In a page on the Starbucks website, Kris Engskov, Managing Director of Starbucks UK, Starbucks offered a full explanation. Engskov provided that, “I want to personally assure you that Starbucks pays and will continue to pay our share of taxes in the UK to the letter of the law. We always have and always will.” Meanwhile executives told analysts that the UK business was “successful”, “profitable” and they were “very pleased with the performance”. The company has made UK sales of £1.2bn in the past three years but declared no profit despite having described the British business as “profitable” to investors and analysts.
PayUpandGetOut, on the same webpage, offered a problem with this argument, “Yes, we know you’re paying “to the letter of the law”, but you are using the law to allow you to pay less tax than really you are expected to. It’s such a shame that you have worked so hard to improve your ethical credentials, and while this does not detract from your apprenticeships, links with local businesses and creation of more jobs, nor your support for farmers, it certainly makes me question your ethics, and thus will make me question buying from you in the future.” Some critics believe that corporate social activities are undertaken by companies such as British American Tobacco, BP, and McDonalds to distract the public from ethical questions posed by their core operations. They argue that some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation with the public or with government. They suggest that corporations which exist solely to maximise profits are unable to advance the interests of society as a whole. Kappa99 offered another widely-held view that it is perfectly possible for somebody to act legally but totally immorally. Kappa99 writes, “Its legal to have sex with a horse in many US States. Its legal in the UK to kill a Scot in Nottingham with a crossbow.” There are numerous absurdities in how English law has evolved, to some extent through a process of ‘trial and error’.
Kris Engskov, UK managing director of Starbucks, has further added that the company had in the past three years “paid over £160 million in various taxes including National Insurance contribution for our 8,500 UK employees, and business rates”. Starbucks is not alone by any means. Last week it emerged that Facebook UK generated revenues of just £20.4m last year and paid just £238,000 in tax to the Revenue. Experts said the social networking giant was not breaking any rules but paid less tax because its European headquarters is not in the UK but in Ireland. Stephen Moss adds in the Guardian: “My mobile network is Vodafone, which UK Uncut alleges obtained a very favourable tax settlement that left £6bn in back taxes unpaid. The headache all these numbers are giving me will be salved by pills from Boots, another target for UK Uncut after moving its headquarters to Switzerland in 2008. In 2009-10, Boots paid just £14m on profits of £475m, equivalent to 3%.” Prominent tax campaigner Richard Murphy, from Tax Research UK, later in this article argues that, “Where there are alternatives we should look for them,” he says, “but we should also be clear that these actions are symbolic. The real purpose is getting political change.” Murphy says the objective should be to make corporate taxation more transparent and establish a ranking of companies – a sort of good corporate taxpayers’ guide. Margaret Hodge, chairman of the Public Accounts Committee, said HMRC should look at the company’s tax affairs after this Reuters report. MPs may also want to grill Starbucks’ management over the revelations. The PAC is responsible for scrutinising the stewardship of public funds, including tax collection.
However, Starbucks as a multi-national company does appear to take its environmental agenda seriously. Earlier this year, Starbucks announced the availability of EarthSleeve™, a new hot-cup sleeve that integrates proprietary technology that enables a reduction in overall material usage while at the same time increasing the post-consumer content. These adjustments correlate to a savings of nearly 100,000 trees. With nearly three billion* hot cup sleeves produced in the United States in 2011 and Starbucks representing nearly half of the marketplace, this material evolution will have a substantial impact on the packaging industry. In marketing management, there has been increasing interest in “greenwashing”. Starbucks, unlike other firms, does not appear to have been engaging in greenwashing activity, on the basis that it takes its environmental agenda seriously. Magali A. Delmas, a professor of management at the UCLA Institute of the Environment and Sustainability and the Anderson School of Management, in California Management Review (2011) has defined “greenwashing” as “a fixed and focus on firm communication about environmental performance … given the shorter time frame required for a firm to alter communications about its environmental performance than for a firm to change it, our analytical focus on the drivers that lead (some) firms to communicate positively about environmental performance while holding firm performance constant is not only useful for analytical tractability, but is also true to shorter-term strategic decisions of managers in these firms.”
There is no doubt that the social media is a major new influence in allowing consumers to give ‘instant feedback’ to suppliers. Indeed, as consumers, the public, and investors become more interested in environmental issues, environmental activist groups become more powerful and can exert more influence and pressure on companies. In the same way, now members of the public are able to give feedback about how they perceive far taxation might work. There is also no doubt in the past that corporates have been using their green credentials to secure “competitive advantage” in the marketplace, and there has been much interest latterly in how ethical banks could attract customers through a “competitive advantage” of acting ethically. George Osborne has a think-tank of a few lawyers thinking about how make the corporate tax system fairer. Taxation has clearly become an issue, with David Cameron restating in one breath that, “Fairness includes asking those on higher incomes to shoulder more of the burden than those on lower incomes. I’m not saying this is going to be easy, as we’ve seen with child benefit this week. But it’s fair that those with broader shoulders should bear a greater load”, while not pursuing aggressive tax policies in top earners.”
Meanwhile, Natalie Bennett, Green Party leader, in responding to David Cameron’s speech, provided that: “Further cutting the real rate of benefits, when they are already insufficient for a basic decent life is unconscionable. As the Joseph Rowntree Foundation calculated, the minimum weekly income needed in Britain is £193 for a single person, but out of work benefits deliver just £85.” A political party which is able to grasp the nettle of this complex toxic mix of marketing, politics and tax may reap dividends at the ballot box perhaps.
