Why Starbucks can't dump its tax bill on the public

No company, even one as big as Starbucks, can simply decide how much profit it makes.

On Wednesday I received the most brilliantly headlined press release I've seen since (yes, this actually happened) the one announcing that god had returned to Earth, and was seeking corporate sponsorship:

'Starbucks are Bastards for not paying Tax in this Country', says Tyrrells Crisps and Chase Vodka Founder

The text of the statement, from founder William Chase, is disappointingly bereft of further expletives, but he does use other strong language. "Our hard earned money". "Patronising". "Laughable". "Theft". And this, remember, isn’t an activist speaking, it’s an entrepreneur (albeit one whose businesses find it rather harder to decide their own tax rate). The rage against corporate tax avoidance clearly goes way beyond the usual suspects.

But it's not universal. Some argue, in fact, that any attempt to minimise such avoidance will blow up in our face. With apologies both for singling her out, and for reducing her argument to one Tweet, here's libertarian blogger Charlotte Gore on Twitter last Thursday:

Starbucks board will have to make the money elsewhere. It's going to be the staff or the customers that ultimately pay.

This is an argument you hear quite a lot – that any attempt to close loopholes in the tax system will actually hurt the general public. That the £20 million tax Starbucks UK has now magnanimously decided to pay means £20 million of extra charges dumped onto the rest of us.

The problem is, it's nonsense.

Actions do have consequences, of course, and any attempt to squeeze a company probably will result in its attempting to recoup that money elsewhere. Starbucks doesn't answer to the public, it answers to its owners: whatever we may think of this fact, shareholder value will always be management’s first priority.

But the libertarian argument is nonsense, nonetheless. It's implicitly based on two dubious assumptions: that multinationals like Starbucks are like vengeful tribal gods, who can never be influenced, only placated; and that the state is utterly powerless before them.

Starbucks' board will try to recoup any extra taxes it pays elsewhere. But the key word there is try. They can jack up their prices, dumping the charge onto customers – but that, all the laws of economics says, would mean fewer sales, and so less profit.

They can lean on the wage bill, eating into paid lunch breaks and sick leave – are trying, in fact, to do just that. But we don't know how it'll play out. Bosses don’t give staff good working conditions out of the goodness of their hearts, but because it’s better for their bottom line. Worse staff performance, or the bad publicity generated by this latest crackdown, might end up costing the company more than it saves.

Then again, it might not. But the point remains: even the most powerful multinational doesn't operate in a vacuum. Managers may wish to dump its corporation tax bill onto its customers or staff. But they might have no choice but to pass it back to its shareholders.

No company, even one as big as Starbucks, can simply decide how much profit it makes – any more than it should decide how much tax it pays.

UK Uncut supporters protest outside a Starbucks coffee shop near Regent Street. Photograph: Getty Images.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.

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Justin Trudeau points the way forward for European politics

Is the charismatic Canadian Prime Minister modelling the party of the future?

Six months after Canadian election day, Justin Trudeau’s Liberal party continues to bask in the glow of victory. With 44 per cent of support in the polls, the Liberals are the most popular party amongst every single demographic – men and women, young and old, and people of all educational backgrounds. 

While most European mainstream parties only dream of such approval, this is actually a small dip for the Liberals. They were enjoying almost 50 per cent support in the polls up until budget day on 21 March. Even after announcing $29.4 billion in deficit spending, Canadians overall viewed the budget favourably – only 34 per cent said they would vote to defeat it.

Progressives around the world are suddenly intrigued by Canadian politics. Why is Justin Trudeau so successful?

Of course it helps that the new Prime Minister is young, handsome and loves pandas (who doesn’t?) But it’s also true that he was leader of the Liberals for a year and half before the election. He brought with him an initial surge in support for the party. But he also oversaw its steady decline in the lead up to last year’s election – leadership is important, but clearly it isn’t the only factor behind the Liberals’ success today.

Context matters

As disappointing as it is for Europeans seeking to unpack Canadian secrets, the truth is that a large part of the Liberals’ success was also down to the former Prime Minister Stephen Harper’s extreme unpopularity by election time.

Throughout almost ten years in power, Harper shifted Canada markedly to the right. His Conservative government did not just alter policies; it started changing the rules of the democratic game. While centre-right governments in Europe may be implementing policies that progressives dislike, they are nonetheless operating within the constraints of democratic systems (for the most part; Hungary and Poland are exceptions).

Which is why the first weeks of the election campaign were dominated by an ‘Anybody But Harper’ sentiment, benefitting both the Liberals and the left-wing New Democratic Party (NDP). The NDP was even leading the polls for a while, inviting pundits to consider the possibility of a hung parliament.

But eight days before election day, the Liberals began to pull ahead.

The most important reason – and why they continue to be so popular today – is that they were able to own the mantle of ‘change’. They were the only party to promise running a (small) deficit and invest heavily in infrastructure. Notably absent was abstract discourse about tackling inequality. Trudeau’s plan was about fairness for the middle class, promoting social justice and economic growth.

Democratic reform was also a core feature of the Liberal campaign, which the party has maintained in government – Trudeau appointed a new Minister of Democratic Institutions and promised a change in the voting system before the next election.

The change has also been in style, however. Justin Trudeau is rebranding Canada as an open, progressive, plural society. Even though this was Canada’s reputation pre-Harper, it is not as simple as turning back the clock.

In a world increasingly taken by populist rhetoric on immigration – not just by politicians like Donald Trump, Nigel Farage, Marine Le Pen and other right-wingers, but also increasingly by mainstream politicians of right and left – Justin Trudeau has been unashamedly proclaiming the benefits of living in a diverse, plural society. He repeatedly calls himself a feminist, in the hope that one day “it is met with a shrug” rather than a social media explosion. Live-streamed Global Town Halls are one part of a renewed openness with the media. Progressive politicians in Europe would do well to take note.

Questioning the role of political parties today

Another interesting development is that the Liberal party is implicitly questioning the point of parties today. It recently abolished fee-paying, card-carrying party members. While this has been met with some criticism regarding the party’s structure and integrity, with commentators worried that “it’s the equivalent of turning your party into one giant Facebook page: Click ‘Like’ and you’re in the club,” it seems this is the point.

Colin Horgan, one of Trudeau’s former speechwriters, explains that Facebook is “literally a treasure trove for political parties”. All kinds of information becomes available – for free; supporters become easier to contact.

It was something the Liberals were already hinting at two years ago when they introduced a ‘supporters’ category to make the party appear more open. Liberal president Anna Gainey also used the word “movement” to describe what the Liberals hope to be.

And yes, they are trying to win over millennials. Which proved to be a good strategy, as a new study shows that Canadians aged 18-25 were a key reason why the Liberals won a majority. Young voter turnout was up by 12 per cent from the last election in 2011; among this age group, 45 per cent voted for the Liberals.

Some interesting questions for European progressives to consider. Of course, some of the newer political parties in Europe have already been experimenting with looser membership structures and less hierarchical ways of engaging, like Podemos’ ‘circles’ in Spain and the Five Star Movement’s ‘liquid democracy’ in Italy.

The British centre-left may be hesitant after its recent fiasco. Labour opened up its leadership primary to ‘supporters’ and ended up with a polarising leader who is extremely popular amongst members, but unpopular amongst the British public. But it would be wrong to assume that the process was to blame.

The better comparison is perhaps to Emmanuel Macron, France’s young economy minister who recently launched his own movement ‘En Marche !’ Moving beyond the traditional party structure, he is attempting to unite ‘right’ and ‘left’ by inspiring French people with an optimistic vision of the future. Time will tell whether this works to engage people in the longer term, or at least until next year’s presidential election.

In any case, European parties could start by asking themselves: What kind of political parties are they? What is the point of them?

Most importantly: What do they want people to think is the point of them?

Ultimately, the Canadian Liberals’ model of success rests on three main pillars:

  1. They unambiguously promote and defend a progressive, open, plural vision of society.
  2. They have a coherent economic plan focused on social justice and economic growth which, most importantly, they are trusted to deliver.
  3. They understand that society has changed – people are more interconnected than ever, relationships are less hierarchical and networks exist online – and they are adapting a once rigid party structure into a looser, open movement to reflect that.

*And as a bonus, a young, charismatic leader doesn’t hurt either.

Claudia Chwalisz is a Senior Policy Researcher at Policy Network, a Crook Public Service Fellow at the University of Sheffield and author of The Populist Signal: Why Politics and Democracy Need to Change