Starbucks ..... wake up and

[Mick Mac]

How do we feel about Starbucks paying little or no corporate tax.

1) Would it affect your consumer behaviour.

2) From a more technical perspective, how much intellectual property is there in a cup of coffee. It seems the profits in the UK are being reduced by a fee from a low tax jurisdiction billing the UK profit centre for the IP. Hence the UK profit is reduced by the inter group fee being paid from UK to Luxembourg. This and other measures reduce the UK taxable profit to a very low level.

How much intellectual property is there in a cup of coffee?

[LondonLogCo]

I've always hated Starbucks, primarily because their coffee is utter shit

But more so now because of their latest revs.

[woodrot]

standard setup bludz - many London corporate locations are merely service offices for HQ in Switzerland or whatever and dont generate any UK profit - this is cock of course, but everyone does it. Of course its justified by the companies as being the best setup for their shareholders - and them pension funds you invest in want to squeeze every bit of value out of an investment.Bloo chip stock Vodaphone pays zero tax and has enough credit to ensure it wont pay any real UK tax for the forseeable

http://uk.reuters.com/article/2012/06/26/uk-vodafone-tax-idUKBRE85P0GO20120626

Thye will argue of course that they pay other taxes to the UKG, such as the deduction from their employees wages, so thats OK then.

A simple solution.

Wipe Switzerland and The Channel islands off the face of the earth, these nazi collaborator bastards have had it coming for a long long time.Execute any survivors and parade their heads on poles as a warning to others. Put a warning shot over the bows of the IoM, Luxembourg, Liechenstein and Ireland for good measure.

[DJKillaQueen]

I hate coffee full stop but how can it be that Costa pay tax and Starbucks don't. I listened to various people on talk radio today try to justify this nonsense, to attract foreign investment and so on. Well, since when did the retail provision of coffee require foreign investment? I'm sure Costa would sieze the opportunity to expand if Starbucks really felt that playing on a level playing field was too much to bear.

[woodrot]

cos Starbucks set up their european structure in a manner that minimises tax liability where loopholes exist. Its not illegal. Amazon are based in Luxembourg for the same reason.Costa are Whitbread IIRC and based in teh UK

[woodrot]

Voda are having a hard time of it tho

http://www.bbc.co.uk/news/uk-england-london-20583607

They just cant get the staff who want to pay London rents. boo fucking hoo.

[Mick Mac]

As I asked originally. How much IP is there in a cup of coffee.

Music, movies I understand. Coffee I don't. There are loads of IP lawyers in ED, please explain.

[woodrot]

Simply, If you view it as an ersatz licence fee payable to an overseas HQ then it makes more sense - this however can be anything you want it to be and invariably varies according to a turnover forecast - you are not talking about an absolute value here, its up in the ether. Just like a landlord can make "repairs" at useful times in the financial year, big corps are able to use the malleability of present legislation to their benefit.

/ back to discussions about really important matters like cats & the selling on the EDF therof

[Mick Mac]

Relating it to turnover can't be justified under TP rules.

Is there an IP expert out there?

[woodrot]

Mick Mac Wrote:

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> Relating it to turnover can't be justified under

> TP rules.

>

TP is regulated & supposedly checked, there are many other ways of moving funds that dont come under TP rules if you have a mind to to it

[Salsaboy]

As I said before, what they are doing is legal under the current tax regime. It's down to the government to change it. With regards to IP they could argue that it's all in the blend or the way it's made.

Starbucks coffee is shite though and I haven't been in one for a couple of years.

[Mick Mac]

You are making a lot of generalist comments Woodrot. None of which suggest you know more than joe public about IP.

The OP was whether peoples buying habits would be affected by Starbucks being in the news, or if someone could explain to me how to put a seemingly large value on IP in coffee making, whihc can be invoiced around the world from a low tax jurisdiction.

[MrBen]

There are basically four types of IP:

- Patents - the hardest to get and must show true innovation in design with no "prior art" Example: hover-boards - someone could invent one eventually but wouldn't get a UK patent on it because the concept was shown in Back to The Future.

- Design - e.g. the body shape of a new Ferrari

- Trademarks - e.g. Coca Cola or other logo's and branding

- Copyright - the most common form of IP and pretty much produced by all of us on a daily basis in our daily work

If Starbucks have their own special blend and they've invested R&D time/money to create that then this constitutes IP (copyright or design category probably). And if UK law currently allows them to licence their own IP to each corporate entity in each geographic jurisdiction then they aren't breaking the law.

Remember that all tax legislation was created by politicians in the first place, some quite recently to promote growth. The problem with tax law is that when you plug one hole for the "right" reasons, you invariably create implications elsewhere which are then exploited legally. The actual solution to all this waffle is clear, simplified and unambiguous tax law.... not moralising finger wagging from politicians/media. It's either legal or it's not.

If you don't have that certainty in place then what can anyone realistically expect?

[woodrot]

I never indicated I was an IP expert - IP in this example is a vehicle for tax efficency, theres not much more to understand -you own IP, you licence it,assuming you can justify the arms length criteria bro'

[MrBen]

Woody's basically right:

Other examples of legal profit transfers :

- Charging interest payments to UK operations from an overseas HQ that effectively wipeout UK profits due for taxation

- Insurance companies who domicile themselves in Bermuda but make all their money at Lloyd's of London then "reinsure" themselves to their Bermuda HQ, paying large insurance premiums to themselves to effectively transfer profits to a lower tax regime.

- Royalty payments e.g. U2's royalties going to a Netherlands based company where taxes are lower.

[Annette Curtain]

I think they may be paying royalties to use the packaging/brand.

Still stinks tho, so does Bono.

[LondonMix]

Didn't we do this two weeks ago?

http://www.eastdulwichforum.co.uk/forum/read.php?5,30460,page=3

[Mick Mac]

Putting an acceptable value on the IP being charged is the key. This allowable element is within the control of the UK trasnfer pricing authorities (to some extent). Obviously transfer pricing came in to prevent inter group abuses, but in this case the IP is the issue, not moving profits around.

Its a valuation issue. IP is potentially the biggest TP abuse currently happening. Whilst all of this is within the law, valuation abuses are rife and should be the focus of HMRC attention.

Other jurisdictions are taking a much firmer line on tax avoidance than the UK. Of that I have no doubt.

In this case Starbucks say "we have been in discussions with HMRC for some time". This means either 1) nothing ie they have ongoing dialogue, which is now the norm for big groups, who have a face to face relationship with HMRC, or 2) they have been under pressure on this issue already.

Hopefully its the latter - but either way I think people should vote with their feet. Consumer action hits companies reputationally and affects their behaviour, I expect already they will be adapting their TP policy. No CT is not acceptable, irrespective of employment taxes, VAT etc. Thye won't leave the UK, they just need to pay a fair price for the ability to make money here.

[woodrot]

It would be near impossible to set a fair value on the licencing of a totes unique IP.

[????]

We the consuemer have the power as we do with banks. That's freedom in a capitalist world.

THE ONLY reason Starbucxk are in discussion on this is because after the news broke they looked at their salse figures and they were materially down as consumer boycotts started to roll up. That's all.

Government's/ the IR PAH.... it's us stupids.

Next stop, Stop moaning about the 'bastard banks' and move your money to the co-op...

Empower yourself..

,,,not holding my breathe

[indiepanda]

I love coffee and therefore hate Starbucks - the stuff they sell is really below par compared to a lot of the independent cafes, come to that even my Nespresso does better tasting coffee. If I did like it, would it change my shopping choice? Maybe, there's usually a Nero or Costa nearby if wanted poor chain coffee.

But it shouldn't be down to consumers to guilt companies into paying an appropriate level of tax, it should be for government to ensure the tax rules are tighter so companies have to make a fair contribution and can't get round it with tax avoidance schemes. If it's legal companies will do it, expecting large corporations to be moral is, unfortunately, naive.

Was interesting to see the power of bad publicity harnessed by 38 Degrees during the Olympics though - many of the sponsors gave up the tax breaks they'd been promised to sponsor because of their efforts.

[Mick Mac]

Indiepanda. That's pretty much spot on but whilst companies want to save tax, the loss of revenue as a result of consumer action hits them harder than any tax saving. Hence where governments fail consumers can make a major impact.

[Gidget]

Their ginger loaf cake with icing is rather nice.

[indiepanda]

Mick Mac Wrote:

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> Indiepanda. That's pretty much spot on but whilst

> companies want to save tax, the loss of revenue as

> a result of consumer action hits them harder than

> any tax saving. Hence where governments fail

> consumers can make a major impact.

Am sure that's precisely why Starbucks are changing their tune, they've certainly not got morals overnight.

It's like all the green policies companies have (mine included). They like to make out they are saving energy because its environmentally friendly etc, but lower energy bills don't exactly hurt the profits either.

I've hardly spent anything in Tescos since I read a couple of books which shed some light on the shabby way they treated their suppliers... not that I think they've missed me that much.

[Huguenot]

I think what's creating confusion Mick Mac is that you're justifiably trying to judge coffee making IP as a fixed price asset when it's not.

I have the IP on Huguenot's magic egg mayonnaise - but it's effectively worthless as it brings no profit opportunity.

The IP is the profit opportunity associated with a brand. Take ground beef and a wet beer mat in isolation and you have nothing, if you call it a Big Mac you have a licence to print money.

It's the same model as a franchise - head office can basically 'tax' UK subsidiaries what they wish, and the more they make, the more they can 'tax' as it represents an increase in brand value.

In practice franchise fees of this kind are calculated as a negotiated solution with the Inland Revenue, and whilst they're significant, there's often reason involved in their apparent madness.

As someone else pointed out, be carefully what you wish for, as the value derived by such practices is often delivered back to you in terms of pensions and reduced insurance premiums. Law of unintended consequences and so on.