Tax Avoidance And The Corporate Company

Posted on December 20, 2012

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Here is an article I wrote for the recent issue of The Leeds Debacle magazine. It will be my first ever print article, so I’m pretty excited to finally hold it in my hands! The new issue is to be published online tomorrow and will be out in print shortly after. The magazine actively promotes creatives and independent businesses, so it’s something I’m really pleased to be a part of. Check it out here if you can: http://issuu.com/thedebacle

starbucks

You may have read or heard in the news recently about the small matter of tax avoidance. More specifically, tax avoidance in relation to large corporate organisations. The fact that corporate companies pay little or no corporation tax is hardly a new notion. In fact when I prompted the subject of tax avoidance amongst friends/colleagues/family, the general response was not one of surprise. The overwhelming lack of reaction surprised me, and it soon became apparent that the general attitude towards the subject was ‘this is the way thing go’.

In October 2012 the three industry giants Amazon, Google and Starbucks were named and shamed with exact figures of tax paid in the UK, revealing impossibly low figures and sparking a new outcry of controversy from journalists, the general public and MPs. The new figures suggest that along with other industry giants, the popular coffee chain Starbucks paid just £8.6m in corporation tax in Britain over a period of 14 years. In 2011 the company, worth a mammoth £25bn, paid no corporation tax despite revenues of £397m.

Though the company’s actions could be described as immoral, Starbucks’ tax avoidance tactics are perfectly legal. Starbucks are able to reduce their tax bill by legally channelling money out of the UK, choosing to deal with their taxes overseas. The company also buys its coffee beans from a Swiss subsidiary through a practice called “transfer pricing”, which also allows the company to pay less tax.

In a meeting with the UK parliamentary committee, chief financial officer of Starbucks Troy Alstead responded to claims by stating “we’re not at all pleased about our financial performance here.” He continued to tell the committee that in the UK Starbucks have to compete in the “most competitive coffee and espresso market.” However, the company still remains to be the largest coffeehouse company in the world, with 20,366 stores in 61 countries. And any attempts to dismiss claims were met with hostility. In an interview with the Guardian, Starbucks were labelled as outright “tax dodgers” by business secretary Vince Cable. When commenting on the decision made by some people to boycott Starbucks, the MP said he could “fully understand why people would vote with their feet.” Although when I passed by one of the many local Starbucks close to my house, I couldn’t help but think there wasn’t much boycotting going on.

Perhaps it is a mixture of laziness and habit; perhaps it is the taste or variety of the coffee sold. Or perhaps it is the red Christmassy cups that keep consumers coming back for more. Let’s face it; the city centre of Leeds certainly isn’t short of great, independent coffee shops (although I’m told this has only changed to be so recently). For me, one of the perks of living in the city centre is just that. From the charming atmosphere at Laynes Espresso on New Station Street to enjoying a late night espresso at La Bottega Milanese, I can’t help but feel it is these stores that deserve our hard earned cash.

For some consumers it isn’t practical to shop at an independent store. Time constraints often mean that the modern consumer may enjoy the convenience of shopping in one store, hence the popularity of the supermarket. But when it comes to enjoying a good coffee, the same does not apply. So if you are yearning to shop around, dislike the idea of Starbucks and would like to try somewhere new in Leeds believe me, there are plenty of alternatives to Starbucks.

All things considered is it really fair to place all of the blame on companies such as Starbucks? After all, love them or loathe them they do provide jobs for thousands of people across the UK, and it must be stressed that the coffee chain are not committing an illegal offence. More recently the attention has focused upon the HMRC for being too lenient with wealthy businesses. They have responded by speaking of plans to crackdown on the loopholes that allow tax avoidance to occur.

So where will the investigation go from here? MP Danny Alexander has announced that funding of at least £150m will be placed into investigating elaborate tax avoidance tactics. The investment is expected to recover approximately an extra £2bn a year in absent tax. And after months of debate, bosses at Starbucks have responded to negative publicity by claiming they will review the amount of tax paid by the company.

While I would like to believe the recent outrage and media coverage on the matter will finally lead to big corporations paying their fair share, I can’t help but wonder whether the corporate companies will escape with little more than a slap on the wrist.

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Posted in: Art and Culture