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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Emily Thornberry heckled by Labour MPs as tensions over Trident erupt

Shadow defence secretary's performance at PLP meeting described as "risible" and "cringeworthy". 

"There's no point trying to shout me down" shadow defence secretary Emily Thornberry declared midway through tonight's Parliamentary Labour Party meeting. Even by recent standards, the 70-minute gathering was remarkably fractious (with PLP chair John Cryer at one point threatening to halt it). Addressing MPs and peers for the first time since replacing Maria Eagle, Thornberry's performance did nothing to reassure Trident supporters. 

The Islington South MP, who voted against renewal in 2007, said that the defence review would be "wide-ranging" and did not take a position on the nuclear question (though she emphasised it was right to "question" renewal). She vowed to listen to colleagues as well as taking "expert advice" and promised to soon visit the Barrow construction site. But MPs' anger was remorseless. Former shadow defence minister Kevan Jones was one of the first to emerge from Committee Room 14. "Waffly and incoherent, cringeworthy" was his verdict. Another Labour MP told me: "Risible. Appalling. She compared Trident to patrolling the skies with spitfires ... It was embarrassing." A party source said afterwards that Thornberry's "spitfire" remark was merely an observation on changing technology. 

"She was talking originally in that whole section about drones. She'd been talking to some people about drones and it was apparent that it was absolutely possible, with improving technology, that large submarines could easily be tracked, detected and attacked by drones. She said it is a question of keeping your eye on new technology ... We don't have the spitfires of the 21st century but we do have some quite old planes, Tornadoes, but they've been updated with modern technology and modern weaponry." 

Former first sea lord and security minister Alan West complained, however, that she had failed to understand how nuclear submarines worked. "Physics, basic physics!" he cried as he left. Asked how the meeting went, Neil Kinnock, who as leader reversed Labour's unilateralist position in 1989, simply let out a belly laugh. Thornberry herself stoically insisted that it went "alright". But a shadow minister told me: "Emily just evidently hadn't put in the work required to be able to credibly address the PLP - totally humiliated. Not by the noise of the hecklers but by the silence of any defenders, no one speaking up for her." 

Labour has long awaited the Europe split currently unfolding among the Tories. But its divide on Trident is far worse. The majority of its MPs are opposed to unilateral disarmament and just seven of the shadow cabinet's 31 members share Jeremy Corbyn's position. While Labour MPs will be given a free vote when the Commons votes on Trident renewal later this year (a fait accompli), the real battle is to determine the party's manifesto stance. 

Thornberry will tomorrow address the shadow cabinet and, for the first time this year, Corbyn will attend the next PLP meeting on 22 February. Both will have to contend with a divide which appears unbridgeable. 

George Eaton is political editor of the New Statesman.