James Ashton: Starbucks' tax climbdown means others must wake up and smell the coffee wrangles will continue

Outlook There are all sorts of reasons why Starbucks should have held firm over the issue of tax. Instead, it has opted for the ultimate in tax self-assessment which will see it cough up £20m over the next two years, whatever it makes.

Before its about-turn, the coffee chain was operating within the law by making a royalty payment to its Dutch arm that wiped out profits and negated the need to cough up corporation tax.

That flavour of tax, like this season's gingerbread latte, is only one part of the mix for the company. Like everyone else, Starbucks is also on the hook to pay employment taxes on the staff it has recruited, business rates on properties and VAT on goods and services.

Corporation tax has become a convenient campaigning issue, but measuring it is a very inexact science. A piece of research I carried out last year found that 20 per cent of the companies in the FTSE 100 – so notionally British firms, not foreign multi-nationals – paid their chief executive more than they paid the Exchequer in corporation tax in the prior year. Many had paid no corporation tax at all.

There were all sorts of reasons given, such as benefiting from tax credits for making investments, overpayments in prior years that had been rebated and overseas interests which dwarfed tiny British operations.

Corporation tax is lumpy at best, but more often – as with deciding whether George Osborne's deficit is actually going up or down – just tricky to calculate.

Starbucks came a cropper by following not the spirit of the law, just the letter of it. You don't have to be a tax accountant to drink its coffee, and it showed in the public outcry that ensued.

Margaret Hodge, chair of the Public Accounts Committee who labelled such activity as "immoral", suggested in the House of Commons today that public pressure was having an effect. She has a point. Starbucks has had the froth knocked off its cosy, community-spirited image with this one. Caffeine addicts really were voting with their feet.

Coming out as it did today sets an interesting precedent. Without discussing the matter with HM Revenue & Customs, Starbucks is effectively pledging to pay a fixed fee for operating in Britain – a bit like the banking levy the Government has forced on our lenders.

Who will follow? Google has been bolder in this debate, insisting its tax affairs will be shaped by the law of the land, safe in the knowledge there is less choice in the search engine market for users to stray off to.

International treaties to capture leaking tax revenues aren't easy to agree on, yet Starbucks has shown coffee drinkers and politicians alike that they aren't necessary. Does Amazon share its view? Today's climbdown means this issue will run and run.

News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
sportColombian World Cup star completes £63m move to Spain
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
News
news
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

Michael Jamieson: Why weight of pressure rests easy on his shoulders

The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn