It was revealed recently that despite generating sales of over £3 billion in the past 10 years, Starbucks have only paid £8.5 million in corporation tax throughout that period – tax avoidance on a ‘grande’ scale. Since corporation tax is assessed on profit and not on turnover, the multinational coffee giant was able to all but eradicate this particular tax bill by diverting their profits through countries with lower rates of corporation tax. Essentially, Star-bucks used the profits generated in stores like the one on Market Street to buy some very expensive coffee beans from their stores in Switzerland, and in doing so tactically avoided a hefty payment to HMRC.
It is sickening when one imagines other uses for that money: the number of the NHS nurses it could have employed, the number of new textbooks it could have bought for our schools, the number of police officer jobs it could have saved. Labour MP Margaret Hodge is one of a long list of people crying out for a boycott of Starbucks, but before you grab your pitchforks and jump on the bandwagon please take note – This is a terrible idea. Starbucks does pay tax, in fact in the last 3 years the company have paid over £160 million in various UK taxes, such as VAT and PAYE (Pay As You Earn) tax for their 8500 UK employees. As a publicly traded company it has an obligation to its shareholders to run its accounts in the most efficient way possible in accordance with the law. That is exactly what they have done.
The majority of people would have agreed with George Osborne when he described aggressive tax avoidance as ‘morally repugnant’. The government has indeed invested heavily in finding individuals who are intent on paying less than their fair share of tax. Unfortunately this government is as guilty as its predecessors in failing to take any meaningful action to minimize corporate tax avoidance. Social responsibility will not force Starbucks and others to pay tax, that’s what laws are for. Don’t hate the player, hate the game.