The smile on Starbucks' iconic mermaid must be a little tighter than usual today following news that the Seattle-based giant is "in discussions with HMRC and the Treasury" over the backlash concerning the low amount of tax that the company pays in Britain.
It is round one to the campaign to put the spotlight on multinationals that appear to operate flourishing businesses in the UK but pay almost no tax. Only weeks ago, in October, managing director Kris Engskov was dismissing calls for a change in Starbucks' UK tax methods. After reportedly paying a modest £8.6m in corporation tax in 14 years of trading in Britain, and none for the past three years, despite sales of £1.2bn in the UK, the company protested that nothing was amiss. "Regretfully," it said, Starbucks "had not been as profitable as we would have liked". Now, following "feedback from our customers", it has promised to look again at its tax approach.
The anti-tax-avoidance campaigners, who had mooted ominous-sounding plans to target some of the 700-odd Starbucks outlets in Britain, are entitled to feel satisfied. They have shown that public pressure can humble even the mightiest global corporation if it poses a threat to that all-important phenomenon, the company's brand image. And there is little doubt that a portion of Starbucks' most loyal customers – those politically aware, laptop-using youngsters who congregate there for the free wi-fi as much as for the latte – would have fled at the merest hint of street action against the chain. Such calculations surely explain the speed with which Starbucks has recanted.
While campaigners celebrate a victory for people power, credit should also go to the Chancellor, George Osborne, who has threatened to clamp down on corporations that avoid paying tax legally but, in the view of MPs, immorally, by shuffling their assets around and exporting profits from one country to another.
During Wednesday's autumn statement, the Chancellor is expected to announce the appointment of an expert to lead a consultation into a possible new levy on multinationals that appear to be wriggling out of paying their fair share. At a time when Labour is pressing home the line that the Tories are friends only to the rich and powerful, Mr Osborne would do well to play up his role in bringing Starbucks to its senses. He should remind the public that being pro-business does not have to imply sympathy for "creative" accounting.
But the battle is only half won. Of the three companies charged by MPs with "immorality" in terms of corporation tax payments, Starbucks, by the nature of its business, was always going to be the most vulnerable. Google and Amazon may be more resistant, although their tax offerings, if anything, are even more insulting to businesses in this country who do not have the luxury of moving assets around the world. Google paid £6m in corporation tax in 2011. Amazon stumped up just £2.3m in corporation tax in this country over three years.
Replying to MPs' complaints last month, Google's boss in Britain, Matt Brittin, said the fault lay in the tax system, not in the tax policies of companies like Google. Inadvertently, perhaps, he has pointed the way forward. Rather than relying on campaigns to shame companies into paying more tax than they are legally obliged to, the Chancellor must change the law and close those loopholes that have proved so fruitful for accountants and lawyers. The line should be clear: companies that make big profits in Britain should be taxed on those profits, and the money should remain in this country, not vanish elsewhere.Reuse content