Starbucks has had second thoughts.
Starbucks has UK sales of £400m annually but arranged its affairs so that it paid no UK corporation tax in the last 3 years.
It paid £8.6m over the last 14 years. In contrast homegrown Whitbread's Costa turns over less but
pays about £15m annually. It's was all legal but the questions was: was it right? Neither UK politicians nor UK public opinion thought so.
Now Starbucks has changed course. It will pay about £10m UK tax in each of the next two years by foregoing tax deductions on coffee purchases, inter-company loans, royalty fees and capital allowances. In other words it is abandoning widely used, generally legal, strategies designed to shift profits from higher tax countries to lower tax countries.
First, who will follow Starbucks? Amazon? Google?
Second: Does a system that encourages corporation tax avoidance overlaid with voluntary tax donations make sense?
And third, will the Chancellor now consider dropping all corporation tax deductions (except perhaps bad debts) and setting an ultra-low flat rate of corporation tax?
Anthony Fitzsimmons is Chairman of Reputability LLP and author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”
- This blog carries a series of posts and articles, mostly written by Anthony Fitzsimmons under the aegis of Reputability LLP, a business that is no longer trading as such. Anthony is a thought leader in reputational risk and its root causes, behavioural, organisational and leadership risk. His book 'Rethinking Reputational Risk' was widely acclaimed. Led by Anthony, Reputability helped business leaders to find, understand and deal with these widespread but hidden risks that regularly cause reputational disasters. You can contact Anthony via anthony.fitzsimmons At cranfield dot ac dot uk