In Depth

Starbucks suffers reputation slump over tax 'avoidance'

Consumer goodwill drains away over coffee chain's failure to pay tax as more politicians call for boycott

STARBUCKS has suffered serious harm to its reputation over revelations that it pays no corporation tax in the UK, according to pollsters YouGov. The news comes as the coffee shop chain faces calls from MPs for a consumer boycott over its perfectly legal tax affairs.

Reuters reported this week that Starbucks had paid £8.6m in corporation tax since it first opened in the UK in 1998 – and none since 2009. Corporation tax is paid on profits, and Starbucks UK has not reported a profit for the past three years. Despite this, Starbucks officials have regularly described the UK business as "profitable".

YouGov's BrandIndex, a daily measure of brand perception, reveals that Starbucks, which makes much of its ethical corporate policies, has declined markedly in people's estimation, The Guardian reports.

Starbucks' 'buzz' score, which is a measure of the number of negative and positive comments consumers have heard about a brand, has fallen from +0.7 to -13.9 - its lowest in four years. Starbucks' reputation score also dipped: from +4.6 a week ago to -3.9 following the tax revelations.

A BrandIndex spokeswoman said: "To say this story has been a disaster for the Starbucks brand would be a bit of an understatement. It's still too early to say what the long-term impact of this is going to be, but in the current climate we've seen the public take a fairly dim view towards accusations of corporate greed."

Tax campaigner Richard Murphy said of YouGov's findings: "I think the case that tax avoiding can harm shareholder value has been made. It's time corporate bosses noted. The anti-tax avoiders campaign is not going away."

Starbucks UK managing director Kris Engskov made a brave attempt to justify his company's tax arrangements, writing a blog that said they had "paid over £160m in various taxes, including Pay As You Earn for our 8,500 UK employees, national insurance and business rates" over the past three years. The post was later altered to remove the reference to PAYE, which is a tax on employees.

There is no suggestion that Starbucks has done anything illegal, a fact that has led to calls from MPs for an inquiry into the coffee chain's tax affairs and its relationship with the taxman. Others are supporting a consumer boycott.

Lib Dem MP Stephen Williams told the Financial Times that "consumer power" would force Starbucks "to come clean about their tax avoidance activities".

Williams added: "Consumer boycotts have a long tradition in the area of coffee and sugar going right back to 18th century Quaker-led campaigns in Bristol against the slave trade. Think before you drink and maybe we'll get this company to act responsibly." The chairman of the House of Commons public accounts committee, Margaret Hodge, has also called for a boycott.

Meanwhile tax campaigners UK Uncut are reportedly planning sit-ins at branches of Starbucks, a tactic it has previously used to draw attention to the tax affairs of Vodafone and Barclays.

And it's not just consumers that Starbucks has to worry about. CrossCountry is reportedly considering ending sales of Starbucks coffee on its train services, telling The Guardian: "If our customers were to tell us they were unhappy for us to sell them Starbucks coffee then we would, of course, review this arrangement."

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