the wrong… when it was quite clearly a PR gesture attempting to head off protests (note that neither Amazon or Google offered up any tax.. does that mean, by Hodge’s logic, that they have done nothing wrong? Or is it just that they don’t have a high street presence liable to UKUncut disruption?).
The interview was a populist hatchet-job, and it’s extremely inappropriate to question an accounting professional about the details of a specific client. Putting him in that position and then making fun at him for not sounding comfortable is hardly dignified. Do we want to have an informed debate? Or a witchhunt?
Yes – it’s obvious I’m saying the accounts are inaccurate
I am sure they are
They show a loss
Starbucks says the UK is a profitable activity
They’ve been here for decades
I rest my case
And as for Dodwell – he’s ugly enough to take it and if not he should not have gone on
Well given the DA stands for depreciation and amortisation I image the difference is largely in there which might be surprising given the expenditure needed to acquire a lease and fit out a shop?
Oh come on – it’s a coffee shop
HMRC proved them to be right and Vince agreed. Better than some journalistic speculation. Before you mention it the ‘tax’ was a PR stunt to deflect the pressure they were under. Treasury, HMRC and the Government didn’t think it was due (even applying the spirit of the law). The only thing that gives me pause for thought is the fact that you don’t appear to have been threatened by a law suit.
HMRC has never said any such thing
And why would I be threatened witha law suit? Reuters did the work
I agree that Dodwell is ugly (and rich) enough to take it. I’ve no sympathy for the man.. but I don’t see how that helps the integrity of the debate.
As for Starbucks.. well if you just think that the accounts are wrong then there’s not a lot that anyone else can say. Short of a fraud investigation getting underway, your theory can’t be tested. Given that.. I wouldn’t necessarily call it a ‘brave’ assertion.. but it’s not one that anyone else of note has made.
I think you’ll find that’s the whole basis of the Reuters report that started it all
And the whole profit shifting focus of attention is on mis-stated accounts
Haven’t you noticed? It’s how it happens
So, if the accounts are mis-stated, why is everyone at pains to say that nothing Starbucks has done is illegal? Surely they can’t mis-state their accounts and say it’s perfectly legal. In any event if accounts are mis-stated HMRC already has the power to base the tax on proper accounting principles.
Getting transfer pricing wrong is not a criminal offence in any case I’ve ever heard of
But the only transfer pricing adjustments identified don’t turn a loss into a profit and so you have no evidence there is anything wrong other than guess work at best.
James,
It’s fairly obvious that your posting nonsense and defending the indefensible. Starbucks has said that over it’s 14 years of operation in the UK it has made no profit in any of those years (give or take a negligible amount).
What happens when a company expands into a new market and makes a consistent loss over a few year period?
It does exactly what Tesco has done with its fresh and easy chain in the U.S, or best buy did in the UK. It exits the market.
So why has it not done so? And what group of shareholders would not fire a management team, that would refuse to close a loss making division that had not turned a profit in 14 years?
Use common sense and logic to arrive at a conclusion as to whether not starbucks makes a profit. Not an artificially created set of accounts that we all know can be tailored to say whatever someone wants them to say.
JN’s dealing with Bill Dodwell this morning was hilarious – Naughtie was on form. When a Radio 4 presenter openly laughs at your responses, the interview is not going well!
Dowell made it easy, he was overly defensive – to the point that he did not sound credible. It’s not at all surprising to see that Starbucks have an engagement with Deloitte for tax advice.
Looking at the results of Costa for example (not “loss-making”), it is so obviously fantastical to imagine that profitability in this arena can be the result of economics of scale (Costa have roughly double the number of outlets of Starbucks in the UK).
The fact is that a choice has been made as to where profits have been declared.
One wonders when something is going to be done about the conflict of interest that occurs within most accounting firms with regard to auditing and providing tax advice. Some attempt has been made to deal with the conflict between auditing and management consulting but as yet (please note Mr Barnier) next to nothing has been done regarding tax advice. Of course with things as they stand the auditors are more than happy to sign off practically any level of management etc. charges as being true and fair. The sooner we have proper auditors of accounts the better.
I’m new to this world but it seemed odd to me that Dodwell used the HMV situation as a comparison. HMV shops are closed and vacant – Starbuck’s aren’t????
And HMV had been issuing profit warnings for years and Starbucks says all is hunky dory in the UK
It’s official Dud Billwell has followed Alice down the rabbit hole and is currently enjoying tea with the Mad Hatter.
Starbucks keep one set of books for their shareholders, they’re profitable in that one. Oh and they keep another for HMRC, where they struggle to make a brass farthing.
As Eric Schmidt, like Kenny Everett’s character “Cupid” would say “it’s all done in the best possible taste” ie it’s legal and is tax avoidance.
The poor man’s version of keeping two books, because he cannot afford expensive accountants to “game the system”, is definitely not legal and is tax evasion.
Surely the General Public, who stand back and look from afar at the picture painted cannot see all the legal nuances and niceties. Instead, I would suggest they see the following:-
Tax avoidance = Tax dodge
Tax evasion = Tax dodge
and therefore ….. QED
The tax profession maintain that the General Public should be educated, so that they can see the difference between evasion and avoidance. Quoting a well known Chancellor of the Exchequer though:-
“The difference between tax avoidance and tax evasion is the thickness of a prison wall”
Equally perhaps, the “tax profession” should be educated to stand back and look from afar at the “picture painted” and by doing so, see beyond narrow self interest!
I seem to remember that one of the reasons that HMV failed was that they had to pay VAT on their sales and their competitors had found another tax loophole to avoid doing so.