Re: Three cheers for the Chancellor : Wed Nov 07, 2012 1:28 pm  

If Starbucks was not called Starbucks would as many people visit the coffee shops? Would people also pay well over the odds for a Latte if it wasn't in a Starbucks?

If we accept that the Starbucks name drives both volume and profitability then surely the owner of the name has a right to charge for the use of it? If costs of driving the brand is borne by HQ surely they have the right to recover those costs?

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 1:40 pm  

Sal Paradise wrote:

If Starbucks was not called Starbucks would as many people visit the coffee shops? Would people also pay well over the odds for a Latte if it wasn't in a Starbucks?

If we accept that the Starbucks name drives both volume and profitability then surely the owner of the name has a right to charge for the use of it? If costs of driving the brand is borne by HQ surely they have the right to recover those costs?

But is the value attributed fair?

Alternatively, why not say to them that no deduction for royalties paid overseas are a cost of doing business in the UK. Take it or leave it? If they left if we'd have a less homogenous scene.

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 2:04 pm  

Dally wrote:

But is the value attributed fair?

Now that would be a valid question to ask. Far more valid than the view you (and BG and Him etc) earlier proposed that royalty payments should not be allowed at all.

[DaveO]

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 2:19 pm  

Richie wrote:

Now that would be a valid question to ask. Far more valid than the view you (and BG and Him etc) earlier proposed that royalty payments should not be allowed at all.

Well it's only taken umpteen pages to get here but I see we did. The cross charging of royalties has been tax deductible for ages I believe. The issue is how much Starbucks charges its UK arm for the privileged.

They charge a far higher percentage than McDonald'd do for the same thing and so it looks clearly a tax avoidance device to me as opposed to a legitimate tax deductible expense.

The problem could be solved by HMRC saying "Oi, your taking the mick" over the amount.

There is then a separate question as to whether this should be tax deductible at all. Starbucks can still cross charge if it wants but I see no reason why this needs to be tax deductible in the first place.

Either way I think this one is a pretty straightforward tax avoidance mechanism to close off. If Starbucks US stopped taking so much off Starbucks UK the latter would make more money. Theoretically a good thing for the UK business and the fact in practice that isn't the case for Starbucks globally shows how broken the tax system is.

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 2:27 pm  

The royalty payments are not fair AS A TAX DODGE because it is all the same firm. If it wants to transfer money to its US parent it is free to do so but the UK operation should not be able to get a tax break. At all.

The lie is given to the whole deal by the resulting fiction, namely that Starbucks UK makes no profit at all to speak of, and so has no corporation tax to pay. Leaving aside that senior Starbucks people frankly bull up how profitable the UK business is for them, isn't it stating the bleeding obvious that if they weren't profitable they wouldn't still be here?

The Reuters investigation found Starbucks had made over £3bn in UK sales since 1998 but had paid less than 1% in corporation tax. It had reported losses in each of the last five years and therefore did not have to pay any corporation tax, yet executives told analysts that the UK business was "successful", "profitable" and they were "very pleased with the performance".

According to the news agency, the firm told investors its European businesses made a $40m (£25m) profit in 2011, but filed accounts that showed a $60m loss.

Now, that is the truth of the matter, and can have no justification at all. No executive could be very pleased with the performance of a successful and profitable business which made losses for five straight years, so those attempting to plait fog can now desist, as you are just wasting your time and ours defending the indefensible.

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 2:32 pm  

DaveO wrote:

Well it's only taken umpteen pages to get here but I see we did. The cross charging of royalties has been tax deductible for ages I believe. The issue is how much Starbucks charges its UK arm for the privileged.

They charge a far higher percentage than McDonald'd do for the same thing and so it looks clearly a tax avoidance device to me as opposed to a legitimate tax deductible expense.

The problem could be solved by HMRC saying "Oi, your taking the mick" over the amount.

There is then a separate question as to whether this should be tax deductible at all. Starbucks can still cross charge if it wants but I see no reason why this needs to be tax deductible in the first place.

Either way I think this one is a pretty straightforward tax avoidance mechanism to close off. If Starbucks US stopped taking so much off Starbucks UK the latter would make more money. Theoretically a good thing for the UK business and the fact in practice that isn't the case for Starbucks globally shows how broken the tax system is.

We could have got there ages ago if we didn't have so many (and another since) declaring that any cross charging is wrong. The question should be "how much?" rather than a statement of "not at all"
Of course, the amount will vary across businesses and may even vary across the product set of their sales.

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 2:35 pm  

DaveO wrote:

There is then a separate question as to whether this should be tax deductible at all. Starbucks can still cross charge if it wants but I see no reason why this needs to be tax deductible in the first place.

Richie wrote:

We could have got there ages ago if we didn't have so many (and another since) declaring that any cross charging is wrong. The question should be "how much?" rather than a statement of "not at all"
Of course, the amount will vary across businesses and may even vary across the product set of their sales.

No, nobody is saying charging royalties is "wrong". The argument is that they can charge whatever royalties they want. But in this case they should not be tax deductible. Not at all.

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 2:36 pm  

Ferocious Aardvark wrote:

The royalty payments are not fair AS A TAX DODGE because it is all the same firm. If it wants to transfer money to its US parent it is free to do so but the UK operation should not be able to get a tax break. At all.

The lie is given to the whole deal by the resulting fiction, namely that Starbucks UK makes no profit at all to speak of, and so has no corporation tax to pay. Leaving aside that senior Starbucks people frankly bull up how profitable the UK business is for them, isn't it stating the bleeding obvious that if they weren't profitable they wouldn't still be here?

The Reuters investigation found Starbucks had made over £3bn in UK sales since 1998 but had paid less than 1% in corporation tax. It had reported losses in each of the last five years and therefore did not have to pay any corporation tax, yet executives told analysts that the UK business was "successful", "profitable" and they were "very pleased with the performance".

According to the news agency, the firm told investors its European businesses made a $40m (£25m) profit in 2011, but filed accounts that showed a $60m loss.

Now, that is the truth of the matter, and can have no justification at all. No executive could be very pleased with the performance of a successful and profitable business which made losses for five straight years, so those attempting to plait fog can now desist, as you are just wasting your time and ours defending the indefensible.

So you are still taking the line that despite the valid brand value given to the UK subsiduary, and the costs the parent company may incur, and the value to the UK business, the UK business isn't entitled to pay it's parent company and consider that a cost?

To re-visit one of my earlier points, can the UK operation transfer money for buying produce to the parent company and consider that a cost?

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 2:38 pm  

Ferocious Aardvark wrote:

No, nobody is saying charging royalties is "wrong". The argument is that they can charge whatever royalties they want. But in this case they should not be tax deductible. Not at all.

Why can't that cost be tax deductable, but the cost of buying (e.g.) coffee beans from the parent company can be?

No posters on this thread have suggested that a business should be able to charge "whatever royalties they want"

Re: Three cheers for the Chancellor : Wed Nov 07, 2012 2:40 pm  

Richie wrote:

So you are still taking the line that despite the valid brand value given to the UK subsiduary, and the costs the parent company may incur, and the value to the UK business, the UK business isn't entitled to pay it's parent company and consider that a cost?

What brand value does it give?

If the royalties mean the UK sub. makes a perennial loss, remind me what that "value" is again?