Ethical taxpaying

Starbucks has had second thoughts.

Starbucks has UK sales of £400m annually but arranged its affairs so that it paid no UK corporation tax in the last 3 years.  It paid £8.6m over the last 14 years.  In contrast homegrown Whitbread's Costa turns over less but pays about £15m annually.  It's was all legal but the questions was: was it right?   Neither UK politicians nor UK public opinion thought so.

Now Starbucks has changed course.  It will pay about £10m UK tax in each of the next two years by foregoing tax deductions on coffee purchases, inter-company loans, royalty fees and capital allowances.  In other words it is abandoning widely used, generally legal, strategies designed to shift profits from  higher tax countries to lower tax countries.

Three questions:

First, who will follow Starbucks?  Amazon?  Google?

Second: Does a system that encourages corporation tax avoidance overlaid with voluntary tax donations make sense?

And third,  will the Chancellor now consider dropping all corporation tax deductions (except perhaps bad debts) and setting an ultra-low flat rate of corporation tax?


Anthony Fitzsimmons
Reputability
London

Anthony Fitzsimmons is Chairman of Reputability LLP and author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”