Guardian error attributes the entire estimated tax gap of £32bn to avoidance, which HMRC put at £5bn
Starbucks could face angry protests tomorrow after the pressure group UK Uncut said it planned to start targeting the coffee chain's stores, The Guardian reported last night.
The Guardian quoted Anna Walker, a spokesperson for UK Uncut, as saying: ‘Companies such as Starbucks are definitely targets in our sights for future protests. UK Uncut's previous sit-ins and occupations in the branches of tax dodgers have proved very effective in highlighting the unjust practices of big business.’
The paper reported that the group ‘will meet outside St Paul's in London on Saturday morning under the banner "no cuts, no tax-dodging", before joining a TUC march through central London against the government's austerity programme.’
It added that a spokesperson for Starbucks said: ‘Obviously, the safety of our staff is paramount, but we currently have no plans to close stores in central London over the weekend.’
HMRC’s annual estimate of the tax gap, released yesterday, put the total tax gap at £32bn. HMRC’s analysis indicated that error, failure to take reasonable care, criminal attacks, evasion and the hidden economy accounted for £23bn, or 73%, of the tax gap. Avoidance accounted for £5bn.
The Guardian incorrectly reported: ‘On Thursday, HMRC said a total of £32bn had been lost to tax avoidance in the past year, an increase of £1bn on 2010/11.’
The error was noted by at least one reader, who commented: ‘The £32bn figure is the entire tax gap, of which tax avoidance was £5bn of this figure. That wouldn't include anything from Starbucks of course because paying management/royalty fees and loan interest to a parent company is not tax avoidance.’
Corporate social responsibility
Nils Pratley, The Guardian's financial editor, said the criticism of Starbucks ‘is that it has championed the success and profits of its UK operation in corporate statements but then minimised its UK corporation tax bill through a variety of techniques – all perfectly legal’.
He wrote: ‘The original Reuters investigation said this "licence to lose money" worked in three ways: via royalty payments to a Dutch-based Starbucks company that pays some of its revenue to another Starbucks unit in Switzerland; via purchasing coffee beans from a Swiss-based trading unit; and via high-cost debt financing provided by the US parent.
‘That's the detail of the story that [Kris Engskov, Starbucks’ managing director in the UK] hasn't addressed. It's common practice to pay royalties for the use of a brand, but why is Starbucks UK's set at a steep 6% of revenue and why do some of the payments appear to end up in Switzerland? Similarly, is the UK business paying commercial rates for its coffee beans and debt?’
Salman Shaheen, indirect tax editor at International Tax Review, noted that the ‘scandal’ over the Starbucks’ UK tax arrangements had ‘sullied its reputation’. In an article posted on the ITR website, Shaheen suggested that arguments based on a company’s ‘total tax contribution’ no longer ‘wash’ with public opinion. ‘If companies are to learn from Starbucks’ example, they may do well to consider tax when formulating their CSR policies,’ he said.
‘But for the campaigners, the key lesson is that Starbucks managed to pay so little tax without breaking any laws,’ he added.
Shaheen quoted ActionAid’s Chris Jordan as saying that the Starbucks ‘debacle’ was evidence for a broader review of the international rules. ‘It’s impossible to boycott every company and ultimately we need government action,’ Jordan said.
Guardian error attributes the entire estimated tax gap of £32bn to avoidance, which HMRC put at £5bn
Starbucks could face angry protests tomorrow after the pressure group UK Uncut said it planned to start targeting the coffee chain's stores, The Guardian reported last night.
The Guardian quoted Anna Walker, a spokesperson for UK Uncut, as saying: ‘Companies such as Starbucks are definitely targets in our sights for future protests. UK Uncut's previous sit-ins and occupations in the branches of tax dodgers have proved very effective in highlighting the unjust practices of big business.’
The paper reported that the group ‘will meet outside St Paul's in London on Saturday morning under the banner "no cuts, no tax-dodging", before joining a TUC march through central London against the government's austerity programme.’
It added that a spokesperson for Starbucks said: ‘Obviously, the safety of our staff is paramount, but we currently have no plans to close stores in central London over the weekend.’
HMRC’s annual estimate of the tax gap, released yesterday, put the total tax gap at £32bn. HMRC’s analysis indicated that error, failure to take reasonable care, criminal attacks, evasion and the hidden economy accounted for £23bn, or 73%, of the tax gap. Avoidance accounted for £5bn.
The Guardian incorrectly reported: ‘On Thursday, HMRC said a total of £32bn had been lost to tax avoidance in the past year, an increase of £1bn on 2010/11.’
The error was noted by at least one reader, who commented: ‘The £32bn figure is the entire tax gap, of which tax avoidance was £5bn of this figure. That wouldn't include anything from Starbucks of course because paying management/royalty fees and loan interest to a parent company is not tax avoidance.’
Corporate social responsibility
Nils Pratley, The Guardian's financial editor, said the criticism of Starbucks ‘is that it has championed the success and profits of its UK operation in corporate statements but then minimised its UK corporation tax bill through a variety of techniques – all perfectly legal’.
He wrote: ‘The original Reuters investigation said this "licence to lose money" worked in three ways: via royalty payments to a Dutch-based Starbucks company that pays some of its revenue to another Starbucks unit in Switzerland; via purchasing coffee beans from a Swiss-based trading unit; and via high-cost debt financing provided by the US parent.
‘That's the detail of the story that [Kris Engskov, Starbucks’ managing director in the UK] hasn't addressed. It's common practice to pay royalties for the use of a brand, but why is Starbucks UK's set at a steep 6% of revenue and why do some of the payments appear to end up in Switzerland? Similarly, is the UK business paying commercial rates for its coffee beans and debt?’
Salman Shaheen, indirect tax editor at International Tax Review, noted that the ‘scandal’ over the Starbucks’ UK tax arrangements had ‘sullied its reputation’. In an article posted on the ITR website, Shaheen suggested that arguments based on a company’s ‘total tax contribution’ no longer ‘wash’ with public opinion. ‘If companies are to learn from Starbucks’ example, they may do well to consider tax when formulating their CSR policies,’ he said.
‘But for the campaigners, the key lesson is that Starbucks managed to pay so little tax without breaking any laws,’ he added.
Shaheen quoted ActionAid’s Chris Jordan as saying that the Starbucks ‘debacle’ was evidence for a broader review of the international rules. ‘It’s impossible to boycott every company and ultimately we need government action,’ Jordan said.
