TAXATION WITHOUT COMMUNICATION
2012 has been a good year for transparency. If there is one trend to emerge from this year’s front pages it would be this: ‘bad things happened at big institutions for a long time’. As scandals at News International and the BBC fall out of the headlines, the media’s focus turns to a growing preoccupation with tax avoidance.
Transparency is difficult for those who avoid tax precisely because their practices depend on a lack of it. Companies can use intra-group transfer pricing to reduce UK profits and make money reappear in low-tax jurisdictions (in Amazon’s case Luxembourg). Tax avoiders do this without breaking the law.
So when the beady eye of transparency looms over a company like Starbucks, it’s nothing more than a PR problem. What makes it a massive PR problem is when there is no consistent story to tell.
Starbucks has, until now, been expert at sweetening the unpalatable. This skill has deserted it in the last month as it struggled to reduce the complex work of its tax advisers into a simple, coherent message.
A major problem for the coffee brand has been the revelation that shareholders and HMRC have been told different things about profitability. Tax avoidance demands this shadiness, but it doesn’t hold up against calls for transparency. In a big year for uncomfortable committee performances, the roasting of Starbucks’ Troy Alstead by the Public Accounts Committee is a great example of why it is crucial to have a clear and positive answer for when the hard questions are asked.
As Starbucks learned, ‘we don’t have to pay more anymore than we do’ is not really good enough. The ‘we don’t have to’ bit gets a little difficult when you stop talking to Margaret Hodge and start listening to consumers. You can pump as much money into CSR projects as you like, but if you are seen to be mugging off taxpayers, the whole Fairtrade, green mermaid thing starts to look much more like a Siren of national plunder.
Businesses, and other things like Jimmy Carr, could learn that when light is shed on their ugly (but not illegal) financial arrangements, a good move is to apologise and do something to turn bad into better.
Nobody at Starbucks will be losing sleep over their £10m fudge-light climbdown, but conveying this positive message a little earlier might have made it a little less sickly-sweet.