Starbucks agrees to pay $32m in UK taxes. Is it too little too late?

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.

The Daily Telegraph:

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.

StarbucksIt’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.

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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9 Responses to “Starbucks agrees to pay $32m in UK taxes. Is it too little too late?”

  1. RyansTake says:

    I wish we Americans could get as pissed off over our companies when they get caught not paying taxes (and often worse — not paying, but taking hundreds of millions or billions in government contracts or tax credits… cough*GE*cough).

  2. A reader in Colorado says:

    I bet that libertarian dream world would turn into a libertarian nightmare if it was made clear “if you wish to do business in our country or sell anything to our citizens, you will pay the tax rate we require you to pay, including back taxes”.

  3. cole3244 says:

    the well off wether an individual or a business are the takers in all societies, the average citizen is always the giver, when everyone realizes this things might change for the better.

  4. Asterix says:

    It’s a PR stunt, the same way that Apple building Macs in the US is. Cheap, at that.

  5. They’re just looking worse and worse. Everyone I know in the UK has stopped buying anything at Starbucks. Some news reports reckon they’ll be down 20 percent in revenue in the next quarter as so many Brits are so pissed off.

    As for me, I never buy at Starbucks. Hate the company.

  6. Naja pallida says:

    So, in a libertarian dream world, this is what we should expect corporations to decide to contribute to the society they choose to do business in?

  7. A reader in Colorado says:

    Yeah, you’re right.

  8. OtterQueen says:

    More like 5%.

  9. A reader in Colorado says:

    32 divided by 630 is 0.5 percent.

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