The point about a ‘donation’ is that it is a gift freely given without obligation. What makes it worse in Starbucks’ case is that it is obviously ‘volunteered’ only because the company is fearful, with good reason, that otherwise its trade will be seriously damaged by a widespread consumer boycott, not because it accepts that it should be paying its fair share of tax once all the artificial contrivances designed to cut its tax liability have been stripped out.
But however much Starbucks deserve the treatment they’re getting for their disingenuous and disreputable way of doing business, the real point which is being missed is that all the tricks that the company has got up to – charging royalties to subsidiaries within their own corporate network, imposing an excessive mark-up on the price by which their product (coffee beans) is passed between their own subsidiaries from one country to another, transfer pricing to switch their liability for tax to a low/no tax jurisdiction, etc. – are commonplace among all multi-nationals today. It’s not that Starbucks is a black sheep, it’s rather that they all are.
This has happened for several reasons. The neoliberal Thatcher-Blair ideology and the rubric of ‘light touch’ regulation in the City had at its heart the freeing of business from all constraints wherever possible in order better to compete in the market.
Just as this approach brought financial regulation to its knees (and was a major reason for not taking the much tougher regulatory action which might have averted the financial crash), so this same approach has decimated the tax system. Ministers now talk readily about tax competitiveness – a no-win game if ever there was one, like competitive devaluations in the 1930s – as a totem which prevents them giving up their present cosy relationship with big business based on softly, softly tax arrangements.
The absurdities to which this leads is illustrated by the change in the controlled foreign company rules in Osborne’s March 2012 budget. From January 2014 the tax on multi-nationals which operate a finance company in a tax have will be reduced from the current 23% to just 5%. That massive de-taxification of business is justified by Gauke, the Treasury minister, on the grounds that it will persuade more big international companies to move their headquarters to London.
Even if that were so, what about the 18% cut in Corporation Tax for those (far greater in number) already located in the UK? Doesn’t Gauke know that 98 out of the FTSE-100 UK companies already have a base, shell company or otherwise, in a tax haven so that they’re being offered gratis a colossal tax gift grace of British taxpayers?
I offered to pay HMRC in tax the same % as Starbucks. And for two years, as well. You know what they said? Well, my dears, it was unprintable….