Education game must follow Starbucks controversy

by Calum Fuller

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18 Oct 2012

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Starbucks

THE NEWS THIS WEEK that Starbucks has paid no corporation tax in the UK since 2009 – and just £8.6m since it arrived on these shores in 1998 – is the latest in a long, long line of controversies.

Of course, adding the coffee house's name to the ever-growing list of big corporations allegedly not paying their fair share will do little to quell the widespread ire that many hold.

A substantial part of that is that these companies' situations have not been adequately explained, nor has the government sought to clarify what is due and why.

A case in point in the Starbucks furore is that many reports suggest it has not paid any tax on its turnover. Yet corporation tax is a tax on profits, not turnover, and it posted losses in its accounts, as many fast-growing businesses do. As such, no corporation tax is due.

The biggest issue in the Starbucks story is that its top brass have allegedly been telling investors the company is profitable in Britain while still posting losses with Companies House. That, of course, raises its own questions.

However, the continuing focus on the large numbers and famous names does little to help the true issues or help people at large understand the processes involved. Instead, they are vaguely angry with Starbucks and react by threatening a boycott without understanding how we got to this point.

Education is the crux of the problem, as without it, this situation will persist and more companies – which may or may not be engaging in tax dodging – will be dragged in.

Who undertakes that task, to whom, and by what means is a whole new debate, however.

Calum Fuller is the tax correspondent for Accountancy Age and Financial Director.

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