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back to article Brit retailers tell Amazon and Google to pay their taxes

British retailers have been calling on overseas firms that make a profit in Blighty to pay their tax in the country as well. Dixons boss Sebastian James tweeted that he agreed with John Lewis chief Andy Street, who said on Wednesday that Amazon can use its tax position to get one up on UK companies. "There is less money to …

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If the public were angry, they would not buy from internet multinationals

This 'public anger' sounds like astro-turf to me. If the government wanted fairer taxes, they would not be giving tax relief to patent trolls:

http://www.hmrc.gov.uk/ct/forms-rates/claims/patent-box.htm

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Anonymous Coward

Re: If the public were angry, they would not buy from internet multinationals

Patents have nothing to do with it.

The public look for the best deal.

Buying a new TV, Amazon may be 20% cheaper so why go to a retail store?

If these big businesses are able to circumvent the tax system then they will be able to offer items for much less than high street stores.

Now I know that's not a fair and level playing field, however when I buy something I look to save money.

The public are not going to get angry and boycott a firm if it means they will have to pay more!

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Dunno

I have been buying things from Gaugemaster both direct and via Amazon, thought laziness when they pop up in a search. I have stopped using the Amazon route.

I am more concerned about the AA, (http://www.guardian.co.uk/business/2012/nov/18/aa-owner-acromas-corporation-tax) - do the vans all go back to Luxembourg every night? I think I shall be cancelling my membership, and going with Green Flag.

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Re: Dunno

There are many names on the high street that play a similar game. Boots I believe is headquartered in Zug, Switzerland.

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Surely QOTW

"None of the three companies were able to change the Public Accounts Committee's mind that they may be avoiding tax legally..."

There you have it. They're not doing anything illegal. So who should the public be venting their anger at? THE LAWMAKERS, ie. Parliament. Why haven't Parliament done anything about it over all of these years?

If the public keep shouting about it, they could even close one of the biggest IT "loopholes" there is: alienation of personal services income.

A "contractor" (through a company) - eg. Jeremy Paxman, Fiona Bruce, Jimmy Carr - legitimately enjoys lower tax rates and deductions for expenses that a non-corporate contractor can't make, etc. while at the same time providing the recipient (eg. employer) with exactly the same personal service. Insurance is available for the individual, so why "contract" through a company? Answer: the tax breaks available to a corporate are greater than those available to the individual, eg. lower tax rates, capital allowances, income splitting, non-residency - to name but a few.

So while on the subject of the 'immorality' or otherwise of tax avoidance, just give a thought closer to home. The only difference between Starbucks, et. al. and contracting for personal services is scale.

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Black Helicopters

Re: Boots

I live (near) there, and have never seen their HQ. I thought it was in Nottingham.

Like most corps, I suspect it's simply a tax-friendly, monitored mailbox in an anonymous corporate office block. This is a surprisingly common occurance.

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Stop

Re: If the public were angry, they would not buy from internet multinationals

"The public are not going to get angry and boycott a firm if it means they will have to pay more!"

Bets?

I know of people who have moved away from Amazon, Google and Starbucks in the last month, due to tax avoidance.

Ultimately, I'd prefer to spend with a company knowing the cash isn't disappearing from the country, too.

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Re: If the public were angry, they would not buy from internet multinationals

nonsense.

as AC said, people will always go for the best option for them, if people were as to do as you suggest then no one would buy anything made in China, we all agree China has a terrible human rights track record in parts of its country but we all overlook it because it saves us a few quid

no, MPs say its legal but morally wrong, ok, well they now need to do what is over all best for the public and that is make it legally wrong it is completely within our power, you want to trade in this country, fine, then you pay up. the amount of profit they make would far outweigh the losses incurred if they decided to leave altogether.

Most people here work their arses off, get taxed to buggery and we have to live with it, Most people are not in the position to join some tax avoidance scheme but even if we were, what good would it do us? not paying taxes cuts off the hand that is trying to feed us, so to speak

If you want to sell stuff here you pay tax, if you want to work here, you pay tax, if you don't want to do either, then F$%k the hell off as you/they shouldn't benefit from us that do support the country.

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Boffin

Re: @shagbag

No, there is a single, significant, and to my mind major difference between contractors running their own services company and multi-nationals using tax havens.

The contractor is minimising their tax payments within the systems of the country in which they do business. The multinational is using quite artificial measures to move their turnover outside of that country, pure for the avoidance of taxation.

I was for many years a contractor, and as such I had the opportunity to use the same K2-style international tax avoidance that recently caused Jimmy Carr such discomfort. I declined, because I thought it was wrong to do so. This cost me several tens of thousands a year in additional tax, however I still feel it was the right decision to make.

GJC

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Re: If the public were angry, they would not buy from internet multinationals

They pay more either way.

Either more money to buy products from non-tax-avoiders, more tax themselves, or lower benefits.

Either way, the public pays.

A look at that Great British [Virgin Islands] Company, Virgin, is educational.

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Meh

Re: Boots

Boots is definitely HQ'd in Nottingham.

Massive place - seriously I've been in significantly smaller international airports.

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Re: Boots

That might be their primary office, but whether it's the registered business address is debateable.

Boots is now an entirely owned subsidiary of Alliance Healthcare - lord alone knows where they pay tax.

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Anonymous Coward

Re: If the public were angry, they would not buy from internet multinationals

I do buy from UK retailers when possible, I prefer the service I get from them, and John Lewis vans are a common sight outside my house.

I would rather Amazon pay more tax here, but they DO collect the 20% VAT, so the gov does get a cut of every VATable sale....

I still think we need a more competitive tax rate for businesses, and other incentives to get businesses to move here...

The primary thing should be to get more people employed than tax companies into the ground..

More employment means more tax income and a lower social bill

i.e. 1 employed single person on 24k/year pays £5100 plus 2200 is paid in employers NI, i.e. a total income of £7300 (roughly), or about 27% of the cost of employment.

The same single person would be entitled to about 4.5k in housing benefit, plus around £3.6k in Job Seekers Allowance.. That is before any other benefits & healthcare etc are considered.

So a cost of at least 8.1k

The government needs to realise that making it cost effective to employ here rather than offshore, will improve tax returns even if the company itself is not paying hefty taxes..

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Re: If the public were angry, they would not buy from internet multinationals

Do I like to get the cheapest price I can? - Yes

Do I want a high street? Yes

Would you prefer to shop in a high street over online? - Well... sometimes.

Would you stop using a company if they continued to avoid taxes? - Sure!... unless it's the company which gives me a wonderful mobile experience, or gives me a huge range of cheap products which are free to deliver. Everyone else - no problem.

*Boycotting Starbucks purely because of the asking your name thing. Didn't they study the British people!?

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Anonymous Coward

Re: If the public were angry, they would not buy from internet multinationals

I've stopped buying stuff from Amazon, purely because of this issue. Yes price is important, but not over all other factors.

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Anonymous Coward

Re: Surely QOTW @ Shagbag, you clearly have never worked as a contractor..

Why contract through a company? its easier!

Contracting as a sole trader is hard, not many will deal with you, and, in the case of people like you mentioned, they usually have agents and other people working for them, in which case they need a company.

Another point is the 'normal' contractor will not get work unless they work through their own Ltd or an umbrella, clearly you have zero knowledge of the real world to point this out..

.

the real scandal was the offshore tricks they use to cut their tax down to near nothing, something most contractors do not do.

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Anonymous Coward

@ EddieD

"whether it's the registered business address is debateable [sic]"

Actually no, that particular piece of information is certainly not *DEBATABLE. It is a matter of public record:

http://wck2.companieshouse.gov.uk/d29ede152a9d7280f375f616e8c6004c/compdetails

It's in Nottingham.

The location of their registered office, of course has no bearing on whether they are employing any given tax avoidance techniques or not.

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Re: @Geoff Campbell

Geoff, the very point is that to interpose a tax efficient vehicle (in this case, a company) between two parties to a contract for services that can only be provided by personal exertion is perfectly legitimate in the UK but in other jurisdictions it is considered artificial/a sham eg. Australia where it is called a 'Tupicoff Scheme' (after the 1984 tax law case involving Mr Tupicoff - yes, that's right, 1984 when this sort of thing was outlawed 'Down Under').

So, one jurisdiction (UK) says it's a legitimate exercise while another (Oz) says it's completely bogus. Such is international tax law.

As to any claims about the 'quite artificial' nature of these types of transactions, there are provisions within UK tax law (eg. Ramsay) where the Courts can set aside transactions which are considered 'artificial'. So either the Inland Revenue is not doing its job or the transactions have passed muster and are not, as you put it, 'quite artificial'. Or perhaps you know something the Inland Revenue doesn't? In which case you should contact the Inland Revenue as soon as possible and point out to them where they're going wrong.

It's very easy to join the bandwagon and cry 'aritifical', 'sham', 'immoral', etc. but to do so misses the point: it is the Government which sets the law and it will be a much more profitable exercise to vent frustration at them than to swallow their misdirection and blame the multinationals for following the law.

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Re: Surely QOTW

The difference is that when it was just some ordinary bloke contracting the government could bring in IR35 and make you pay employee and employer NI contributions, could hand down decisions that you WERE really an employee when it came to tx but WEREN'T when it came to redundancy.

When it's big companies with lots of lawyers they suddenly can't do anything,their hands are tied etc

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Stop

Re: If the public were angry, they would not buy from internet multinationals

Your benefits costings are interesting, and valid, but...

I've been digging about around this a little recently. If your one person is changed to a 3 person household, two adults and one child say, (based in Northampton, in a 2 bed house, with band D council tax) the benefits they can claim if they are out of work is £17,910.54 per year.

If one of the adults is on Minimum Wage, working 42.6 hours per week, they (and their employer) will pay £2,719.08 in NI/Tax, but they will recieve £9,287.39 in benefits, meaning that the government is subsidising their employment to the tune of £6,568.31 per year.

With one adult on Living wage (outside London) that improves to being £3,997.24 in NI/Tax, and only £7,497.99 in benefits, meaning the subsidy is cut to £3,500.75 per year.

It's only where both adults are working 42.6 hours per week on either level of pay that they are paying more tax/NI than they get in benefits.

I've not yet calculated where the break even point is in terms of hours worked yet, it gets a bit tricky to do so.

That is just on Tax/NI/Benefits, I've not looked at including travel and childcare costs to find the break even point in terms of working vs benefits yet. I intend to do this shortly though, as well as trying to model different transpodt choices into that mix.

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Anonymous Coward

Re: Boots

Group HQ is currently in Zug - presumably for tax purposes, however they have recently sold 45% to Walgreens in the US with the option of selling the rest in 3 years time.

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Anonymous Coward

Re: If the public were angry, they would not buy from internet multinationals

Vistaprint are also at it. These companies are draining cash from the economy. No matter how many times The Sun and their ilk scream about benefits cheats costing us millions it pales into insignificance when you look at the big tax fiddlers.

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Welcome to Capitalism

Boo Hooo i only like the system when it benefits me they arn't playing fair waaaaahhhhh

its not right but they would be doing the exact same thing if they could get away with it.

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Unhappy

Perhaps I'll be the first to admit...

... I want the best of both worlds: It angers me to think that the likes of google is not paying a fair rate of tax on its profits but at the same time, I'd be lying if I said that I wouldn't buy a TV from Amazon if it was the cheapest place to shop.

However companies like Starbucks are on a different scale as far as I'm concerned: Not only are they not paying a fair rate of tax on their profits but they're raking it in AND gouging their customers at the same time.

So perhaps the main problem for me is that these aren't small, independent underdog companies working the tax system in order to stay afloat in a tricky market - these are vastly-profitiable multinationals who - in some cases - are screwing us twice: once when they rip off their customers at the till and then again when they don't pay tax.

I would, however, add that I'm completely absent of financial knowledge so may be oversimplifying things somewhat...

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If the Govm't are so concerned about this, then they need to fix the tax rules. Taking the time to do it properly will mean more money for them, more competitiveness in the market (good for us) and they get to be seen doing something good. While they are at it, they need to fix personal tax dodgers like Phillip Green as well.

Multinational profits made in a country should be taxed in that country.

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Anonymous Coward

Multinational profits made in a country should be taxed in that country.

The problem is how do you decide how much profit Starbucks make in any country?

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Re: Multinational profits made in a country should be taxed in that country.

its really easy. look at how much they sell in the UK, minus what it costs to make that revenue, and bosh you have magically worked out how much profit they have made. And if the try to make it harder than that, then fine them.

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Re: its really easy

It is only easy if the law is changed so that the multinationals can't claim that, for example, royalties for the use of intellectual property (a brand - Starbucks) are a legitimate cost of sale.

That will not be an easy thing to change. My company licenses copyright software to a Canadian company and clearly they need to be able to offset the licensing costs against the tax to their government. If the tables were turned and my company licensed software from Canada, how easy is it going to be for HMRC to distinguish that legitimate cost of sale from the 'immoral' Starbuck's cost of sale?

Just saying that it ain't easy - I for one don't agree that Amazon should be able to operate within a different tax world to John Lewis.

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Re: its really easy

It is easy. If the licensing is coming from any other group member or from a company with significant shared ownership HMRC rule it as a tax dodge and clobber them.

Part of this problemn is the HMRC giving the big boys a cosy ride....

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Re: Multinational profits made in a country should be taxed in that country.

> its really easy. look at how much they sell in the UK, minus what it costs to make

> that revenue, and bosh you have magically worked out how much profit they have

> made. And if the try to make it harder than that, then fine them.

So, if you sell apps on the App Store you'd be expected to figure out how much profit you'd made in each country in the world and pay corporation tax to that country at its individual corporation tax rate?

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Re: Multinational profits made in a country should be taxed in that country.

I know where your going with this, but yes. Its the only way to make it fair.

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Mushroom

Re: Multinational profits made in a country should be taxed in that country.

The nuclear option would be to completely ignore profit, and tax revenue instead.

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Anonymous Coward

@Mike Brown

Won't work, companies would pull out totally in that situation, I know I would loose money if I had to do that, I am based in the UK but sell around the world, so what am I do to? I sell one item in one country suddenly I have to pay tax there? the costs would outweigh the benefits...

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Agreed...but...

I agree with what you're saying but what is your definition of 'profits', eg. do you allow deductions for interest on borrowings? if so, what about shareholder loans? how much can a company borrow (and therefore, get tax relief on interest) before you deny them the ability for tax relief? 100% leverage, 80% leverage, 79.9% leverage? what about payments on perference shares - interest or dividends? do you allow deductions for raw materials bought offshore - if so, how much is a reaonsable mark up for the vendor? what if the vendor is related to the purchaser (ie. transfer pricing) - what markup is acceptable then?

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Anonymous Coward

Is it just me?

I find it ironic these immoral, expenses cheating politicians, with their gold plated taxpayer funded pensions are crying foul when they set up the rules of the game that the mulinationals play.

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Mushroom

Let them pull out ...

> Won't work, companies would pull out totally in that situation

If Starbucks or Amazon pulled out of the UK then so what; all that means is there's a huge gap in the market that would be filled quickly by an operation whose investors were willing to cut the UK government a fair share of the revenue stream.

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Re: Let them pull out ...

Yep, similar thing happened when all the corporations pulled out of South Africa. Local firms just took over and boosted the SA economy even further.

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Re: Multinational profits made in a country should be taxed in that country.

No, that doesn't work with low-margin things.

The nuclear option is to apply IR35-like rules uniformly. Revenue and customs sucks on the their finger, sticks it up in the wind and decides whether or not your revenue is taxable or not. Corporate law and tax law are not the same and may be contradict each other.

The problem is, that a "tax haven" is just another country. Compared to some countries tax systems, the UK is a tax haven. The difference is that some countries have low running costs (and therefore low taxes) but the UK does not.

Personally, I'm not sure if driving the high-street out of business is altogether bad. If people are happy to shop online, why are we pushing up prices by having physical shops in cities and towns? What is bad, is that the tax arrangements to accomplish this are complex and not open to the smaller trader.

Perhaps, rather than hiding the loopholes, the government could make it clear and easy to avoid corporation tax, perhaps under a "small trader" regime. Then smaller traders with lower overheads can join in, take trade from the big-boys and the government picks up extra tax revenue as income-tax, which is more difficult to avoid.

That just offends the large corporates, so we can't do that, can we minister?

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Re: Is it just me?

They are aren't worried. Its just posturing and blame shifting for managing the economy into a hole.

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Vic
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Re: Multinational profits made in a country should be taxed in that country.

> look at how much they sell in the UK, minus what it costs to make that revenue

And that's exactly where the loophole exists.

What it "costs" to make that revenue includes things like the price of their *unique* ingredients, plus licencing fees to the global brand owner. The difference between what they take and what they pay is negligible - hence the tiny tax bill.

What's needed is to find a way to prevent excessive transfer pricing - but that's not a simple thing when you've got multiple legal entities trading across international borders, and it's even harder when some of the countries involved will bring significant political muscle to bear to protect "their" companies...

Vic.

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When the Euro officials wrote the laws

They never anticipated the wholesale cross border trade we see today.

They only thought cars would be a problem.

So with cars you pay VAT (and other taxes) where you live.

For booze, fags and other stuff you pay VAT where you shop

Amazon are based in a lower tax country than the UK, so people get to go shopping more cheaply there.

This has happened for years. A colleague from Belgium once told me that where he came from on the boarder one side of a road was in Luxenbourg and the other in Belgium. Everything was cheaper to buy on one side of the street, so guess where people go shopping.

The situation with booze and fag tax in the UK has meant that for years people pile down to Dover and hop the channel to go shopping.

Its always been the case that you could phone a shop in another country and buy things straight from them.

It is just that the Internet and online shopping has made this easier.

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Re: When the Euro officials wrote the laws

That street in belgium/luxembourg is amazing. One side is just petrol stations, but none on the other side (that was 25 years ago mind...

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Anonymous Coward

Re: When the Euro officials wrote the laws

I thought that the debate was over 'royalty payments' and internal pricing rather than VAT. Any profits made in the UK are apparently wiped out by 'Royalty payments ' that are demanded by the offshore based parent. Similarly UK profits can be reduced by charging high internal transfer prices for supplies provided by that offshore parent.

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Re: When the Euro officials wrote the laws

Amazon (in the EU) actually charge you VAT based on where you ship the item.

Put something in you basket, then change the shipping address to France/German and watch the price change to reflect this.

VAT is the one thing Amazon et al do not **** around with because that part of HMRC actually know how to do their job.

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Re: When the Euro officials wrote the laws

exactly

The politicians winge about corporation tax, employees working for organisations via their own companies, etc, however none of this is illegal, but the politicians are too scared to take charge of the problem and give hmrc a swift kick in the fork.

The tax code in the UK has the largest number of pages in the EU , more than Germany or France, is excessively complex, and lets the big boys get away with it, why, because the politico's fear the big boys will leave.

Where are the results of the tax simplification exercise?

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Re: When the Euro officials wrote the laws

Of if we are cynical, '... because the politicos fear the big boys will end their party donations and the promises of a non-executive directorship...'

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Everything was cheaper to buy on one side of the street, so guess where people go shopping

Tax avoiders!!!!!!

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Anonymous Coward

Re: When the Euro officials wrote the laws

Also lets not forget the 'handling charge' for credit/debit cards, which reduces the vat for the seller, but means you get a lower vat amount to claim from hmrc, I personally experienced this with a well known out of town shopping complex shiny box UK retailer, and dobbed them to trading standards as they did not explain this 'feature' in their stores. TS passed it on to hmrc.

Just ask for a proper vat receipt , or closely scrutinize the receipt. In the end I used cash, just to annoy them.

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Megaphone

Switch to PC World? I don't think so!

Businesses have a right and duty to minimise their tax. Starbucks and Amazon are not breaking the law so fair play to them - we should get the framework changed if we want more of their money.

I use Amazon all the time and will continue to do so. Much of their sales are from UK based third parties who do pay tax and still offer competitive prices even after Amazon gets their cut.

Starbucks is great for nice tea, cool sounds, and good wi-fi - but for decent coffee it's Costa all the way, tax or no tax. (Mine's a Cortado thanks.) Plus Costa have real baristas and real espresso machines, not the automated junk Starbucks use.

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Anonymous Coward

Re: Switch to PC World? I don't think so!

"Starbucks is great for nice tea, cool sounds"

I. Don't. Even.

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