Taxing. What we can learn from the Starbucks fiasco.


by Magnus Shaw.

There's only one thing that surprises me about the Starbucks saga, and it isn't their reluctance to pay tax. As large corporations are only really answerable to shareholders, that is to be expected. No, it's the fact they thought nobody would care that amazes me. Apparently, while they were busy arranging for their beans to be roasted in the sweltering jungles of ... er ... Switzerland and renting a logo to themselves, not a single person in Starbucks' PR, marketing or corporate responsibility divisions thought 'How will this look to our customers?'

Although perhaps they did and were ignored. Or maybe the stock response 'We have met all our obligations' seemed enough to cover all eventualities. I can't be sure. But I do know their collective complacency was so great, it led them to the kind of public relations disaster usually reserved for restaurants caught serving cat.

I think it's fair to assume Starbucks' communications machine was so bound up in matters of global warming and fair trade, its operators failed to spot the changing agenda. Since the banking crisis and the resulting funding cuts, the populace has been considerably less exercised by greenhouse gases. These days, it's large businesses, who appear hell-bent on making everything worse, that set hearts racing. In fact, corporate tax is now the hottest of potatoes. There's an inquisition afoot and escape is impossible. Starbucks pay people to notice that kind of thing. They didn't.

So how much damage has the Starbucks brand sustained? Time will tell, but I see their backs against a very bumpy wall. Sure, Google has been up to similar shenanigans, but they're somewhat insulated. Because Google provide their principal product - a search engine - for free, it's difficult for the punter to feel ripped-off by the brand, whatever the truth of their tax affairs. Starbucks, however, was already performing something of a PR balancing act before their tax avoidance came to light. Their pricing policy, for example, has long been the cause of some head scratching. Old skinflints like me have always had the uneasy feeling they are being charged an awful lot of money for a milky hot drink. Those daft size descriptors ('Grande' is the small one?) and awkward requests for one's name hasn't helped much either. And now this.

Of course, logic suggests such an impasse should never have occurred. Starbucks were doing very nicely at the old 'frothy liquid in a paper cup' game and paying exactly the amount of tax required of them. That just happened to be none at all. They're golden, right?

Well, anybody involved in the management of public opinion should know how small a role logic plays in the process. Having a strong defence (and in Starbuck's case, it's not actually that strong) isn't the point. Smart brands work hard to ensure they have no need for a defence. Not being brought before the court is infinitely preferable to winning the case.

Interestingly, the Starbucks brand has been particularly harmed by the numbers. Or lack of them. In all honesty, it's that big fat zero that brought the roof down. Had Starbucks been paying 10% corporation tax, there would still have been raised eyebrows and a liberal dose of complaint. But to be caught not paying a penny is so stark, so easily understood and so audacious, that indignation has inevitably rocketed.

And worse, the company has now exacerbated the problem by falling to that ready defence, haughtily assuring us they have met their tax obligations and utterly missing the point. Dissatisfaction with HMRC rules now reaches as far as the Treasury itself, so asserting your compliance gets you nowhere. To then offer to pay a negotiated 'something' just rubs salt in the wound. Again I am taken aback by such a clueless manoeuvre. Could Starbucks really not see how high-handed and patronising that would sound? It's hardly surprising the direct action against them, planned by UK Uncut, has met with substantial approval.

For other brands, looking on in horrified anxiety, the lesson is clear. Thanks to a moribund economy and a ruthless administration, scapegoating is the biggest game in town. Regular folk are livid and looking for someone to blame. The spotlight has swung from bankers, to politicians and subsequently to corporate entities and their tax arrangements. Now blood has been scented and thousands of citizens feeling the sting of austerity will be delighted to expose any brand ducking its dues.

Time to make corporate responsibility mean something, or prepare your beans for a thorough roasting.

Magnus Shaw is a writer, blogger and consultant.


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