Starbucks’ move is a game changer

Well, someone’s got to say it.

I presumed there’d be something weasily in there somewhere, but reading the statement in full, it seems pretty watertight.

To be clear, Starbucks UK will not claim deductions:

• For the royalties it pays

• For the intercompany profit on the coffee it purchases

• For interest paid on intercompany loans

• For capital allowance deductions nor our carry-forward losses

In addition, we are making a commitment that we will propose to pay a significant amount of corporation tax during 2013 and 2014 regardless of whether our company is profitable during these years.We are still working through some of the calculations, but we believe we could pay or prepay somewhere in the range of £10m in each of the next two years in addition to the variety of taxes we already pay.

It seems that Reuters, the Public Accounts Committee and UK Uncut were capable of inflicting brand damage worth at least £10 million a year to Starbucks.

The state of play is illustrated brilliantly by this collection of blistering quotes at the Telegraph. Sure, Starbucks’ move breaks the mould and may force other companies to follow suit (I’m intrigued by the potential for “a payment level of companies that sell to the public, particularly with younger customers, and then another level of tax for the rest”). Next time a company is accused of tax avoidance, the first question will be “are you going to do a Starbucks?”

But, more importantly, it destabilises the consensus around the UK’s (and indeed the international) corporate tax system. A speaker at yesterday’s PWC “building public trust” tax transparency awards lunch expressed it roughly as follows: we’ve been offering companies a more and more attractive tax system to encourage them to come to the UK and create jobs, but then when we discover how low their tax bills are as a result, we get angry with them. The consensus yesterday seemed to be that, “we need a debate on corporate taxation, just not this one.” Whatever it looks like, I’m looking forward to it.

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  1. Pingback: How much tax “ought” Starbucks to have paid? « Martin Hearson

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