Starbucks to end ‘insulting’ tax payments

In it together? George Osborne is under pressure to crack down on tax avoidance © Getty Images

With gloomy predictions of a long period of austerity for the UK, pressure grows for global corporations to pay more UK tax. Ministers and MPs are calling for ‘fair’ contributions.

With George Osborne due to stand up in the Commons on Wednesday and make a major announcement about tax and spending, this week’s news is already dominated by arguments about who bears the costs in a struggling economy.

Should it be the better off? The chancellor of the exchequer is expected to say he will make it more expensive for those with money to set aside for retirement to pay into an old age pension.

Or should society decide it can no longer afford to support all those who claim benefits? A major argument looms between ministers who want to cut welfare dramatically and those who argue for tax rises on the rich first.

In the meantime, almost every voice in public life is being raised against a group rapidly becoming the political bogeymen: the major international corporations who manage to keep their tax payments low by clever accounting.

Google, Amazon and Starbucks have all been condemned for taking profits made in the UK and moving them abroad or offshore where tax is either lower or non-existent. In the judgement of a powerful cross-party group of MPs, that is ‘insulting’ to ordinary taxpayers and UK-based businesses.

After widespread public anger and the start of what could have become a major boycott campaign, the coffee chain has announced it will now start to pay more.

The company was said to be ‘stung’ by all this criticism: which implies it worries about its public reputation. In previous cases, celebrities like Jimmy Carr, the comedian, who have been unmasked using offshore schemes to pay very little tax, have had to publicly apologise. On Wednesday the chancellor is expected to say he will fund more aggressive tax inspection of wealthy individuals, which could earn the public purse an extra £2 billion per year.

Paying our way?

When George Osborne took the helm at the Treasury, he famously prepared the country for a period of cutbacks and hardship with a promise the pain would be shared: ‘We are all in this together’, he pledged. Two years later, some commentators say the well-off are not being asked to make enough of a contribution. This political war on tax avoidance, whether by big companies or household names, distracts attention from other inequalities: Osborne is just shifting his own public relations problem onto the Googles and the Jimmy Carrs, they claim.

But is this a pessimistic view? At a time of great political division, MPs and ministers of all parties, together with ordinary customers campaigning, have forced a powerful global company to increase its tax payments. So why not celebrate? This might, some argue, be one good thing to come out of our economic problems: a new, shared emphasis on fairness.

You Decide

  1. Margaret Hodge, chair of the MPs’ committee leading the campaign against avoidance, says boycotting these companies is ‘good citizenship’. Do you agree?
  2. Left wingers tend to believe high tax is fair because it evens out inequalities and the money is then spent on social goods. Right wingers think allowing people to keep the money they, their family or business make or inherit is fair. Where do you stand?

Activities

  1. Two-minute soap box: make an elegant argument based on these discussions and get up to justify your position to the class. You can be yourself or play a role.
  2. Draw a spectrum from left to right of views about tax and fairness and ask the class to place themselves on it and give a one sentence explanation of their point of view.

Some People Say...

“The more you tax a company, the fewer jobs it can provide.”

What do you think?

Q & A

These companies are too big to care what I think.
Maybe, maybe not. By spending your own money with companies whose behaviour you approve of, you can send a signal, however small. If enough people disapprove, a company can experience a dent in profits and then the bosses worry.
OK, a David and Goliath situation.
Indeed. But if a major customer like a government department decided to stop buying things from a company it ‘disapproved’ of, that would have a huge impact – so huge that some parliamentarians said yesterday it would be an abuse of power and an inappropriate intervention in free trade.
And what about my own tax?
Well, surveys show young people don’t see paying tax as a moral issue: but perhaps once you have your own earnings, you will find this debate affects everyone.

Word Watch

Offshore
Some countries offer wealthy individuals and companies a ‘tax haven’, where they can register businesses, or keep their money, without having to pay tax in their home country.
Chancellor of the exchequer
In the UK, this is the title of the most senior finance minister. It sometimes causes confusion because in other countries the title ‘chancellor’ is used for the head of government: in Germany for example.
Cross party group
The House of Commons Public Accounts Committee, currently chaired by Margaret Hodge, is made up, like all select committees, of backbench MPs from across the political spectrum. It is the most powerful committee because it investigates spending decisions. It has no power over organisations not funded by the taxpayer but, as this campaign shows, the committee can exert severe pressure.

Subjects

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