Starbucks. The brand that was loved could be in trouble over paying low tax.

Starbucks, the brand of choice for the new middle classes, is taking a hammering in the UK and will in Ireland, as its tax affairs become more public.
Whilst tax affairs have never really been the concern of marketing managers, in these days of austerity, issues like this come more to the fore.

The image above is one of many and taken from an 'Occupy London' protest.

A respected market research company 'YouGov' said Starbucks was facing a "brand catastrophe" and that consumer perceptions are declining daily after Reuters published an investigation into Starbucks low tax. It revealed that they only paid 8.6m stg in tax since they opened in the UK in 1998 (about 600,000 a year over 14 years).

In current climates, the public have a low tolerance of anything that even sounds like corporate greed but of course, Starbucks are only availing of "policies" from The British government/revenue to locate there. 

Indeed Ireland, has a widely acknowledged and hugely controversial, low 12.5% tax base which means that international companies who locate here, can wash global profits through Ireland at the lowest tax rate in Europe. It's a strategy that attracts investment which is based not on the PR spin of talent/resources/education, but rather, tax advantage. It is utter nonsense to suggest that if you allow corporates to avail of special tax incentives and evade tax in other markets where they trade by utilising EU provisions, that they won't avail of it.

Starbucks have now joined Google (headquartered in Ireland), Facebook (headquartered in Ireland) and Amazon as the focus of disquiet from the public about their tax affairs. Starbucks claim they're actually paying correct levels of tax due to loses incurred in their set-up in the UK although given that it attracts over one million customers a day in the UK, this is hard to believe. A business with that level of custom, should be profitable.

In the UK, tax is calculated on profits after interest costs and royalties and of course, adjusting those royalty costs, allow the company to minimise its tax. The fee is paid to the European HQ in Amsterdam and for example, in 2007 Starbucks would have been handsomely profitable if this "fee" wasn't paid.

However, payments like these, with the consent of HM Revenue, help corporates to avoid tax locally and about 25% of the 700 largest UK businesses paid almost no tax according to The Financial Times through devices such as these which smaller companies have no real access to.

Public anger over corporate tax is absolutely likely to continue and affect brand. Already campaigns against Starbucks, outside their stores, are planned.

The once doyenne of the middle classes could very quickly become a pariah.
And so too, very many others.