Starbucks sticks it to the Brits

I always look forward to reading yet another story about how multinational corporations slither out of their tax responsibilities and was, therefore, duly amused by a piece I encountered in Al Jazeera about the world's favourite coffee shop. It appears Starbucks, while selling £643-million worth of goods in the U.K. last year, paid not a cent in corporate taxes.

This was nothing new for the coffee giant. Despite handling a third of Britain's coffee shop trade, and boasting to investors the U.K. was among the best performing of its overseas markets, Starbucks has reported 13 years of losses to the taxman. Apparently it pulls this off by such sleight of hand as transferring funds to a sister company in the Netherlands as royalty payments and paying high interest rates on money borrowed from other parts of the corporation.

Her Majesty's tax collectors are not amused. The U.K. finance ministry announced it will provide £76-million of new money to track down wealthy individuals and companies who try to avoid paying tax. (Starbucks is by no means alone.) How much good this will do is moot. According to U.S. attorney David Spencer, consultant to Tax Justice Network, "There is more and more evidence of the fact that multinationals are shifting substantial income from high tax to low tax jurisdictions. This is because the OECD's [rules] are very complex and very difficult to enforce."

Public reaction may be more effective. Outraged Brits are calling for a boycott of Starbucks and protests at its shops. A spokesperson for the company stated, "We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more." Indeed—many millions of pounds more.