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Hush Money

June 24, 2013

Apparently, it’s better some days to just give in.  Starbucks has handed the British government £5m, and is promising that again, if only to calm down the public and government whiners.

“We felt that our customers should not have to wait for us to become profitable before we started paying UK corporation tax,” the company explained in a written statement.

“We listened to our customers in December and so decided to forgo certain deductions which would make us liable to pay £10m in corporation tax this year and a further £10m in 2014. We have now paid £5m and will pay the remaining £5m later this year.”

The responsibility of a company is to its owners.  In the case of a public company, that responsibility is to the shareholders as represented by the board of directors.  There are many flaws with this system, but it’s worked fairly well for, oh, centuries, so it can’t be all bad.  When a company bows to the pressure outside of the shareholders, it’s showing a weakness that’s hard to stop.  I don’t think that it’s a good idea to voluntarily give up taxes when they’re not owed.

Now, that said, the loopholes that multi-national corporations can exercise are many, and that creates a playing field that makes it tough for anyone else.  As the owner of a small business, I often see larger companies able to take advantage of factors we can’t to win a sale that we might have otherwise won.  Well, life’s not fair.  We have to keep competing on our competencies, and hope that we maintain a customer base that is happy with our service.

Starbucks is only taking advantage of the rules given it for the benefit of the shareholders.  If it wants to instead be a responsible country citizen and forego deductions or accounting tricks that saves it money… well, if that brings it more business then it wins.  If those actions hurt the bottom line, then the shareholders will react.

Life is complicated, and showing weakness in a global market makes it more so.

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