tag:blogger.com,1999:blog-3993498847203183398.post5389727801390736674..comments2024-03-28T09:19:27.451+00:00Comments on RevK<sup>®</sup>'s ramblings: This Starbucks thingRevKhttp://www.blogger.com/profile/12369263214193333422noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-3993498847203183398.post-66045548737663489792012-12-12T17:34:05.044+00:002012-12-12T17:34:05.044+00:00Interesting - bizzare if the UK company is not bre...Interesting - bizzare if the UK company is not breaking the law doing this but the US company is breaking US law!<br />if they are breaking laws, that changes the whole argument, of course.RevKhttps://www.blogger.com/profile/12369263214193333422noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-59793616194272560382012-12-12T17:22:52.343+00:002012-12-12T17:22:52.343+00:00RevK says: "There is no set rule on what cons...RevK says: "There is no set rule on what consultancy and name rights and so on cost or their market value or that companies have to pay market value for stuff anyway. So the audit will be perfectly fine."<br /><br />An expert on US business rules says: "As a U.S. based publicly traded corporation, Starbucks is obliged to follow U.S. securities law and Generally Accepted Accounting Principles (GAAP) when speaking with our shareholders. U.S. accounting rules stipulate that our taxable income in regional markets, such as the UK, be calculated before accounting for the impact of intercompany license and interest payments." [1]<br /><br />So musrepresenting the intercompany licences and interest payments and such can't legally be used to hide the profits.<br /><br />And Starbucks themselves have said they will not in future claim tax deductions "for royalties or payments related to our intercompany charges."<br /><br />UK-only businesses don't have the opportunity to play this silly arbitrage game. Do you think multinationals like BT also play this game? Would smaller businesses prefer to be playing on a slightly fairer (and certainly simpler) playing field?<br /><br />[1] http://starbucks.co.uk/blog/setting-the-record-straight-on-starbucks-uk-taxes-and-profitability/1241cjhttps://www.blogger.com/profile/12864716352761027073noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-22328638798215423962012-12-12T11:38:18.832+00:002012-12-12T11:38:18.832+00:00Well, yes and no. As I understand it the accounts ...Well, yes and no. As I understand it the accounts declare no UK profit as the parent company charged it a lot of money leaving no profit. That is fact, albeit contrived to ensure profits go where they want them to. There is no set rule on what consultancy and name rights and so on cost or their market value or that companies have to pay market value for stuff anyway. So the audit will be perfectly fine.<br /><br />The upsetting customers one is a good point - and it is odd how lots of other high street names manage to do the same without customers campaigning outside their store. Now we have the disproportionate reaction to starbucks, they will have to do this differently I expect. Odd they are being picked on, and not the laws that allow then to do things they way they are.RevKhttps://www.blogger.com/profile/12369263214193333422noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-92181867745811060072012-12-12T11:32:29.610+00:002012-12-12T11:32:29.610+00:00The UK company presumably publishes accounts as re...The UK company presumably publishes accounts as required by law.<br /><br />The UK company's accounts are presumably audited as required by law.<br /><br />Ditto the parent company.<br /><br />Howcome the auditors are happy (or even allowed) to sign off on accounts where the relationship between reality and the numbers in the accounts is somewhat farfetched (to put it politely)?<br /><br />Don't problems like this (and quite a few others) go away if audited accounts actually mean something?<br /><br />Looking at the slightly bigger picture, isn't it incumbent on a company's directors to see that if they upset their potential customers sufficiently, they will go out of business?<br /><br />Tax dodging does upset customers, and should therefore be factored into the directors actions, along with the other usual factors.cjhttps://www.blogger.com/profile/12864716352761027073noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-83249365914259241952012-12-12T04:11:07.844+00:002012-12-12T04:11:07.844+00:00I have not looked at the structure, but if the UK ...I have not looked at the structure, but if the UK company is owned by the parent company, i.e. they are the shareholders, then that is who the directors have to consider. There is no requirement to act in the best interests of the UK tax system or the UK as a whole, but in the company members (i.e. the shareholders).RevKhttps://www.blogger.com/profile/12369263214193333422noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-39381210633787909102012-12-12T03:05:51.768+00:002012-12-12T03:05:51.768+00:00I can see how it's in the best interests of th...I can see how it's in the best interests of the parent Starbucks corporation, but I have to wonder if the directors of the *UK* arm of Starbucks are really fulfilling their obligations. As I understand it, Starbucks UK are overpaying for services from other Starbucks owned companies (eg paying above market rates for their coffee beans, above market rate loans etc) which serves to make the UK company have a loss, and the parts of the business in low tax countries make the profit. Overall good for Starbucks. However, it's clearly a bum deal for Starbucks UK, who could be making a profit if they didn't have these above-market-rate deals. Shouldn't the directors be thinking in the best interests of the *UK* company and be sourcing things at market rates? (And hence making a profit here, on which they'd pay tax).<br /><br />Or is there some get-out in UK company law that lets the directors of a UK company be allowed to deliberately do things that are bad for their company, just because they happen to be good for one of their overseas shareholders?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-39105699975177800092012-12-11T01:30:19.972+00:002012-12-11T01:30:19.972+00:00I don't think most people in this country even...I don't think most people in this country even think about a tax bill, let alone envy Starbucks over theirs.<br /><br />But they might have benefits that are being slashed, and reasonably feel aggrieved at HMRC's soft touch compared to ATOS' brutal benefit assessments.<br /><br />The principle is that Starbucks are making profit from the UK market, yet not paying tax here. The legal means by which they shift that profit is widely seen as immoral, because it's only available to the very largest companies, and even then not all of them choose to do it (e.g. Costa). Starbucks's scheme is also, as I said, likely _not_ legal due to the high prices charged for intra-company transfers.<br /><br />You might want to check out e.g. http://www.taxresearch.org.uk/Blog/2010/07/07/tax-avoidance-evasion-compliance-and-planning/ to see why using an ISA is different from unrealistic transfer pricing.Matthew Blochhttps://www.blogger.com/profile/05871321013845582412noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-83666474048575487542012-12-10T13:34:01.552+00:002012-12-10T13:34:01.552+00:00Good for Starbucks - Still getting many UK and non...Good for Starbucks - Still getting many UK and non UK citizens buying their coffee - Seems protesting is fine so long as no one is thirsty. Agree totally with your blog post Rev.Gary M Houghhttps://www.blogger.com/profile/10976032477129336885noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-72160449355531975352012-12-10T10:39:45.379+00:002012-12-10T10:39:45.379+00:00If they are legally allowed to move the profit tha...If they are legally allowed to move the profit that means they are declaring zero profit in the UK. That is not a lie, it is a choice as to where they declare the profit, which is a choice lots of multinationals make. They made profit from the UK sales, obviously, as a multinational, but moved where it was made by legal means.<br /><br />Also, the idea consumers pay the VAT is just wrong. Tax at the point of sale does not work like that. If you add a tax then the price will find a new market rate which is possibly higher than without the tax but not simply the previous price plus the tax. Jaffa cakes are a good example as their price competes with chocolate covered biscuits - if VAT was added that would almost all fall on McVitie's not the customer as the price could not easily go up a lot. Prices are not set based on "cost", they are set based on market value and utility functions and so on. So a tax on the point of sale, like VAT, is a tax that hits the customer and the supplier in various degrees. However, regardless of who pays the VAT, the VAT does got to HMRC. After all the coffee buying customer pays for the profits and pays for the corp tax as well, it is money they pay that ends up in tax, so saying VAT is paid by the consumer is missing the point, sorry.<br /><br />It is a fact directors have to act in the best interests of shareholders - it is almost unheard of for them to be done for not doing so, and typically a director would have to resign rather than criminal case. It is hard to prove that a director is not acting in best interests of shareholders in most cases. The main reason they do not get done is that they do in fact do their job and act in the best interests of shareholders, often being a shareholder themselves. My point is that the law is such that we expect and require companies to be selfish so should not be surprised when they are not.<br /><br />It is not that I don't see the difference, it is that I am trying to distil a clear principle. If taking an action that reduces tax going to HMRC is immoral, then so is using an ISA. So clearly the principle is not simply "taking an action that reduces tax going to HRMC". So what is the actual principle that is immoral here? Personally I think the issue here is "someone else is managing to save on their tax and I am not, whaaaaaaa whaaaaaa!" but I may be wrong - there may be a clearer principle here.RevKhttps://www.blogger.com/profile/12369263214193333422noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-47431117511336947512012-12-10T09:09:03.675+00:002012-12-10T09:09:03.675+00:00It is not really lying - it is moving the profit t...It is not really lying - it is moving the profit to another country. They are making profit "from" the UK, but that profit is in another country as the corp tax there is lower. Someone said Microsoft pay tax in some obscure country - can we boycott all Windows machines please?RevKhttps://www.blogger.com/profile/12369263214193333422noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-14362997280965379792012-12-10T08:38:28.298+00:002012-12-10T08:38:28.298+00:00I thought that the issue was that they lied about ...I thought that the issue was that they lied about how much profit was made in the UK and artificially inflated prices to ensure that they paid no UK profit.<br /><br />That would be bad and, quite rightly, the UK populace should burn them at the stake. (whilst sipping their coffee no doubt...)<br /><br />If they make no profit in the UK then their duty to their shareholders would be to pull out would it not?<br /><br />2cSimonFhttps://www.blogger.com/profile/03711861360301638111noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-13948059056580809772012-12-10T01:57:40.947+00:002012-12-10T01:57:40.947+00:00Large corporations have powerful lobbies that infl...Large corporations have powerful lobbies that influence laws, including tax laws. Tax laws are too numerous and too convoluted precisely because vested interested have influenced them in this way, because it makes them ripe for loop-holes. Of course it's wrong that politicians are influence by powerful lobbies, but that is a fact of our political system, and in fact politicians are much less powerful than most people realise.<br /><br />Just because the law says it's ok doesn't mean it's morally ok. After all, it's not cool for somebody to cheat on his girlfriend, even though he's not breaking the law.geordiecoderhttps://www.blogger.com/profile/00609970736185580773noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-12077835060296750222012-12-10T00:07:11.181+00:002012-12-10T00:07:11.181+00:00You miss that Starbucks have been dishonest on one...You miss that Starbucks have been dishonest on one count, and outright evading on another.<br /><br />They are being outright dishonest in claiming they have never made a profit in the UK. 735 branches and they've not made a penny? It's a lie; the company as a whole would be much poorer without the UK and they tell their investors how well the UK is doing. So what they're actually doing is _disguising_ the profits they make from the UK.<br /><br />Where they're evading (as Mark on uknot pointed out) is that the UK is paying for intra-group loans and invoices at well above "arms length" prices, and (likely) illegally writing down their profit - see http://www.reuters.com/article/2012/10/15/us-britain-starbucks-tax-idUSBRE89E0EX20121015 for more details on this.<br /><br />You shore up the faulty argument that of course multinationals have to pay VAT (*cough*, their customers do), payroll taxes and so on, and we're lucky to have them here avoiding all our other taxes. I don't agree with that - if they weren't here, local competitors like Costa would step in and give us the same products while paying the right amount of tax.<br /><br />I've never heard of any case anywhere in the world where shareholders of a successful got their directors jailed for not paying the bare minimum in taxes - I don't know how that argument keeps popping up from either.<br /><br />What most people think of as "robbing the UK taxpayer" isn't taking advantage of ISAs, allowances and straightfoward tax incentives that HMRC make available, and document well. It's rewriting something ordinary on a balance sheet as something that it isn't, where the "Ramsay Principle" is a useful smell test (http://en.wikipedia.org/wiki/The_Ramsay_Principle), and something that most people understand instinctively.<br /><br />These kinds of avoidance schemes are impossible to police internationally because of countries that compete on both corporate secrecy and low tax rates - e.g. the Netherlands, Ireland, Switzerland and various UK havens with special arrangements. The only way the UK can work around that is to insist on multinationals submitting country-by-country reporting for every jurisdiction in which they trade, otherwise multinationals can continue to hide their real profits.<br /><br />Well done on starting to claim R&D credits, we only did that recently too after a tip from an friend at Deloitte.<br /><br />If you really don't see any difference between that and elaborate profit rewrite schemes, please do check out root2tax.com who presented to me a few months ago, and whose scheme I wrote up in as much detail as I could understand at http://matthewblo.ch/462/how-to-cheat-at-tax/ You'll be able to siphon profits out of AA much more efficiently that way, and their service looked very slick, very hands-off.<br /><br />I think there's probably reasons you wouldn't want to use their service, and I'd be interested in knowing what those would be.Matthew Blochhttps://www.blogger.com/profile/05871321013845582412noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-32188756760507507782012-12-09T22:57:57.463+00:002012-12-09T22:57:57.463+00:00I think Starbucks have been picked because they ar...I think Starbucks have been picked because they are easy to boycott by going to the Costa Coffee nextdoor. Other companies that have also been mentioned are less so. Google for instance is a hard one to leave; where are you going to go? Bing? I saw recently that Microsoft choose to pay their corporation tax in Luxembourg. Anonymoushttps://www.blogger.com/profile/01838178783348784220noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-3526530516884618472012-12-09T21:54:54.534+00:002012-12-09T21:54:54.534+00:00Correct, but all I am saying is that this was McVi...Correct, but all I am saying is that this was McVitie's choice. HMRC decided they were something that should have VAT and McVitie's decided to argue and it went to court. They could have just accepted HMRCs claim that they counted as biscuits and had VAT apply. Their choice caused less VAT to go to HMRC. That was a choice they made that "robber the UK tax payer". It was, of course, a sensible and legal choice that they made, just as starbucks are doing, but the end result was that it reduced money going to HMRC. I use it as an example because the claim being made was, it seems, that choosing actions that reduce money going to HMRC is "robbing the UK tax payer", and jaffa cakes are an example of such a choice.RevKhttps://www.blogger.com/profile/12369263214193333422noreply@blogger.comtag:blogger.com,1999:blog-3993498847203183398.post-45048237382697297992012-12-09T21:49:56.382+00:002012-12-09T21:49:56.382+00:00Mcvities do not have to levy VAT on Jaffa cakes be...Mcvities do not have to levy VAT on Jaffa cakes because they are cakes, and cakes are zero rated. So are biscuits, unless they are chocolate covered ones and then the full 20% is levied.Anonymoushttps://www.blogger.com/profile/06722704467361879843noreply@blogger.com