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Blogs

Last call for Starbucks. Your flight is about to depart

27 January 2013

2:11 PM

27 January 2013

2:11 PM

A friend of mine who has worked in the City all his life, and is by no means a leftist, can still explode with rage at the nom-doms and corporations, who expect to stay in Britain without paying tax. When their representatives say they will leave if the government taxes them, he replies

“Fine. If you don’t like paying the taxes the rest of us have to pay, there’s a big road heading out of London called the M4. Take it, and hang a right at the sign marked Heathrow.”

He understands that the notion of the state granting tax exemptions to fortunate classes ought to have died when the French revolutionaries abolished the privileges of the noble and clerical estates in 1789. So does Jesse Norman, whose conservative assault on crony capitalism you can read here, and the other intelligent Conservative I write about in my Observer column this week. So, apparently, does David Cameron.

Yet I remain astonished by the number of conservatives who defend the right of the plutocracy to escape the taxes the little people must pay. Go to this list of press releases from the Taxpayers’ Alliance, and you will notice a startling omission. The most hypocritical campaign group in Britain has issued barely a word of protest about corporate and plutocratic avoidance. It complains about government waste, but keeps silent about the burdens the super-rich place on the people it so presumptuously claims to represent.

In the past, right-wingers argued for lower taxes and a smaller state and left-wingers argued for higher taxes and a bigger state. Both agreed, however, that you had to pay what taxes the state set. If you did not like them, you could campaign for a change in government policy or a change of government.

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Now libetarianism, once an interesting anti-authoritarian philosophy, has degenerated into servile money worship, and taken large numbers of right-wing thinkers down with it. Conservative writers cannot see anything wrong with plutocrats gaining an unfair advantage, and do not think about how powerful interests that can demand state bailouts distort markets.

Norman does, and has little time for the conventional right-wing argument that if tax avoidance is legal then no one should complain. We are not talking about a couple moving assets to keep their tax bill down, but vast corporate structures hiding money in piratical tax havens. When the representative of Google spoke to the Commons Public Accounts Committee last year, he explained that his firm paid next to no tax in Britain because its brand was invented in America and its engineers were based in California. He sounded reasonableness personified until MPs pointed out that Google ran its profits through Bermuda, which is neither the birthplace of its brand nor a home to its engineers.

A good rule of thumb in all circumstances is to ask whether you can defend your actions in public. No person or organisation lives apart from society, and if you cannot explain yourself to your neighbours or fellow countrymen and women you are finished. The tabloids are damned because they could not point to one of the stories they obtained by hacking and say, ‘we may have been in technical breach of the law, but because we broke it to find evidence of corruption and the misuse of power, you should thank us.’ The corporations are damned because, even though they were within the law, they avoided taxes with such effort and on such a scale they hurt the society that houses and protects them.

As my City friend would have predicted, now that even David Cameron is condemning tax avoidance, corporations are threatening to leave in a huff. The Telegraph reports that Kris Engskov, Starbuck’s UK managing director, has demanded talks after the Prime Minister said tax-avoiding companies had to ‘wake up and smell the coffee’.

Sources close to the business said that plans announced last year to invest £100 million in new UK branches could be put on hold, meaning fewer jobs will be created.

Mr Engskov has not asked himself why the British should care if Starbucks cuts back on investment or leaves altogether. It has paid £8.5 million in corporation tax, despite total sales of £3 billion. The Public Accounts Committee said Starbucks UK had achieved this remarkable feat by shuffling profits around the world. It is now offering to donate £20 million as a sort of goodwill gesture. (Can we all do that, incidentally? Not pay tax for years then make a charitable donation.) Even if it does, the tax will represent a tiny portion of turnover. From the point of view of the Exchequer, it is a matter of supreme indifference whether Starbucks stays or goes.

You may worry about the jobs of Starbucks low-paid workers. I did until I looked at Marketing Week’s survey of the coffee market, which pointed out that there are many other chains and thousands of independent coffee shops. If Starbucks were to go, they would move into the gaps in the market, and may pay tax too.

There is no reason why Mr Cameron should not listen politely to what Mr Engskov has to say, then point him westwards, and tell him to keep going until he reaches Heathrow.

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