Want evidence that the corporate capitalist system is rigged to benefit the powerful and wealthy? Check out the accounting tricks Starbucks employed in the UK to avoid paying tax despite raking in billions of pounds. From the Independent:
Starbucks has exploited accounting tricks to pay almost no UK tax on the millions of coffees, sandwiches and cakes bought by the British public over the past decade, it was revealed yesterday.
An investigation showed that the coffee company has paid only £8m in corporation tax to HMRC in the 14 years since it arrived on British high streets, despite generating sales of £3 billion.
Starbucks UK’s accounts shows that it has minimised its tax burden by officially recording losses of tens of millions of pounds year after year.
Yet in its briefings to stock market investors and analysts during the past 12 years, Seattle-based Starbucks has consistently stated that its UK unit is “profitable” and three years ago even promoted its UK head, Cliff Burrows, to run its vastly larger US operation.
Starbucks is being singled out here, but the trick is extremely common for giant corporations that hire teams of tax specialists to ensure they pay as little tax to the countries they operate in as possible:
In common with other large companies, Starbucks appears to be exploiting differing tax regimes around the world. The coffee company’s UK unit, for instance, is required to pay a royalty rate of 6 per cent of sales to Starbucks for using its intellectual property. It is not clear where this money goes.
The problem with the international financial system is that there is little international regulation of how capital flows around the world. The ultra wealthy and corporations can shift money from one side of the world to another in the blink of an eye to places where they won’t be taxed (for a good example of this check out Mitt Romney’s personal finances), so getting them to step in line is close to impossible. Governments have less and less power to tax corporations as they are now so powerful losing their business would be even worse. Starbucks has brought jobs to the UK and knows it can get away with cheating the tax system with little repercussion. The the government gets too heavy handed Starbucks will threaten to pull its stores and use the capital to invest in tax friendlier countries. Is there a solution? Possibly, but it would require a multilateral governmental approach around the world – and despite attempts to coordinate, it isn’t happening any time soon.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.