Starbucks nonsense conceals real tax scandal

The tendency for television cops to arrive at crime scenes clutching a large cardboard cup of untouched coffee started with ‘Kojak’ in the seventies.

Here was the original off-beat American cop, a snappily-dressed New Yorker in possession of the show’s best lines and his ubiquitous dark filter coffee.

Britons had nothing comparable. Our high streets were bereft of coffee chains and besides, no-one could imagine Jack Regan in ‘The Sweeney’ drinking anything other than ten pints of bitter and a half bottle of Scotch for lunch. Had Regan stumbled upon a skinny latte, he would have declared, “You’re nicked”.

It’s all change today. The over-sized coffee cup is the TV cop’s must-have accessory, irrespective of where they’re heading or what they’re doing. Have you noticed how no-one ever tries drinking the contents through that ridiculously small hole in the lid?

No matter – although I assume that nowadays, no actor worth his salt playing a tough, off-beat British policeman would be seen dead clutching a Starbucks.

The high street chain has been lambasted over the past few weeks for paying just £8.6 million in Corporation Tax on estimated UK sales of £3 billion over the course of 14 years.

It should be said that technically, the company has done absolutely nothing wrong. Can it be blamed for taking advantage of a tax system that allows it to minimise its Corporation Tax bill?

Last year, it transpires that Starbucks paid no UK Corporation Tax at all despite enjoying sales of almost £400 million. Its high street rival Costa, meanwhile, had a similar turnover, of £377 million, yet it handed over a cheque for £15 million, or 31% of its profits, to the taxman.

Following a deluge of bad publicity, Starbucks rather sheepishly announced yesterday that: “to maintain and further build public trust, we need to do more. As part of this, we are looking at our tax approach in the UK.”

Some observers, mindful of how many people Starbucks employ, how many shops they rent and how much they pay in local business rates may feel slightly uncomfortable with the Government’s overt display of relentless pressure on the retailer.

Granted, for a company with a stock market value of £25 billion, ‘looking at their tax approach’ might cost Starbucks say, £10 million a year, but few executives at the company’s head office will be crying into their Decaf Caffe Misto as a result. Starbucks had become an easy target, one which allowed the Government to accumulate some effortless political capital merely by bringing attention to the company’s tax record. The company’s top brass know this and so do the Government. When Starbucks stumps up an ex-gratia payment, it’ll be smiles all round and forgotten about with a couple of days.

Yet there is a greater tax scandal about which the Government appears reluctant to do anything and, surprise, surprise, which continues to get little publicity.

Thankfully, a report published yesterday may change all of that, but don’t hold your breath. It revealed that traditional families, ie, ones in which the mother and father are married to each other, pay the highest taxes on earth because Britain is one of only two developed economies not to recognise marriage in the tax system.

Scandalously, a family with two children, in which one parent remains at home while the other goes to work, face an effective marginal tax rate of 73%. The report, published by Christian Action Research and Education, found that  traditional British family bear a tax burden which is 42% higher than the OECD average of major economies.

Britain’s 73% marginal rate of tax imposed upon families compares with an EU average of 40%; in Chile, the effective rate is 7%.

Since the late 1980s, Britain’s income tax system has systematically ignored the benefits to the nation of marriage and the nurturing of traditional families. The results are painfully clear for everyone to see.

Once upon a time, the Chancellor pledged to introduce a tax break for married couples, but there’s little sign of that happening anytime soon. Despite the obvious damage caused by taxing families to the hilt, Mr Osborne appears more content to focus on extracting a few quid from an American retailer.

Regrettably, unlike Theo Kojak, there’s little chance of Mr Osborne looking families square in the eye and saying, “Who loves ya baby?” while doing something positive to relieve their scandalously high tax burden. The best they can expect is a voucher entitling them to a free coffee at Starbucks.   

posted on 06 December 2012 08:51 byPJS