Sunday, 2 December 2012

My Reaction to Starbucks' Reaction to the Public Reaction to Starbucks not paying tax.

It is a hard thing to live a moral life. I have vegan friends, who would insist that the delight I take in [eating] a melting slab of pork belly is depraved. There are difficulties in both utilitarianism and deontology, the two major competing schools of moral philosophy. And what happens when morals run out, and you have to choose between ‘fighting the Nazis’ and ‘saving your grandmother’[1]?

And there’s always the temptation of a gingerbread latte in a red cup, a sweet elixir that the fourth wise man brought Jesus 2000 years ago.

The Starbucks story is well known. Through internal corporate group transfers and payments, Starbucks can manipulate where profits end up. Usually, they end up in countries with lower rates of corporation tax, so that the Starbucks family can cream off the biggest chunk of money that it can. This is a standard sort of ‘tax avoidance’, a perfectly legal way of arranging your finances. But as we know, what is legal is not always what is moral.

Another time, I will look at two ways a state can deal with tax avoidance in law  - retrospective law making and a ‘general anti-avoidance rule’ (or GAAR).

For present purposes, I am more interested in the corporate communications of Starbucks. To me, they look stupendously ill advised.

The initial Starbucks reaction was hilarious. In it, Starbucks claimed to be acting not only to the letter of the law, but in its spirit as well. The ‘spirit’ of taxation, in my view, is that those who benefit from society contribute to it. Not that you move your money away to low tax jurisdictions which are not realistically your key business centres so you can benefit handsomely  Starbucks also claimed to pay £160m in the UK in tax, including in National Insurance, business rates and VAT. Forgive me, but isn’t VAT a consumer tax, paid at the very end of the supply chain? I paid some VAT for Starbucks; give me a medal.

A month or so on, and it’s now reported that Starbucks has acknowledged the ”feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more”.

I like many things about this statement. One, that it’s taken a month or so, and public feedback, for Starbucks to see that their approach sticks in the craw of your average UK taxpayer. Jimmy Carr could have told them tax avoidance isn’t popular. Second, is that it reeks of the corporate sentiment of maintaining customer loyalty, when really what is needed is an appreciation that paying tax is a good thing for society. Capitalism does not necessitate that you forget the world outside your direct business chain. Finally, the ‘need to do more’. No, the need to do the right thing. It’s not more. It’s standard.

[1] I have no idea if this is a common example. I’ve lovingly borrowed it from John Finnis.