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It is not all so balck and white you know, this whole tax debate...

It is not all so black and white you know, this whole tax debate…

This is about the Starbucks tax payment, recently in the news in the UK. For those of you who may not know, Starbucks, through accounting schemes, had not paid any money in corporation tax in the UK where they took in about £400m of business per year in the last 3 years. It was all legal. Starbucks, after about a week of this being in the news, *decided* to pay £20m in what was loosely described as tax over the next 2 years, because, starbucks says, this is what their clients said they wanted. Obviously Starbucks previously thought that their clients were completely happy with the company not paying any tax while the clients themselves were taxed at 20-45% without any way out of it. Ok then, £20m. This of course raises more questions than it answers. How was this number arrived at? Why not more or less? Is this what is acceptable – if agreed with the Revenue people – and expected by other companies? The list of questions is endless and applies to many large multinationals. I wonder how difficult it would be to do this: Revenues should be taxed at source. The moment someone pays £2 pound to buy a coffee, tax should be applied to that. Some carefully calculated tax rate, maybe 20%, whatever. Once the money is with the tax-revenue, then the multinational company can present a case (every year) to say what expenses were relevant and deductable and claim money back from HMRC (IRS in the US) once (and if) it is approved. This plan is of course hugely problematic, very bad for businesses that are now operating on a basis of tax schemes that allow them to keep their money without having to give a penny as corporate tax. The main argument for them is that they are net contributors to employment. This is debatable – how many closed-down coffee shops correspond to each Starbucks? It is really a philosophical question for governments. Do they want big businesses or smaller? Or rather, it is a far less philosophical question for big businesses. Should they do away with governments altogether? How many people still believe that governments have more power than multinational corporations? Have you heard of BAE?

For more information on the subject have a look here:

 

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