Forcing the likes of Starbucks to Pay Where You Earn would help tackle tax avoidance

Last week Phil McCauley won the “top of the policies” vote at Pragmatic Radicalism’s event on industrial policy. The winning proposal tackled the question of reducing corporate tax avoidance

I believe we must act to end tax avoidance. We have seen numerous examples of famous brands proudly paying very little tax; just last week it emerged that Starbucks have a grand total of £8.6m in corporation tax in this country over the last fourteen years.

Once again, as the spotlight has been shone on an embarrassed corporation, we’ve seen a litany of familiar excuses wheeled out to excuse not paying their fair share. This time, as well as the usual “we’ve done nothing illegal” line, part of Starbucks defence was that they paid their fair share of tax via national insurance contributions for their employees! This assumes away the entire basis of corporation tax (e.g. on companies’ profits) and sells every other tax payer short – company and individual alike.

Starbucks disgraceful tax avoidance will not be the last revelation of this type, and unless action is taken, we will continue see yet more billionaire entrepreneurs seeking plaudits whilst legally robbing the exchequer.

For years, all governments have failed to rebalance our taxation system. My proposal involves a new approach that requires legislation from the next Labour government and which represents a radical shift away from the failed approaches of the past.

It’s time for pay where you earn.

Companies should be required to pay their fair share in corporation tax on all revenues derived within the UK. It is simply applying the same rules to companies as to individuals.

Hard working families can’t simply opt out of PAYE, companies should not be able to opt out of corporation tax. This simple idea is capable of delivering billions in fair taxation and ultimately could provide a budget surplus.

Those familiar voices from the right will complain about companies leaving the UK. That the country will be made somehow less productive unless we exempt corporations from the paying their fair share.


Will Vodafone no longer have customers here? Will Boots and Starbucks close their outlets? Will Facebook stop “liking” UK users?

Of course not.

But all of them think it’s quite proper to use outrageous legal accounting duplicity to reduce their fair share of tax. To UK company directors who pay themselves via dividends to reduce their PAYE costs, I say this is equally obnoxious.

Pay up everyone at the same fair rate.  Imagine, if fair share taxation were to exist? The Labour government would be able to continue to invest in education, health and infrastructure. The working class has always paid its fair share. It’s time for the more privileged classes to pay their fair share too with pay where you earn.

Cllr Phil McCauley is a member of the Labour Finance and Industry Group executive board and a serial & social entrepreneur

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7 Responses to “Forcing the likes of Starbucks to Pay Where You Earn would help tackle tax avoidance”

  1. Nick says:

    It’s time for pay where you earn.


    So lets see. Bookmaker in Gibralter.

    What about travel companies? Book a holiday, its overseas, so no taxation in the UK.

    Rolls Royce. Manufactured here. Sold overseas. Used overseas. Hmmm, doesn’t look good for tax revenues.

    Unfortunately, you need to wake up. Things like the internet means that lots of services are international and the business takes place where the servers are.

    You could always introduce a tobin tax. 10% of every credit card transaction to be taxed. Somehow I expect the voter will notice. It’s only a Tobin tax if they can’t see it.

    So on the investment front. Investment make sense if it results in cheaper costs or an income.

    On your investments, how well are you doing? Lower spending means cuts. You don’t like that sort of investment. So it means more tax revenues. Hmm taxation isn’t doing to well is it.

    In otherwords, you’re not very good at this investment malarky are you?

  2. SadButMadLad says:

    It’s not tax avoidance. It’s tax compliance. The companies are following EU law. The EU set up the Eurozone so that companies don’t have to have an office in every single country. So they can pick and choose which country to base themselves in. So countries are competing with countries to provide an ideal base for companies.

    Currently Luxembourg and Iceland and Ireland are winning with lower corporation tax levels which makes the attractive.

    If you want the UK to have multinational companies based here and paying tax then get the UK to offer a corporation tax rate of 10%. Then all companies would come flooding here.

    And anyway, it’s good that companies aren’t handing over money to the state. No matter if it was Labour or Tory, it would only be wasted on pet projects. Eg. With Labour it would be state benefits. By not paying, the state is having to think about what it should really spend money on. Not that they are as the Tories are still spending loads more than Labour did, the debt is not really being paid off.

  3. Ian Stewart says:

    @ Nick: What a silly argument. I presume that the turbines and engines built by Tolls Royce are transported from Derby and Bristol to somewhere else, often using roads and railways, which come out of the public purse.
    They also rely on government contracts for marine and aero engines, and need the government to lobby with other governments for their use in international projects. Unless they will directly pay for all the health and education costs of their workforce, then paying an honest percentage of tax is indeed an investment that creates a profit for them in the long run.
    Likewise Amazon, or any other internet trader that sell actual “things”.
    Nick, were you Perry6 in a previous life?

  4. James McLaren says:

    I think this would get a big thumbs up from the SNP.

    Tax the oil revenues where they are earned.


  5. Amber Star says:

    @ Nick

    “Bookmaker in Gibralter.”
    Doesn’t pay UK corporation tax now; no loss to the UK from a pay where you earn system of corporation tax.
    “Book a holiday, its overseas, so no taxation in the UK.”
    That’s already how the travel companies do it, so no loss of corporation tax to the UK from pay where you earn.
    “Rolls Royce. Manufactured here. Sold overseas. Used overseas. Hmmm, doesn’t look good for tax revenues.”
    Rolls Royce. Designed & developed here. Manufactured in Singapore. Hmmm, doesn’t look good for the accuracy of the rest of your comment.

  6. swatantra says:

    ‘Costa’ managed to get in a plug for their business. A British owned business that pays its full wack oif Corp Tax 28%, here. Lets hope Starbucks users choke on their coffee beans.

  7. Island Loans says:

    Royalties are paid to a third party to use intellectual property not owned, not to yourself for intellectual property you own – if royalties are paid to yourself for property already owned that is simply moving cash and frankly tax evasion rather than avoidance. Was Starbucks going to sue itself if it didn’t pay itself royalties? Aren’t dividends enough any longer? Absolutely ridiculous and utterly bogus. Go after the back taxes and fine them, taxman! If you don’t, corporation tax receipts will collapse, as every subsidiary in the UK starts paying ridiculous royalties to its overseas parent.

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