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.

Grant Shapps on the campaign trail. Photo: Getty
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Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.