Tuesday 23 October 2012

Why we should boycott Starbucks

The reason Starbucks should be boycotted is simple. Starbucks is an aggressive user of tax-dodging scams to avoid paying tax in the UK. The company has used the technique of siphoning all of their profits into subsidiary companies based in Switzerland and Luxembourg to ensure that they paid 0% corporation on sales of over £1 billion, over the last three years.

In 2012 they paid absolutely no corporation tax on sales of over £368 million and they have paid just £8.6 million in tax over the last 14 years, an effective rate of below 1%.

It is absolutely no wonder that they have managed to drive hundreds of small, independent, tax-paying family owned cafes out of business. They have had the massive, unfair advantage of not paying any UK tax on their profits.

The research into Starbucks tax-dodging activities was conducted by Reuters, you can read their full damning report here.

Starbucks are tax-dodgers, the schemes they have used to avoid paying their fair share of tax are legally allowable, but only because successive Tory and Labour governments alike have created and maintained gaping loopholes in the UK tax code. Any part of an anti-tax-dodging campaign should involve applying pressure on politicians to close the gaping tax-loopholes that companies use to apply a veneer of legal legitimacy to their immoral and anti-competitive practices.

Whatever the legal status of a particular tax-dodging scam, it is immoral to avoid paying tax in a country in which your company generates enormous revenues. Tax-dodging is immoral because it is a clear demonstration that a company is happy to benefit from the taxes other people pay in order to generate their profits, but they refuse to pay taxes themselves. To give a few examples.
Starbucks employees benefited from their education, from access to free healthcare, etc. Without these provisions, Starbucks would have to select their employees from amongst the diseased and illiterate. By avoiding tax, Starbucks are essentially saying that they are happy for others to keep their workers healthy and reasonably educated, but they won't contribute themselves.

The majority of Starbucks customers benefited from taxpayer funded infrastructure to even get there, roads built and maintained at taxpayer expense, the taxpayer subsidised rail network or London underground. By avoiding tax, Starbucks are essentially saying that they are happy for others to fund the infrastructure that contributes to their profit margins, but they won't contribute themselves.

Whenever a crime is committed in a Starbucks, the staff will call a taxpayer funded police force to deal with it. By avoiding tax, Starbucks are essentially saying that they are happy for others to fund the police that protect their property and their employees, but they won't contribute themselves.
Starbucks employees and customers pay tax. By avoiding tax, Starbucks are essentially saying that they are happy for their staff and their customers to pay tax on their part of transactions that occur as part of the Starbucks business, but they won't contribute themselves.
Starbucks should thank UK taxpayers for fact that their employees (often but not always) have basic literacy and numeracy and have been vaccinated against horrific diseases like polio and TB, they should thank the taxpayer that their customers are even able to get to their local Starbucks outlet, they should thank the taxpayer that their stores are protected by the police and fire services and they should thank their own staff and customers for making tax contributions. The best way for Starbucks to recognise the contribution of the taxpayer, is by paying their fair share of tax.

The second key argument against tax dodging a free-market argument. A free and fair market is dependent upon there being a level playing field so that competition can take effect. If one agent utilises anti-competitive practices, the playing field is not fair and the market becomes un-free.

If a state allows loopholes that can be utilised only by large multi-national corporations with a team of specialist tax lawyers and accountants and the ability to set up foreign based shell-companies, they are allowing corporate outlets a vast competitive advantage over small independent businesses. Small businesses that have no choice but to pay the standard rates of taxation. Once a state allows aggressive tax-dodgers this kind of cost advantage, it isn't long before the independents are eradicated from the market by the tax-dodgers. This is bad for the consumer, because they are left with less choice, it is bad for the government because they are left with fewer tax revenues from the sector and it is bad for the sector itself because the agents that have established monopoly or oligopoly positions have lower incentives to increase efficiency because their competition has been eradicated.

I believe I have established both the moral and the economic case to protest against tax-dodgers, but the most important measure of a protest isn't actually whether it is valid, but whether it can be effective.

It has been clearly shown that social media campaigns and boycotts can work, just consider the remarkable effectiveness of the Olympic tax dodge protest.

Since the Reuters investigation was published, their brand reputation has been significantly harmed. YouGov’s BrandIndex (which records brand identity strengths) has shown that Starbucks reputation has fallen from +4.6 to -3.99 in just a week and that their "buzz score", based on how many positive and negative comments customers have heard, has plunged from +0.7 down to a four year low of -13.9.

Sarah Murphy of BrandIndex said: “To say this story has been a disaster for the Starbucks brand would be a bit of an understatement. It’s still too early to say what the long-term impact of this is going to be, but in the current climate we’ve seen the public take a fairly dim view towards accusations of corporate greed".

This is why we must speak out against Starbucks tax-dodging activities and promote a Starbucks boycott. The only way these vast corporate enterprises will be made to listen, is by ensuring that their brand gets the maximum negative publicity, and that they are made to suffer financially. If 100,000s of their customers begin boycotting their stores, then perhaps they will be incentivised to pay their fair share of tax. 

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