Starbucks dates back to the first small single store in Seattle in 1971. Starbucks image to the world is serving the best coffee possible, using the highest standards of quality coffee beans from Latin America, Asia, and Africa. Today as Starbucks grows to more than 18,000 stores worldwide, its corporate image is a business imperative. Starbucks follows one value to improve its corporation. It inspires different people and the human spirit and states, “one person, one cup and one neighbourhood at a time”.
Starbucks page profile.
OVERVIEW OF SUSTAINABILITY
In 2012, Starbucks, the biggest company in the coffee chain industry, had to suffer damage to its image. The reason behind this was tax liability, but a very questionable method. Starbucks avoid relative high company taxes in the UK by having its European headquarters in the Netherlands where it has to pay extensively less taxes. In public Starbucks tried to defend the critics. The CEO states that Starbucks was unprofitable in the UK n the last years and therefore has not to pay taxes. Oppositional, Starbucks mentioned a profit to its stakeholders.
Due to the fact that Starbucks defence was inconsistent and high public critics against its behaviour, Starbucks starts to apologise. Starbucks states that they will change their practices in 2013 and 2013 and will pay a sum of $ 15.4 million. In 2014, Starbucks will pay the amount to the U.K corporation of tax, which affected the response of British business money loss. According to the British tax corporation, 5 million pounds were already delivered, which was leaked through an e-mail statement. Throughout the following year, Starbucks will pay the rest of the 10 million pounds.
Starbucks, has always built an important image to their loyal customers and always believed in a great company. In December 2012, practices were made that led to a very controversial issue. Despite the loyal customers which wear loud and clear that it was the right thing to do, to have a mere compliance with the law, Starbucks did not point out the controversial practices in its sustainability report.
3rd paragraph in the case
Criticisms affected the company through many levels of taxable earnings, which led the UK operations to make a royal payment to many Starbucks groups. According to BBC, Starbucks ‘did not do anything underhand at all’. The question of judgement, according to Sir Martin Sorrel, was a shock which led the controversy of the payments being made by companies that where multinational public purses. Don´t understand this sentence. Who is Sir Martin Sorrel?
Starbucks tax avoidance in the UK
In 2012, it emerged that Starbucks was using legal, but nevertheless questionable, methods of
avoiding any tax liability in the UK. The methods included “paying fees to other parts of its global
business, such as royalty payments for use of the brand”. Starbucks has its European headquarters in
the Netherlands where it pays significantly lower taxes than it would in the UK. Starbucks’ initial
public position was to try to defend its practices, claiming that it had paid taxes in the UK through
Value Added Tax on purchases and through the taxes on its 8,000 employee’s salaries. Starbucks’
CFO was questioned in front of a House of Commons’ public house committee and his claim that the
company made a loss for three years in the UK, and therefore had no tax liability, was strongly
challenged. It was pointed out that the company has informed its shareholders that it makes a profit in
the UK. In December, in response to the highly critical questioning of the House committee, and strong public
reaction against its behaviour, which included mobilizations outside Starbucks’ cafes, Starbucks
entered into discussions with the revenue commissioners. While maintaining that its tax affairs were
in “according to the letter of the law”, Starbucks publically stated that it had take a decision to change
those practices in 2013 and 2014 such that it would pay more tax in the UK. The company committed
to “paying a significant amount of tax during 2013 and 2014 regardless of whether the company is
profitable during these years”. It stated that this was the right thing for Starbucks to do, adding that
“We’ve heard that loud and clear from our customers.”
Despite the controversy which the issue led to, and the promise it made in December 2012 to do what
its customers demanded as this was the right thing to do, rather than mere compliance with the law,
Starbuck’s does not mention the issue of taxation in its 2012 sustainability report.
Additional contextual information:
Starbuck is but one of a number of MNEs which has come under attention in recent years in the
context of Tax Avoidance. The success of the “naming and shaming” strategy with Starbucks led for
calls by MPs to ensure disclosure of all companies which were known by the revenue commissions to
have avoided paying their fair share of taxes, even if their behaviour, such as the use of transfer
pricing between subsidiaries, did not technically amount to tax evasion. The Public Accounts
Committee report, published at the end of 2012, called for “more aggressive and assertive in
confronting corporate tax avoidance”.
October 2012 Statement: http://www.starbucks.co.uk/blog/setting-the-record-straight-on-starbucks-uk-taxes-and-profitability/1241
Starbucks commitment to the UK: http://www.starbucks.co.uk/our-commitment
An Open Letter from Kris Engskov (06 December 2012): http://www.starbucks.co.uk/blog/an-open-letter-from-kris-engskov/1249
2012 Sustainability Report: http://globalassets.starbucks.com/assets/581d72979ef0486682a5190eca573fef.pdf
Media and other sources:
Starbucks wakes up and smells the stench of tax avoidance controversy: http://www.theguardian.com/business/2012/nov/12/starbucks-tax-avoidance-controversy
Tax: Starbucks in talks with UK’s Revenue and Customs http://www.bbc.co.uk/news/business-20573208
UK Uncut protests over Starbucks ‘tax avoidance’ http://www.bbc.co.uk/news/uk-20650945
Starbucks: ‘We’ll pay extra tax’ : http://www.channel4.com/news/starbucks-well-pay-extra-tax
Starbucks, Amazon and Google grilled by MPs on tax: http://www.channel4.com/news/starbucks-amazon-and-google-grilled-by-mps-on-tax
Tax avoidance or tax evasion?: http://www.channel4.com/news/tax-avoidance-or-tax-evasion
Google, Amazon, Starbucks: The rise of ‘tax shaming http://www.bbc.co.uk/news/magazine-20560359
Starbucks pays UK corporation tax for first time since 2009: http://www.bbc.co.uk/news/uk-politics-23019514
HM Revenue and Customs: Annual Report and Accounts – Public Accounts Committee Contents:
Tax avoidance by multinational companies: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/716/71605.htm