Coffee House

Starbucks protests: We need political power to reform the tax system

8 December 2012

UK Uncut is holding its day of action against Starbucks today, with more than 40 demonstrations across the country in the chain’s coffee shops. The group’s sit-ins aim to highlight the chain’s tax avoidance strategy which has led to it paying just £8.5m in corporation tax since 1998, despite sales of £3bn in the UK.

While it’s not a bad thing that tax avoidance is moving up the agenda, there are probably more fruitful ways that those irritated by tax avoidance can spend their time, rather than making life a bit awkward for some poor barista who has no involvement in their employer’s tax affairs. It’s worth reading this debate between City AM’s Allister Heath and UK Uncut’s Ellie Mae O’Hagan, where Heath, while accepting that UK Uncut’s ‘protests have been very successful’, points to the real root of the Starbucks problem. He tells O’Hagan:

‘People should be protesting at MPs. All these politicians grandstanding on select committees, saying they’re disgusted – well, wait a second – they’re the ones who voted through finance acts. They’re the ones who voted for budgets. So why can’t they take responsibility and change the law?’

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Covering the Public Accounts Committee’s hearings on tax avoidance, the most frustrating thing was that the MPs interrogating HMRC, Starbucks and others seemed as keen on registering their disgust about tax avoidance, possibly for a nice little press release after the hearing, as they were on the overall picture. Margaret Hodge, a fierce interlocutor, was equally keen to tell the Today programme about her boycott of Starbucks and that she wasn’t using her Kindle any more, even though the firms involved are operating within the law.

Even the small ‘victory’ this week that Starbucks will now pay £20m in corporation tax over the next two years wasn’t enormously heartening as there are always going to be new ways for other companies – including Starbucks, once those two years are up – to drive down their tax bills perfectly legally using Britain’s Byzantine tax system. The people power that drove Starbucks to make its announcements should now turn its attention to political power pushing for reform of the whole tax system, not a make-do-and-mend policy where a loophole is sewn up here, and another avoidance scheme darned away there. Fraser outlined what that reform would look like in a recent column, arguing that a flat tax would remove the hiding places for tax dodgers, and remove the incentive to avoid tax, too.

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Show comments
  • dalai guevara

    This entire Starbucks/Google/Amazon/Apple thing is far too one-sided for my liking. Why all American brands? What happened to Phil Green and his Monegasque wife? What about Boots and their Zug stronghold? Are they all squeaky clean?

    • Rue de la Loi

      If a small business with many cash transactions declares very low profits despite a high turnover, claiming that it prefers to keep employment up and prices down, the Revenue can refuse to take the figures at face value and impute a certain level of profit to the company, it then being in effect for the taxpayer to prove that they did not make the profit imputed to them by the Revenue. It might be possible to do something to impute a notional profit on those using transfer pricing to create liabilities to parent companies in jurisdictions like Switzerland, but within the EU I think you will run into difficulties; the Revenue has basically lost the battle between free movement principles and collection of tax where profit is generated.

      • dalai guevara

        How come Germany already have a superior (intermediate?) working solution? There appears to be a ‘natural gradiant’ within the EU already. Why is that? I am almost certain they do not just employ seven HMRC equivalent staff do deal with the matter…

  • TomTom

    Why is this attention focused on 3 US MNCs Starbucks, Amazon, Google rather than on UK MNCs like Vodafone ? Or even Banks like Barclays and Goldman Sachs, Morgan Stanley and UBS ? It is very peculiar how the PR machine has gone into overdrive before Christmas against certain consumer-facing businesses but ignored the £6,000,000,000 that Vodafone saved through a sweetheart deal with Hartnett at HMRC> Is it true that Hartnett’s former deputy at HMRC works gfor Vodafone ?

  • Daniel Maris

    The Starbucks Story is one of the big reasons why I think the Tories are not going to get re-elected. Because this is something that goes to the fundamentals of the system.

    • ButcombeMan

      WRONG. The Starbucks story is a Gordon Brown failure yet again, inherited by the Coalition.

      Starbucks entered the UK market in 1998 . It grew enormous under Brown and the current low tax inheritance, is his.

      Brown overcomplicated tax & benefits and reorganised the IR & HMC&E on the basis of the evidence free, O’Donnell report. The reorganisation, took too much effort, morale dropped , the combined structure became too big to manage. Staff cuts and reorganisation sapped its strength.

      HMRC struggles now, with almost everything. it is the Balls/Brown love child.,

    • Fergus Pickering

      How does it? Would Labour change this? In what way?

  • Daniel Maris

    You’re suddenly worried about a “poor barista”?!?… since when have you devoted articles to “poor baristas” who lose their jobs despite working incredibly hard because their companies go down in the market place.

    So, let’s at least have as our starting point the fact that you don’t really care about “poor baristas”.

    Then we might have some sensible discussion about tax…

    Personally speaking I think Starbucks needs to be taken down “pour encourage les autres”. We need to bankrupt them completely. It won’t harm them since they aren’t making any profit here anyway (LOL). Let Starbucks disappear from the UK market place. That will send a message.

    • the viceroy’s gin

      …it will send a message that the people doing that are self destructive fools.

  • Colonel Mustard

    In 2008 Gordon Brown, aided and abetted by Ed Balls, raised the tax of the lowest paid workers in the UK from 10% to 20%, doubling the tax burden of the poorest contributors to the economy. He did this just as the prices of basic commodities began to rise.

    This has been forgotten or deliberately disregarded by the Leftist Agenda. Their crimes never count and they never apologise for them.

    Never forget it. Never let the Leftist Agenda forget it when they are peddling their lies and slogans or accusing the Tories of victimising the poor.

  • Keith

    Why is it “not a bad thing that tax avoidance is moving up the agenda”? You offer no justification for this assertion.

    Look at it another way. If the murder rate fell, would you suggest that the life imprisonment avoidance rate should be moving up the agenda? If not, why not?


  • Kevin

    How much of the success of UK Uncut’s protests is down to them as opposed to the popularity of their cause with the TV news channels?

    For example, during the Bush Years, the Stop the War Coalition appeared to be the proverbial “voice of the people” on the subject of Iraq.

    During Obama’s Libya War, however, I had to look up their Web site to find out that they were also opposed to that conflict.

  • David B

    Unfortunately Balls would use any simplification of the tax system to gain political advantage. The last government used complexity as a means of control and they will not want to give that up

    • telemachus

      Balls would turn any Coalition incompetence to political advantage
      Remember you refer to a quite exceptional charismatic genius

      • David B

        Are we talking about the same person, I referred to the guy who made the incompetent response to the autum statement. The guy that help repeal the 10p tax rate seriously disadvsntaging the low paid.

        You must mean someone else

      • Hedxhamgeezer


  • mikewaller

    It would be a very good start if those firms able to do so were encouraged to display signs and include on letterheads etc. a statement to the effect that they take no extra-territorial measures to reduce their liability to UK corporation tax.

    Thanks to an excellent BBC4 documentary broadcast some months ago, I know that both Boots and Cadbury re-registered relatively recently in Ireland in one case and Switzerland in another to cut the Corporation tax they pay in the UK. The reduction for Boots was – as best as I can recall – something like £140 million down to about £11 million, Folks might like to bear this in mind when deciding where to shop. Trouble is, it is not often clear where else to go, hence my call for a signs that would enable well behaved firms to make their position known.

    In the meantime I have just paid more than would otherwise have been the case for an electric blanket from Argos to hold my deals with Amazon to a minimum and e-mailed back one of their customer experience questionnaires, uncompleted with a note saying, “Why should I co-operate with you when you are stiffing my country”. I would encourage others to do the same.

  • Troika21

    Its good that tax is rising on the agenda, but its unfortunate that UK Uncut are driving it, I doubt anyone would welcome their ideas if they got their way.

    • Daniel Maris

      The point is that while we all or most of us thought they were absurd anarchists 3 years ago, we now realise they were speaking straightforward common sense! I’d like to personally apologise to them for ever doubting what they were saying. The idea that huge companies could get away with paying NO corporation tax never occurred to me then.
      Of course now, thanks to the efforts of UK Uncut – whatever their ultimate motivation – I am a lot wiser.

  • Richard111

    Blaming the MPs is far, far too simple, although the majority of MPs are too simple to appreciate that the issue is very simple. Governments propose the law, MPs approve the law, HMRC administrates the law and businesses abide by the law or else it is evasion which is illegal.

    If the law is unintentionally or even intentially unclear, then Government has a duty to propose changes which make it crystal clear whilst businesses have every right to argue a case to their own advantage. It is HMRC’s responsibility to accept that case if it is reasonable in the light of the rules laid down by Parliament.

    If Governments are unable to write a rule book that is crystal clear, then it is not the fault of businesses when they argue for an interpretation to their own advantage. In fact you can go as far as to say that it is their responsibility to shareholders to do so.

    We have had Finance Bills that are over 1,000 pages long whilst the cumulative rules are in danger of squashing anyone they fell on. Yet these MPs are arguing all this is not sufficient regulation and are in effect saying “don’t do as I do, but do as I say”. We are moving a long way from the concept of freedom under the rule of law.

    It is only a few years since a Prime Minister overruled Competition Law to encourage, or coherse if you like, LloydsTSB to merge / take over HBOS. This was done without adequate due diligence and resulted in the taxpayers of this country likely to lose £billions from the subsequent events.

    Yet many of these MPs, who had cabinet responsibility or voted for various measures, are the same ones who seek to tell ordinary people what they should do even though it is within the rules they themselves were responsible for. Dirty, grimy, horrible, smelly pots telling kettles of varying cleanliness. We should be naming and shaming those responsible who sit either on the Green Benches, in another place or even passed over to join the ones being investigate by the police for misdeameanours of another nature.

    • telemachus

      Starbucks refuses to pay the living wage of £8.55 per hour in London and £7.45 across the rest of Britain.

      They have plans to cut terms and conditions on paid 30-minute lunch breaks and paid sick leave for the first day of illness.

      And it is feared that some staff will see pay increases frozen, while cuts in maternity benefits are said to be imminent.

      • Richard111

        Corporation tax is payable on profits. The more you make, generally the more tax you pay.

        VAT is a tax on turnover. The more you sell, generally the more tax you collect and pay over.

        Income tax and national insurance is a tax on earnings. The more you pay your employees, generally the more is collected by HMRC.

        The more you sell may mean the greater selling space required and hence more of a tax called business rates.

        Profit is a function of sales less costs or more precisely gross profit (sales value minus raw materials) less operating costs.

        The lower your operating costs for a given level of sales, the higher your profit and hence corporation tax. But this is likely to be achieved through lower employment and hence less paid to HMRC in terms of income tax and NI.

        Running a business is not straight forward. It would be easier if there were no such things as customers, staff and regulations. At times I wonder why anyone would want to be involved in the hassle, but at least doing so helps you to be able to live. At the end of the day you either make a profit, live to fight another day and pay over some tax or else go bust.

        However, some Governments seem to either not recognise this or, if they do, think it does not matter. They think there is no relationship between making a profit, tax revenues and spreading largesse to the population at large. They seem to be surprised when there is nothing left in the kitty.

        And the real tragedy is that there are individuals who are taken in by this, believing in some magical money tree. But it is only a more grown-up version of believing in Father Christmas or there are fairies at the bottom of the garden.

        • Daniel Maris

          Well Richard 111 you will be pleased to hear that you now hold the official record for the greatest number of platitudes inserted into 9 paragraphs of text. Well done!!!

        • telemachus

          Thankyou for your Business School diatribe
          Does this also apply to Cafe Nero and Costa Coffee or just struggling Starbucks?

          • Richard111

            It applies to each and every company. And so should the way we tax companies.
            Add in years of complexity and we get what we have got. Add in more complexity and the result will be more of the same.

        • TomTom

          You are right and i fear a move to the German system of taxes levied on assets or headcount rather than profits alone. This is a shakedown and will make Starbucks carry a balance-sheet liability which is simply an arbitrary impost to be amortised – Prepaid Taxes

      • Daniel Maris

        Well, this is a rare occasion on which we can agree Telemachus. Let Starbucks be consigned to the outer darkness. Let them make not a penny or pound in the UK.

        • Right On

          Yes, that’s a great idea. And the thousands of people who work there? Other than the tax they pay it seems to be entirely lost on people that they are responsible for thousands of jobs.

          • the viceroy’s gin

            Yes, but they have not displayed complete loyalty to the Reich. In the new national socialist order, they are proving to be insufficiently committed to the Fatherland. .

            And when Starbucks is liquidated, those unemployed people can be put to work building autobahns and such.

          • Daniel Maris

            In my experience they are mostly students, tourists (working their way around Europe) or new immigrants who don’t stay long in the jobs. The coffee trade won’t disappear – it will just move to companies who do rightly pay their taxes in the community that allows them to survive and prosper as a business. They will be able to apply for the new jobs created there.

            • the viceroy’s gin

              Yes, those students and tourists are all gypsies and untermensch. It would be best if we dealt with them now rather than later.

              • Daniel Maris

                Don’t be ridiculous Viceroy.

            • Right On

              You can’t be naive enough to believe that all Starbucks customers would migrate to other coffee shops. Like them or not they are responsible for much of the market and their marketing has brought far more consumers into that market. To think anything else shows a total lack of understanding of why they are succesful.

              • Daniel Maris

                Starbucks were the pioneers – but other companies have followed the formula of creating a reasonably pleasant and relaxing environment in which to drink coffee and selling ridiculously priced biscuits (probably a mark up of around 500% I would guess) as the main source of profit I expect.

                I expect if Starbucks were to give on the UK they would sell up their chain. I don’t think it’s a franchise op unlike some of the others I think.

      • Madame Merle

        Telemachus, this must be the first time in history that I am in total agreement. This is a company which trades on its “hipster credentials, Seatle= capitalist cooler than Frisco, thing” and yet, it treats it’s employees like rubbish. Starbucks are typical of brands that turn marketing on its head so as to appear to be new, fresh and caring.

  • Nick Reid

    Isn’t corporation tax already a flat tax ?

    You pay the same corp tax on your first £1 of profit as on your hundred millionth pound.

    Anyway the point about Starbucks is that it doesn’t declare much profit. And the suspicion that it has been overly aggressive in manipulating this profit down.

    That’s the issue, not whether a tax is flat or not.

  • Hexhamgeezer

    Is UK Uncut an anagram?

    PS. Greggs’ coffee is miles better than that CostBucks stuff

  • baekjo

    Had I known about such protest, I’d went out of my way (the usual Costa) and went to Starbucks, having my double esspreso, why the moronic hong wei bings freeze outside.

  • ButcombeMan

    If Osborne had any real brains he would immediately have set out about simplfying the UK taxation system on becoming Chancellor and also immediately gripped spending. He did not.

    VAT on everything possible at a simple flat rate would be a good start as would other flat taxes. The Uk could & should, have led the world in tax simplification.

    Instead he has been captured by the Treasury wonks and the leftish cries of taxing the rich, as if that will solve the taxation problem, or go anywhere near it. Osborne fell into the Brown/Balls, carefully laid trap.

    Osborne is doing too little and too late. His time has nearly run out. He has fiddled with pasties while the economy burns.

    “Tax does not have to be taxing”.

    • telemachus

      As you say fortunately Osborne’s time has nearly run out
      Soon to be replaced not only by a proper economist but one in whom we can trust

      • Austin Barry

        Trust Balls?

        Tele, you are stark staring bonkers.

        Balls’ track record precedes him, and Osborne is left, untutored, to pick up the pieces. You want Balls back? Madness.

        • Dicky14

          He seems to have a child like affection for Balls undiminished by all facts demonstrating the contrary. He’s definately a stooge but i’ve got suspicions that he may be quite poorly or a 14 year old kid.

          • telemachus

            I have a devotion to excellence and a profound sense of duty to my country

            • Hexhamgeezer

              which country would that be, tit?

      • notme3

        A p-p-proper economist?

        • telemachus

          It I’ll behaves you to mock disability
          No doubt you laughed at the Paralympians

          • notme3

            Do you think equating a politician getting a nervous stutter with the achievements of the paralympians?
            It’s like someone with the common cold thinking their suffering is the same as someone with bowel cancer.

          • Coffeehousewall

            “It I’ll behaves you….” ???????

            I take it that whoever is on duty at the moment does not have English as a native language. It seems that even the Labour Party are employing immigrants to troll who don’t speak English.

    • Nick Reid

      To be fair and sensible I don’t think it would have been entirely sensible to rip up and restructure the entire structure of the UK tax system two years after the biggest financial crisis in living memory.

      The markets would understandably have taken fright. The scope of the Treasury for screwing things up completely was just too great to take that sort of risk.

      However that doesn’t mean that Osborne shouldn’t have been planning a wholesale restructuring of the tax system.

      And it wouldn’t surprise me if he were doing so. Plenty of talk about merging Nat Insurance in with income tax for instance.

      • ButcombeMan

        It could not have been done overnight, as you correctly state. It could have been started and a road map created within 6 to 8 weeks. It is not difficult at all. The Tories had 13 years to think about it.

        Sending signals that the whole taxation system was to be simplified, made more business friendly and cheaper to administer, would actually have reassured the markets. Such behaviour would have contrasted with Balls & Brown, who overcomplicated everything and very incompetently at that.

        You maybe are making the assumption that none of the thinking about these things has been done. It has.

        The current 20% VAT on some goods and zero on others is too big a gap, 20% is also distorting behaviour leading to a lot more fraud, evasion & deregistration which HMRC have no hope of tackling.

        Fraud to evade VAT at 20% leads to further evasion of income tax and corporation tax.

        We have got ourselves to the point that a lot of tax is optional for those in the know.

        PAYE is not coping with a flexible workforce with more than one job. IR35 is not being applied properly and is not working (think of the BBC), self employment is often far more lucrative than working for an employer.

        HMRC now plainly collects some tax (Starbucks?) through blackmail , bluff and secret deals. This is third world stuff.

        HMRC tries to get more tax in by threatening press release (Plumbers & Doctors I noticed recently-among others). It is bluff and bluster. It is pathetic. I feel sorry for that woman-Horner is it?

        She needs to tell politicians the truth

        So complicated is everything that HMRC has no real idea of the tax gap across many regimes (though it pretends otherwise) and no competency to get to real grips with much at all.

        Meanwhile intellectual midgets in the Treasury pull pasties out of their bottom drawer and Osborne falls for it.

        The situation is hopeless. Osborne has failed to deal with simplification and when Labour get back in, as they undoubtedly will now, they will also fail.

        • ButcombeMan

          An article in today’s Telegraph Business says that Treasury modelling shows that reducing VAT in tourism associated industry would boost VAT takings by 4 billion pounds.

          Well exactly .

    • jazz6o6

      When opposition Osborne was briefly a proponent of a flat rate tax system, then Michael Howard or someone sat on him and we heard no more about it.

  • Austin Barry

    Starbucks brought absurdity and complexity to coffee, as our rulers brought absurdity and complexity to tax legislation.

    Both should be simplified.

    • Fergus Pickering

      Starbucks brought comfortable armchairs to sit in and coffee that was nice and not nasty. hy do you supppose people go there? Because the bloated cpitalist has put a spell on them? Even MacDonalds has its points or used to. They didn’t bat an eyelid at what small children did. That’s why I too mine there.

      • Coffeehousewall

        Starbucks makes foul coffee in a bad environment. Neros take for ever to serve you. Costas in Waterstones in Maidstone is the best.

        • Fergus Pickering

          Nothing wrong with Starbucks coffee. I like mocha with sugar and a ton of whipped cream on top. Very pricey which keeps the hoi polloi at bay. Mine’s in Sainsburys so what’s wrong with the environment?

  • telemachus

    They do an uncommonly good hot chocolate without whip streets ahead of the competition
    Leave them alone

    • Austin Barry

      “Hot chocolate without whip”?

      Sounds like pensioner’s night in a brothel.

      • telemachus

        The serious point is that it is Osborne’s job to screw money out of these multinationals, not for them to volunteer money beyond what the law demands

        • Austin Barry

          A first: we agree.

          • telemachus

            That Osborne is guilty of dereliction of duty
            Well that’s a start

        • Fergus Pickering

          How would you suggest he does it. Denis Healey tried and confessed he had failed utterly, And I NEVER pay more tax than I can help. How about you?

      • Hexhamgeezer

        That would be a walnut whip.

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