For Starbucks Shareholders, Something's Rotten in England

"The baying mob is in full throat." So opens today's Lex column in the Financial Times about Starbucks' (NASDAQ: SBUX  ) decision to pay more tax in the U.K., and I couldn't agree more. The company has followed all existing tax laws there, yet is being accused of tax avoidance. In response, the green mermaid has agreed to pay more taxes just to shut the whingers (British for "whiners") up.

When full compliance isn't enough
Just to be clear, those are my choice words, not the company's. Troy Alstead, Starbucks' CFO, put it more gently, telling the Times that complying with U.K. tax law "isn't enough right now."

So the company will pay $13 million-plus in taxes over the next two years, regardless of profitability. And that was at the heart of Starbucks' claim that it paid just $11 million in corporate income taxes since 1998: It isn't profitable in the U.K. 

Oh, the immorality of it all
Amazon.com
(NASDAQ: AMZN  ) and Google (NASDAQ: GOOGL  ) had better watch their step across the pond, as well. Like Starbucks, they were recently named in a damning report by British lawmakers as engaging in "immoral" tax avoidance. George Osborne, Britain's Chancellor of the Exchequer, just announced plans for a $13 billion "tax-dodging clampdown." 

Starbucks is a healthy company. It has $2 billion in the bank and just $550 million in debt, and 11% year-over-year revenue growth for the most recent quarter. Starbucks can afford this absurd tax payment, but it shouldn't have to.

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  • Report this Comment On December 08, 2012, at 6:55 PM, neocolonialist wrote:

    Someone is lying. Why would any company ever pay more taxes than it legally owns? Unless its trying to appease a dictator or facist government so it doesn't get taken over by the state. Is that what the UK is now? Tax by coersion?

  • Report this Comment On December 09, 2012, at 9:43 AM, XMFGrgurich wrote:

    "Is that what the UK is now? Tax by coercion?"

    Seemingly so. They're up against the wall on their deficit, a self-imposed wall, and they're doing whatever they can to bring in revenue, fair or not.

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