back to article That enough, folks? Starbucks tosses £5m into UK taxman's coffers

Starbucks, one of the three firms - along with Amazon and Google - that have been hauled over the coals because of their teeny tax bills in Blighty, has handed over £5m to HMRC to please its customers. The payment, the first the multinational firm has made in corporation tax in the UK for five years, said that it would make …

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Anonymous Coward

Giving the government free money is like handing a Crack addict twenty pounds and expecting him to leave you alone in the future.

You will be disappointed.

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Stop

False Analogy

This isn't giving the government money in the hopes the government will leave the alone.

This is trying to buy a bit of good will from their customers, I bet it's even come right out of the marketing budget.

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At least the crack addict

Would spend 20 quid.. and get 20quid worth of crack.

The government will take the 5mil quid, spent it on something that ends up costing 50mil and is then scrapped because they calculate its cheaper to scrap it than finish the project.

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Anonymous Coward

Just because you don't like what the government does with your money doesn't give you the right to set up trickery to dodge paying it.

Starbucks sells coffee in the UK and makes money from it. By claiming they didn't make any money because every coffee sale requires a royalty payment so the cup can have the Starbucks logo on it is just devious.

Any shortfall in taxation is dumped on the PAYE employee.

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So: basically it's a protection racket

> to become profitable before we started paying UK corporation tax

Well, err ... actually - yes. Isn't that what corporation tax is supposed to be? <FX: scratches head, looks mystified>

However it does appear that the tax climate has changed for multinationals in the UK. In recognition that the accountants who work for companies will always be better (i.e. higher pay attracts talent, civil service pay grades not so much) than those who work for HMRC and the government - and therefore will always find ways of keeping their employers' taxes in the low single figures, the tax position has shifted to a public-opinion based assessment rather than a financial one.

So now, instead of reporting profits, costs & turnover, each company will just bung a wad of it's own discretion at the treasury. In return they won't get the PM making snarky comments about them to the press.

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Meh

Re: So: basically it's a protection racket

"Well, err ... actually - yes. Isn't that what corporation tax is supposed to be? <FX: scratches head, looks mystified>"

Therein lies the problem, what is profitable? What does that mean?

Would there have been profit if not for poorly defined "brand services" charged to the UK corp from a tax haven?

Conversely, are brand services (international marketing? trans-national supply negotiation?) actually quite a legitimate expense?

There's no doubt in my mind that a lot of dodges are used to make it look like there's no profit where there might be tax, and that's the bit I'd like to see pinned down.

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Re: So: basically it's a protection racket

Well, there's accountants being 'good', and then there's accountants creating an corporate structure that makes profit vanish as far as the tax man is concerned but still somehow be around for the shareholders.

Personally I like the idea of a government capable of paying for hospitals, roads, schools, police, and so on. I'm also coming round to the idea of adding the guillotine to that list.

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Anonymous Coward

Re: So: basically it's a protection racket

Not to mention the people who help companies "dodge" tax are all millionaires themselves. People getting filthy rich helping other wealthy people get even richer while everyone else gets lumbered with higher taxes (some of which are used to bail out the casino banks).

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Re: So: basically it's a protection racket

> Personally I like the idea of a government capable of paying for hospitals, roads, schools, police, and so on. I'm also coming round to the idea of adding the guillotine to that list

Yes. The problem is that this method of wringing money out of companies is political and it's corrupt. Who says which companies should be hauled through the pit of public opinion? There may be some tax-minimising companies that a particular government "likes" (whether due to patronage, political donations, employing in marginal constituencies or the old-boys network) and therefore chooses not to lambast. It also means that decisions about the amount of slagging-off that a particular company gets, to "persuade" it back to the path of righteousness is arbitrary and non-transparent: bad properties for a tax regime.

Finally, it may persuade the companies in question to play dirty, too. What happens if Starbucks starts printing political slogans on its coffee cups? Or if banks start giving preferential treatment to customers living in post-codes that have proven sympathetic to the goals of big-business?

While this sounds like a good idea - and probably will work as a one-off (or warning), it could come back to bite the politicians in the bum if used as a blunt instrument (though how a blunt instrument could bite your arse, I don't know)

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Re: So: basically it's a protection racket

What I want to know is why they let Vodafone off 6 billion fairly recently. (Or some huge sum in exchange for a billion right now). At least this site said so didn't bother checking the facts but either way 5 million is peanuts in comparison.

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Re: So: basically it's a protection racket

"Personally I like the idea of a government capable of paying for hospitals, roads, schools, police, and so on. I'm also coming round to the idea of adding the guillotine to that list."

If that was all government was, and was all done in an efficient manner, we'd have 20% tax.

Education costs £99bn. That's just over a grand each.

Health costs £130bn. Around a grand and a half each.

Roads? Well, the road fund license more than covers that.

Policing? £40bn at most. And a lot of that comes from your council tax.

So, that's around 1/3rd of the total government expenditure of 722bn. And a lot of that is badly run. Thanks, but the state can burn someone else's money before mine.

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Windows

I doubt

very much Starbucks have done this on a whim. No doubt expensive lawyers will no doubt have managed someway to circumvent some "law", legally, of course....Therefore diverting funds away from the inland revenue...

Mega corporations are mega for a reason....

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Anonymous Coward

starbucks start paying tax

whatever next ... starts making (half-)decent coffee ??

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Re: starbucks start paying tax

Don't go mad, anon.

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Re: starbucks start paying tax

They pay the tax they have to pay, (until proven otherwise). Nothing more and nothing less - as both those circumstances would allow HMRC to fine them. It's not rocket science. No idea why they would actually want to give money away thought, other than for the aforementioned marketing reason.

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Anonymous Coward

This is just an effort to get the customers back in the door.

I know one person who admits to using starbucks everyone else skips them.

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I never pay at Starbucks

By also having a pee every time I go in I make a net loss and so don't have to pay for the coffee.

Shoplifiting is illegal but "advantageous purchase planning" is all part of my duty as a Yorkshireman to pay nowt.

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Coat

Re: I never pay at Starbucks

What, you pee in your coffee everytime you go into Starbucks ?

That's not coffee steam coming out of your goblet is it ......

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Re: I never pay at Starbucks

They claim a net outflow of money from the country - I claim a net outflow of liquid at Starbucks.

The amount I take in from a cup is less than the amount I flush down their toilet.

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Anonymous Coward

Would you believe a chain with so many branches everywhere you look and they're still not making any profit??? surely that just means, the more they open, the more debt they get into???

Starbucks cranking the bullshit meter up to 11.

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Anonymous Coward

I have a shop that sells bananas.

I also has a tiny office, registered somewhere with a favourable tax policy, that sells bananas, to my shop.

My shop makes a small loss because the bananas are very expensive - so the shop pays no tax.

My office makes a large profit because it buys bananas cheap and sells them at a very large mark-up.

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Anonymous Coward

vertical marketing

Isn't that how petrol and natural gas prices are calculated (less extrotion tax obviously)

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That's a simpler desciption than I managed when trying to summorise what they were doing. Thanks, I'll try remembering that one.

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Transfer Pricing

Is the basic form of this dodge, but most governments can have adopted policies that allow them to assess the costs being charged for the good or service if they fall outside an allowed range (so the "very expensive" bananas would be assessed at a little above their actual cheap price and you would have to pay tax on your profits as if that was the case).

Obviously this depends on the government having a good idea of what a good or service is actually worth

I guess what Starbucks is arguing is that without the very expensive use of their corporate branding, they would be just another, barely-breaks-even coffee shop.

So the branding must be worth all the profits, right?

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Simples:

It's a franchise model. See http://www.starbucks.co.uk/business/franchised-stores

Franchisees have to buy the product from starbucks and pay royalties, etc. they are also responsible for their own tax affairs - it also means that boycotting the shops hurts those local businesses far more than the corporate backoffice. Things are far more complicated than a few soundbites might suggest.

(Starbucks in the USA is not a franchise op)

It appears that starbucks USA business model has been to beat everyone else in a given area out by attrition (there are places in the usa where there's a starbucks on all 4 corners of an intersection), and then reduce the number of stores plus jack up prices. Such activities would be actively curtailed in the EU.

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The shop in the Caymans doesn't even need to sell you the bananas - it can just hold the trademark on your greengrocer's misuse of the apostrophe.

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Stop

better still with your bananas you could have a logo. Simply import the bananas into the UK at a nice favourable rate and put a sticker on your bananas. your sticker needs royalty payments though so your wifes company in switzerland gets royalty payments equal to your would-be-tax. That way at least your business can operate in the UK with normal cashflow without needing to move money about (after paying your wages of course). Your would-be-tax sits in switzerland as a pension fund.

Run at a slight loss to increase your offset just in case you accidentally make a profit.

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Hard to get excited

This is just a PR stunt, as they have already said that they will now have to close or move stores in areas that make little or no money. So they are going to close stores and claim that it's the governments fault as they had to pay tax.

"A spokeswoman said the company was now "undertaking measures to make Starbucks profitable in the UK".

She added unprofitable stores would be closed or relocated and there would be a "greater reliance on franchised and licensed stores". (http://www.bbc.co.uk/news/uk-politics-23019514)

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LPF
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Re: Hard to get excited

Starbucks is very profitable in the UK and said so in their US annual statement. If they are making no money, then I suggest for the good of the company that we close down those shops and sell themoff to rivals, so that we don't take starbucks down and allow that great company to continue in more profitable countries.

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Re: Hard to get excited

Great, closing down stores out of pettiness will leave space for local, tax-paying, businesses to move in offering the same service.

But with better coffee and less austere surroundings.

Win win.

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Re: Hard to get excited

They may have to shut down some of their stores? Say it ain't so! That'll have absolutely no negative effect on anyone's life*, and might expose some folks to decent coffee sourced from smaller, tax-paying local companies...

What's the downside, exactly?

* Okay, maybe a few folks will need to swap their Starbucks name badge for a Costa / Greggs / Whatever name badge...

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Re: Hard to get excited

Since they are vital to the nation's economy ( the city would grind to a halt if people couldn't get their espresso) and yet they lose money they should be nationalised

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WTF?

PR cost £5m

So basically Starbucks did some market research to see at which point they will see less public support for the campaign against them and picked up the most profitable amount?

"We listened to our customers in December and so decided to forgo certain deductions", really sounds to me, we decide how much we are ready to pay, it's nothing about stopping using tax optimisation tactics but balancing it with PR.

Amazing how large corporation just decide how much they are going to pay.. ummm I'll give your £10m this year if you promise to shut up and stop moaning.

Still well below what tax should be on their pseudo-non existent profit is (ie: Total of sales - Cost (minimum wages, rent, cost of coffee)), not license (etc...) fees from Irish/Virgin Island/Cayman Island subsidiaries.

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FAIL

Expensive Lesson Learnt

Maybe it would have been cheaper to keep up the political donations after all, eh, Starbucks?

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If I were Starbucks shareholders I'd now be looking into a class action against them for giving money away rather than funnelling it back into shareholder profit!

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And therein lies the problem.

'Nuff said.

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FAIL

Why? 5 mil is pretty cheap if it expands your market or un-tarnishes your reputation in the UK.

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Paris Hilton

No! Don't do it!

Dear Starbucks

Please make sizeable donations to UK charities of equivalent amount and cancel the cheque to HMRC immediately.

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In other news ...

Starbucks' Swiss parent company declares 12 million loss for the next two years due to non-payment of transfer cost items by the UK subsidiary.

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Pot meet Kettle

"while firms like Starbucks, Amazon and Google haven’t illegally evaded tax, they’ve behaved "immorally" by employing tactics designed to see their profits end up in countries and regions with low tax rates."

I look forward to this being applied by the government everywhere:

* Whilst not technically guilty of fraud, Party X have not kept their election promises so should be jailed (bye Clegg!)

* Blair being banged up for conspiracy to commit (mass)murder and fraud. Sure technically it was a police action against WMD but it was "immoral"

* Various politico's who got busted on expenses claiming they have done nothing wrong, guess we can nab them now?

Or is it a token PR move to get the facebook boycotter's to come back which should not be too hard as most people can't seem to function without a large paper cup in hand!

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MJI
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Never been in one

None locally, we have at least 8 Costas, 3 in supermarkets and 1 next to one of those. Even have a Costa in a school.

But they pay tax.

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Angel

Starbucks have had £3,000,000,000 sales in the UK apparently. And paid very very little tax on that.

Let's assume a 30% profit margin (on extremely overpriced coffee, so I think I am being generous to Starbucks here), that's almost a billion profit in that time.

Corporation tax is what? 20%? So Starbucks SHOULD have paid some £200,000,000 in tax to date.

So, in my opinion, retail (B2C) outlets based abroad should have the option to not pay corporation tax at all (as they will just avoid it). Instead, their sales would attract a higher rate of VAT. Either consumers will move to cheaper home-grown retail outlets as they're cheaper (lower VAT rate, pay corporation tax), or the UK government will rake in the extra VAT. And the companies can't shift profit and loss and costs around to make "0 profit" to avoid tax. VAT has been raised already, partially because of shifting tax from corporations (ever decreasing corporation tax rates) to consumers, so let's take it a bit further and stick two middle fingers up at these corporations.

B2B, needs some thought.

Maybe we need some physical beatdown on the corporations, directors and accountants that screw society over with their actions.

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Unhappy

Re :- Maybe we need some physical beatdown on the.....

you missed lawyers, school teachers, doctors, that bloke down the road who doesn't seem to do anything but drives a better car than you. Yeh!, just go for it. Better for you, better for society. Don't worry about the fact that all their nefarious stuff might actually be within the law.

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Re: Re :- Maybe we need some physical beatdown on the.....

Just because something is within the law doesn't guarantee un-nefariousness.

Just ask GCHQ's gigantic, entirely legal, wiretap department.

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Re: Just because something is within the law doesn't guarantee un-nefariousness.

Good point but why go after the people/companies complying to the law as it stands. Surely attacking the cause rather than the symptom is the more efficient route.

(Yes I understand that generally you need a bad guy figure to throw the virtual tomatoes at, but it really only worked when the bad guy was in the same village you lived in, and also they never left it).

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Anonymous Coward

--- Yes, it is entirely legal. You don't need to ask us, we already know.

Regards,

GCHQ

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Anonymous Coward

Margaret Hodge

A paragraph paraphrase:

While Margaret Hodge, head of the committee, hasn't illegally evaded tax, she's’ behaved "immorally" by employing tactics designed to see her profits end up in countries and regions with low tax rates.

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Coat

Not making money

I've seen hundreds of them, why expand if you arent making money >_<

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Five Meeeelion Pounds

Wow. All our financial troubles are now over.

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Pirate

All politicians and government employees

Need to be on a pay-for-performance scale. The public decides if they are doing their job and they get compensated accordingly. Just like the rest of us that they think they are better than.

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