Starbucks do not pay corporation tax

I don’t work for them, I don’t even like them. The coffee is as bland as the shop, but I use them anyway because it’s convenient and they have wifi. At least the staff are consistently friendly and try their best despite atrociously long queues. Starbucks is insanely popular. Whether we like to admit it or not, we all like to use Starbucks, but it seems some of us would like them to “contribute” a bit more tax, for the good of the country.

© Shinji WATANABE

The problem is that “Starbucks” is a legal and marketing fiction, an abstract concept, like “blue” or “liberty”. Blue walls don’t paint themselves. Liberty doesn’t fight for itself and “Starbucks” does not pay tax, and it never could. People paint walls blue. People must fight for liberty. People must pay taxes. The law says this legal fiction can have money of it’s own, and it has a bank account from which taxes are expected to flow. If “Starbucks” isn’t a person then who’s money was that really? Shareholders, yes, but also employees and customers.

Tax is paid for by earning revenue from sales to customers, as are the investors seeking a return for their outlay. To get the same return, if costs go up, investors will insist on higher prices or their money back. Why wouldn’t they? They will be trying to get by without their money for a long time and risk loosing it. Often that money is someone’s pension. It doesn’t matter if the new cost is a tax, the price of toilet cleaner, or the premium paid for the Fair Trade logo, it all comes from people buying stuff, in this case, coffee. Corporation tax is levied as a proportion of profit so reduces an investor’s return (their pension) directly. You buy the coffee that pays for it so corporation tax is pushing up the price you pay.

There is another group that ends up paying part of the corporation tax bill: the staff, from logistics, marketing, fat-cat management or shift-working barristas; all of them are paid from revenue just as the corporation tax is. The barristas are competing for sales money with all these other costs, including all the taxes, employers NI (our hidden 13.8% job tax), VAT, local authority rates and corporation tax. Even tax paid on behalf of employees (income tax and NI) pushes up the cost of salaries to the business and the costs of administration too. Once again, share holders who agreed to invest for a certain return fairly insist that any costs be trimmed out of wages. Corporation tax lands on shareholders, and on every member of staff too. That applies to every company.

Whether you work at Starbucks, or any other company, remember that abstract brand names don’t pay corporation tax. One way or another, you do.

  6 comments for “Starbucks do not pay corporation tax

  1. pavel
    Nov 26, 2012 at 11:37 pm
  2. Nov 27, 2012 at 1:27 pm

    Remember Corporation Tax is paid on profit, not revenue thankfully…

    • Nov 28, 2012 at 12:45 am

      I clarified the article. Is it still punchy enough though? Hmmm.

  3. Nov 29, 2012 at 1:18 pm

    The headline is slightly misleading. The Starbucks legal entity does pay corporation tax – it’s affairs are merely structured (deliberately one assumes) to ensure that it earns its profits in jurisdictions where the tax due on profits is less onerous than in the UK. This is a further benefit of relatively free global markets – to encourage countries to compete for the profit-earning jurisdiction of large corporations. The same is true of high net worth individuals. Only yesterday there was the release of figures showing that the number of individuals declaring UK earnings of £1m+ plummetted when the 50% rate came in. Hopefully the UK government will finally get the message – lower taxes means more people wanting to do their business and declare their profits in our country. You’ll raise more revenue by taxing 10% of a lot than 50% of fuck all.

    • Nov 30, 2012 at 9:41 am

      The headline is disingenious, the point is that no corporation pays corporation tax! I’m not much into debating, but I believe they call it a category error. Banana’s can’t be atheists and legal fictions cannot really pay tax.

      … and nor would we want them to.

Comments are closed.