Stinking Christmas

Dec 14, 2012

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Espresso for the customer – Yesterday’s Americano for the tax man

 

Monster sent to me a rather detailed article listing the dubious and it seems to me, the simple great unwashed of honest ‘middle England’, rather under hand methods which Starbucks had used to ensure Nil –No – Zero TAX was paid in these fair isles, in the last year….

It makes interesting reading and clearly ‘route maps’ how the rich are getting richer !

Indeed, since the first sign of the Starbucks blight appeared on these shores, with the first cafe in 1998, we now have a grand total of 735 units the length and breadth of the UK!

In that time they have achieved sales of 4.8 BILLION USD – on which the grand total of UK tax paid was 8.6 M GBP!!

Good performance eh? Even better if you are part of the dynasty, which owns the business now capitalized at c $40B!

And this measly bit of tax only slipped in ‘under the radar’ because the vigilant UK tax man would not allow some of the tax deductions the coffee monster had  sallied forth with!

Over the past three years, Starbucks has reported no profit, and paid no income tax, on sales of 1.2 billion pounds in the UK

McDonald’s on the other hand had a tax bill of over 80 million pounds on 3.6 billion pounds of UK sales

And – KFC paid taxes of 36 million pounds on 1.1 billion pounds in UK sales

Yet transcripts of investor and analyst calls over 12 years show Starbucks officials regularly talked about the UK business as “profitable”,  and a business which was a pleasing case study for other territories!  so how is the business loss making and therefore exempt form tax- beats me!!?

There is no suggestion Starbucks has broken any laws!

 

Indeed, the group’s overall tax rate – including deferred taxes which may or may not be paid in the future – was 31 percent last year, but on overseas income, Starbucks paid an average tax rate of 13 percent, one of the lowest in the international consumer goods sector

However, the bean counters at the business, have taken the lead from other big boys such as Microsoft and Google when it comes to the gimmickry involved in protecting and  diverting profit – Firstly by charging each and very unit a  fee for intellectual property at 6%

The UK tax authority, Her Majesty’s Revenue & Customs, allows companies to deduct intellectual property fees if they can show the charges were made at “arm’s length” – that is, if companies can show they would have agreed on the terms even if they were not connected

Secondly, by assigning additional margins at the points of value add in the supply chain- hence the green bean purchasing business in Lausanne and the production plant in Amsterdam, are individual Business units or profit centres which add a hefty margin

“The profit sits where the value is created. That is a principle we subscribe to,” (Starbucks CFO)

 

And thirdly by creatively using inter-company loans…

Now I can do with a bit of loan to help me through a straightened Christmas period-!! Do you think Starbucks would help me, the small and innocent coffee sourcer and roaster- a mere pimple on the bottom of the same trade which Starbucks manages and orchestrates?

No me neither – So I say avoid Charbucks like you would any nasty rash!

 

Guru writes for Aromo Coffee – They are coffee experts focussed on providing convenient and tasty ways for the caffeine addict to take their medicine. Aromo supplies excellent ESE Coffee pods and superlative Senseo pods,  both of which offer the espresso and filter connoisseur  a no mess, no fuss,  super fresh and environmentally conscious method to make stunning coffee… the guys at Aromo also have a range of Dualit branded capsules which make a brilliant and economic alternative to nespresso capsules

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