Starbucks has been facing a lot of criticism for having paid little to no taxes in the UK, and in Europe at large, and they may finally be paying the price with lower business. The main criticism was that Starbucks was paying zero taxes in the UK, despite $630 million in sales.
After heavy criticism, Starbucks eventually met with British tax officials and “voluntarily” agreed to pay 20 million Pounds in taxes, or about $32 million. Yes, you read that right. Voluntarily.
Not everyone is impressed. One official said, the “church plate going around on a Sunday morning is completely the wrong way to think about it.” And the reaction to the voluntary $32 million tax payment has been less than complimentary to Starbucks.
Tax experts described the company’s payment proposals as “commercially gobsmacking”. Politicians said it proved the UK’s tax system was being treated as a “complete joke”. Even tax campaigners lambasted the move as “just a desperate attempt to deflect public pressure”.
These complaints were compounded by Starbucks deactivating the comment facility on its UK website – unlike early blogs, which were swamped with comments from customers threatening to boycott the stores. “The emotion of the issue has taken us a bit by surprise,” said Engskov last week.
It’s true that there may be a few slight problems in the tax code when multi-nationals can pick and choose like this. We shouldn’t be surprised though, because the multi-nationals have teams of lawyers and lobbyists to work around pesky problems like “taxes.” If the oil industry can get billions of tax breaks each year, and bankers can get their lifestyle bailed out, it shows that anything is possible for this crowd so long as you have the right team in place.
They live by different rules than the rest of us, and usually they win. Recently though, there have been cracks in their fortresses. The Papa John’s CEO who has a moat and golf course around his mansion is suddenly facing a hit to his brand after his temper tantrum over having to pay for Obamacare for his low-paid employees. Same story for the healthcare-bashing Applebees and Denny’s.
And now in the UK, though we don’t yet know about Starbucks’ sales, we do know that their competitor, Costa Coffee, is suddenly seeing an increase in their sales. This is a step in the right direction for fairness. And Costa Coffee is now using the Starbucks incident to their advantage with customers.
“We have been the UK’s favourite coffee shop for some time; we remain the taxman’s favourite coffee shop too,” said Andy Harrison, chief executive of parent company Whitbread.
He said it was impossible to attribute Costa’s increasingly strong performance to the controversy surrounding Starbucks’s tax affairs, but noted that Costa had enjoyed a record week last week, with UK stores – excluding franchised shops – taking £10m and attracting 3.8 million customers.
Harrison said he had seen the results of a YouGov brand preference survey, conducted at the end of October, shortly after a Reuters report highlighted Starbucks low tax payments in the UK. “They show Starbucks have taken a bit of a knock as a result [of public outrage],” he said, but he was not able to release the precise figures.
Bad behavior shouldn’t be tolerated, and if this recent trend continues, it’s a positive sign that despite being out-spent by these large companies, it is possible to have an impact.