Starbucks tax payments a bizarre move

by Calum Fuller

More from this author

24 Jun 2013

  • Comments
Starbucks

SO, STARBUCKS has come good on its £20m promise to the taxman, making its first £5m payment to HM Revenue & Customs this week. How kind.

The move - an attempt to placate the irate British public, tabloids and Public Accounts Committee after it emerged the coffee house had paid only £8.6m in corporation tax since 1998 - gives the impression the levy is somehow voluntary. Indeed, these new payments have been openly described as such.

"HMRC should calculate what it thinks it is owed and charge it, and Starbucks should pay it. Tax is not voluntary, and the taxman should not be in the business of accepting extra, voluntary, payments."

I wrote those words in December after Starbucks announced its intention to make the payments, and I feel it's as true now as it was then.

Granted, it may be a good PR move, but that is simply not how it works, and gives entirely the wrong impression of how the tax system functions.

A prime example of that is the mainstream media's repeated and widespread citation of companies' sales and turnovers rather than their profit, which is, of course, what corporation tax is levied on. It only serves to confuse and does very little to further the debate on corporate taxation.

So do these payments mean Starbucks is profitable in the UK? It's not clear, although its statement alongside the first instalment said it is "undertaking measures to make Starbucks profitable in the UK", suggests it isn't just yet.

Well, it wouldn't be if it hadn't decided to forego reductions against various transfer pricing mechanisms and capital allowances, which it's entitled to.

It's an incredibly weird situation, but the salient point is this: companies' tax bills should not be determined by public opinion, rather than the rules.

From Starbucks' perspective, though, it should be minded to follow through its new policy. A one-off gesture will only attract more ire.

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

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

Appointments to University Committees

University of Glasgow 120x60University of Glasgow - Glasgow - unremunerated positions

 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.