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Starbucks' tax tricks are killing small businesses

Posted by Anthony Karibian on Nov 13, 2012 12:15:20 PM

Over the last few months, controversy has slowly been building around the amount of tax paid by large corporations operating in the UK. It all came to a head yesterday when three of the main offenders (Starbucks, Amazon and Google) were questioned by the House of Commons Public Accounts Committee. As taxpayers, we all feel a little cheated by some of our favourite household names. But I can’t help but think that, yet again, it’s the small businesses that are taking the burden.

Starbucks, the headline act in this latest show of tax avoidance, has paid only £8m in UK corporation tax in the last 14 years, despite generating sales of £3 billion. Last year, it paid nothing. Starbucks said they haven’t made any profit in the UK, but every cup they sell here actually generates royalties which are dealt with in the Netherlands - where they can legally pay a very low tax rate.  Clearly, you don’t need an MBA to figure out there some fat margins in every cup of latte.

What Starbucks is doing is not illegal - although in my eyes it is immoral. It is not very different than squeezing the small coffee producers in Ethiopia that supply Starbucks. Big businesses like Starbucks can afford creative accountants who find loopholes in order to pay a tiny percentage of tax. Small businesses can’t afford these creative accountants - they can only afford to be honest.

The UK’s main corporation tax is 24%, whereas some big businesses are getting away with paying just 3.2%. I wonder how many small businesses have failed because they simply couldn’t afford to pay all the taxes required. This tax avoidance is not only bad for small businesses, it’s bad for the country - HMRC estimates such schemes cost the UK £32 billion last year.

The silver lining of the tax fiasco is that it has highlighted the dubious practices of some big corporations. As a result, their image has suffered - according to YouGov's BrandIndex, Starbucks’ "buzz" score, which measures the number of negative and positive comments customers have heard, hit -28.6 during the most heated point of the controversy last month. A year ago its rating was at +3.1.

Because of the wide coverage, I can only hope that people have a new-found respect for independent businesses such as cafes and bookshops, rather than turning straight to Starbucks or Amazon. We should all stand behind the honest, hard working small businesses this country has to offer. Besides they have more charm and better coffee than the big dull chains.

Topics: CEO's blog

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