A tax storm in a coffee cup

Several newspapers have highlighted the fact that Starbucks has paid no corporation tax in the UK in the last three years.  This is rather surprising.  I’m a bit of a latte junkie but resent coughing up about £2.80 a cup.  You don’t have to be a business genius to realise that this is one hell of a profit margin on the actual cost of the coffee and milk. Even when you factor in staff costs (catering tends to pay minimum wage) and rents the profits are still huge.

The coffee shop business has boomed in Britain in recent years.  In Bristol we are fortunate to have many independent cafes on all our high streets.  But the corporate franchise chains have also sprung up in every street.  I don’t mind that as long as they comply with local planning (Bristol has had a run in with Costa) but also pay their taxes.  Competition is good but it’s not fair if one cafe is able to plan tax avoidance.  An independent cafe has little in the way of clever ruses to dodge taxes.  But multi-national chains can siphon off profits via various company charges to head office for use of the brand name, loan interest or inflated prices for raw materials.

In Starbucks’s case they made (per the October 2011 accounts reported in today’s press) just under £400 million in sales.  But after deducting costs they made a loss of £33 million and so paid no corporation tax.  That’s simply not credible.  You see Starbucks in every major retail centre.  They’ve been trading and expanding in Britain for years.  They’re clearly not a duff business.

The perplexing fact is that many of these well known brand businesses put a great deal of effort into defending their name and making us feel good about their products.  But all the claims about fair trade coffee or action in the community (I have supported some groups in Bristol who get Starbucks sponsorship) are undermined if a company fails in a basic duty of corporate social responsibility – pay the proper level of tax.

So what can be done?  I’ve called for HM Revenue and Customs to have a good look at Starbucks’s activities.  But even if they’ve done nothing illegal they will still be offending the public if they are paying no tax on a business that is clearly a money spinner.  All of these big brands need to learn that aggressive tax avoidance infuriate people and will lead to brand damage.

Consumer power is the answer.  I will not be buying any lattes off Starbucks until they come clean about their tax avoidance activities.  Consumer boycotts have a long tradition in the area of coffee and sugar going right back to 18th century Quaker led campaigns in Bristol against the slave trade.  I hope that others will now boycott Starbucks.  Think before you drink and maybe we’ll get this company to act responsibly.

There’s also an on line petition, part of the wider campaign that I and my Liberal Democrat colleagues are leading for fairer taxes and a crack down on aggressive tax avoidance – http://www.fairertax.org/starbucks

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