To be horrified by this article about Starbucks?

[PropertyNightmare]

I love Starbucks. I can't wait for the red cups.
Now I am gutted to learn that the corporation has not paid any UK income tax since 2009. Despite making 1.2 billion in that period in the UK. Apparently there is nothing 'illegal' about the tax arrangements which allow them to do this. AIBU to feel let down and a bit of a mug? The NHS and schools would have found sOme extra cash handy....

Starbucks, I am shocked and feel like you have let me down

www.taxresearch.org.uk/Blog/2012/10/15/starbucks-brewing-up-more-than-coffee-when-it-comes-to-tax-avoidance/

I just love the "moneygrabbing bastard" monikers. Say that to a US pensioner, whose pension fund no doubt contains a large number of Starbucks shares.

That's all very well for the US pensioner. Not quite so good for UK pensioner requiring treatment from the cash strapped NHS.....

Sure, which is why you put pressure on your MP to call for a change in tax legislation.

Not only are Starbucks doing nothing wrong by minimising their tax, their directors have a positive duty to minimise, and I would imagine lawsuits could follow if they did not minimise.

OK in practise companies can spend some money on good causes, for PR benefit, so in the unlikely even that paying tax to HMRC yields more of that than say giving charity to African Orphans, they could pay slightly more tax than they need to.

Companies do not have a duty to maximise their profits or to avoid tax.

garlicbutty, corporations have a duty to maximise shareholder value.

monsterchild - The system created by the government is that Starbucks should pay tax in the UK on its UK profits. If it is not doing so that is Starbucks' fault, not the government's.

I note that their most recent annual report says that they are undergoing a tax audits in a number of jurisdictions covering the years 2006-2010. It is not clear if the UK is one of those jurisdictions.

I can't believe people are surprised about this. This is the same Starbucks that tried to charge New York Firefighters $130 for three cases of water on 9/11. I read that a few years ago and it is absolutely disgusting. They only tried to rectify the situation after it became public knowledge. They are one of the greediest companies out there.

Read my link Merinda.

The word 'value' isn't mentioned anywhere, neither is 'profit'.
Moreover, your equation of value with profit is offensive.

Well Property I don't have any immediate bad news about M&S, but at least one of the existing tax laws that reduces corporate tax payable in the UK was written as a result of pressure from large companies, including M&S. So dig deep enough and you'll find a reason to boycott just about every business. It's more a matter of scale of avoidance than of avoiders vs non-avoiders, and also a matter of some things appearing more immoral than others.

Exactly Propertynightmare. I went on the Starbucks website. It's all very well with their boasts about fairtrade coffee. What about fair taxes. Sorry but I have really gone off them.

Garlicbutty that's an interesting link, but given that CA 2006 does say companies need to promote their success for the benefits of their members (i.e. shareholders) and the benefit that shareholders will generally recognise is a combination of dividend income and growth in the capital value of their shares, profits are a necessary part of this - in the long term anyway.

So profit maximisation is not necessarily the primary responsiblity of the directors but they can't achieve this "benefit of their members" without making a profit.

Honestly if you take any one piece of tax legislation you will find loopholes that can be exploited. Taxpayers (individual and corporate) will exploit them. I don't approve, personally, but I disapprove even more of the politicians who lack the courage needed to close them.

Ultimately businesses will still want to sell us coffee etc. They won't just stop trading here if they have to pay tax. We are not asking them to pay a ludicrous amount of tax on their profits either, and corporation tax rates are falling.

Nobody's ever said companies shouldn't aim to make profits, maillot, the question is whether they have a duty to maximise them - there is no such duty - at the expense of the communities in which they operate - which are harmed by excessive financial outtake. Further, their shareholders are consumers, taxpayers and users of public services. They may even have staff and family members who suffer due to welfare cuts.

The corporate duty is to be more responsible than they are being. Their directors can barely claim they're acting "in good faith" in the face of increasing public censure.

Their duty is to maximise shareholder returns within the bounds of the law.

That can mean accepting lower profits if it engenders more customer loyalty or reduces the chances of overt draconian govt intervention.

Turnover does not equal profit. Our local Starbucks is closing because they are losing money as are many others apparently.

Corporation tax is only one facet of the taxes that businesses pay - lets not forget business rates, VAT, PAYE, NI etc.

Don't blame the player, blame the game.

amaturish you only pay corporation tax on profits. That is after all your overheads have been taken into account (paye ni wages rent etc etc)
Also VAT collection the company pay so much back to the government (depending on the business type) they then get to keep a % of VAT.
Our company is building industry and my dh collects 20% VAT we pay the vat man 14% & get to keep 6% of all vat collected.

I am stunned by posters' ability to read what isn't there in the statute.

Companies Act 2006: 172: Duty to promote the success of the company

(1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
(a)the likely consequences of any decision in the long term,
(b)the interests of the company?s employees,
(c)the need to foster the company?s business relationships with suppliers, customers and others,
(d)the impact of the company?s operations on the community and the environment,
(e)the desirability of the company maintaining a reputation for high standards of business conduct, and
(f)the need to act fairly as between members of the company.

(2)Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.

(3)The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.

I would say overenthusiastic tax avoidance impacts on subsections a - e.

I note, again, the absence of directives to 'maximise' 'profits', 'returns' or shareholder 'value'.

I note the presence of the word 'fairly'. Adherents of the greed motive love to say fairness has no place in business. In fact, the word 'fair' is all over company law.

Responsible profit does not mean no profit. It never has done. Those of you who work with finance will be aware that so-called ethical investments have been outperforming traditional sectors for a considerable time already.

garlicbutty Just because a company doesn't have a legal duty (that could result in criminal charges if they fail to live up to it) doesn't mean they do not have a duty, there are duties other than legal ones.

I wouldn't argue with you there, Fred! We might differ on whether a 'duty' to avoid paying fair taxes outweighs a statutory duty towards the interests of employees, customers, the community and the environment.

It is jejune to imagine tax avoidance doesn't affect welfare. Welfare directly affects members and their households, employees, customers, community and the environment.

Its a moral duty not a legal one. something our government needs to sort out because they are facilitating big corporations by having loop holes.

YY, Monkeys. Most of our company law is based on principles from the late Victorian era, when decency and moral duty were pretty much taken as read. It's a long time since I studied case law but suspect there are some historical judgements that could be used to re-emphasise duties to the wider community, however they wouldn't be likely to reference taxation in particular. My point is that the 'loopholes' exist because decency was expected. When it flies out the window, it must be enforced.

I've got issues with governments facilitating profitable business. Only with them prioritising it over the wellbeing of their electorate and customer base.

I've got no* issues!

Transfer pricing is supposed to move revenue around fairly to represent where the real work is done - not just to transfer to the lowest paying jurisdiction- if used rightly it could actually move revenue from offshore jurisdications (which could be used for valid or at least non tax reasons) to taxpaying jurisdictions.
Ignoring the rights and wrongs of what starbucks is doing the Inland Revenue should be policing this very carefully

Garlic my understanding is that the 2006 act changed the previous primary emphasis on shareholders to a broader one of members, which includes but isn't limited to shareholders. In practice I think shareholders are treated as "first amongst equals", perhaps somewhat through habit but also because without access to the funds of those shareholders, there might not be a business.

In the case of Starbucks, presumably its primary governance is the equivalent of the Companies' Act in the US, I don't know what is the member equivalent there.