Should Starbucks be let off tax free?

Times are tough, markets are tougher and its hard enough for our independent coffeehouses to get a share of the coffee pie without the almighty Starbucks not paying tax.*

Now, I’m no bean-counter but we all know low tax rates are good for the economy by attracting foreign investment. Which of course creates jobs, encourages more investment and helps makes the world go around. I also understand that its legal for multi-nationals such as Starbucks to trade with their own foreign subsidiaries to pay the lowest possible rates of tax possible (despite being ever-so-slightly immoral).

It starts to be a problem when companies use their sheer size and multinational entities to avoid paying tax, to the detriment of small businesses. Starbucks, who are the largest coffee chain in the world, have done just this by claiming not to have made any profit for the past 3 years in order to get out of paying tax. Yet they can still find a way to open more stores, in more locations, increasing the competition and making a laughing stock of all the small businesses this affects. Its a huge unfair advantage over smaller retailers who do have to pay tax but don’t have the luxury of having offshore entities to help. I mean, how are they even supposed to start to compete on such an uneven playing field?

Of course taste and service will ultimately decide where you choose to go for your coffee – which to me rules Starbucks out based on taste – but this is a serious threat. If we don’t support small businesses, the multinationals will gain momentum, the independents will be forced out and what good is having choice if there’s nothing left to choose from… ?

So come on Governments, make it fair and stop letting Starbucks off tax free!

Do you agree?

Sources:

* reports vary from no tax being paid to 0.3% tax being paid. Good to know, as its just keeping it real.

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4 Comments on “Should Starbucks be let off tax free?”

  1. October 17, 2012 at 7:54 pm #

    Is that just in the UK where they do not pay tax? I normally like Starbucks as the service in our local shop is great – lovely staff BUT this would put me off. It would be better to support local more.

    • October 18, 2012 at 7:48 am #

      Well all the news reports are focusing on what they’re up to in the UK. I’m not sure about elsewhere in Europe, but one of the reasons they’re able to pay nothing in UK is by transfer pricing elsewhere. But I totally agree with you – it would be great to support the local coffeehouses instead. They’re having a really tough time at the mo. Starbucks even looks for local trade to establish one of their cafes right next door.

      Where’s your next fav cafe after Starbucks?

  2. Shaks
    October 18, 2012 at 6:58 pm #

    Hi Una,great blog by the way!

    I was speaking to a friend about this and the problem is that a company which is part of a Group can offset the debts and losses against profitable parts of the business. So if Starbucks is making a loss in one territory it then transfers the loss against the ones making a profit. So a tax rate of 30% reduces considerably to 13% or even as low as 0.1%. When they submit their returns they move the expenses and costs around the business, however when filing their annual reports they make it look more favourable to shareholders.

    The other problem is the definition of what a Group is. Did you know you can’t sue a Group, you can only challenge the Limited company subsidiary where the issue took place? This gives them an added protection. Not to mention they can afford to hire the best lawyers and accountants to protect their interests

    It’s a travesty that small businesses can’t club together and sue the local governments and tax authorities for giving Corporates an un-competitive advantage and loss of earnings for over 14 years?

    • October 18, 2012 at 9:31 pm #

      Thanks Shaks! That’s a really good explanation – shows to what extent the multinationals are being protected from the government! Can’t believe they can’t be sued either, as I think your idea about small businesses clubbing together would be fab!!

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