Why is it so taxing?

Starbucks was recently accused of paying almost no tax in the UK. In fact it claims it won’t be doing so for several more years. The fact that this has gone on for about 16 years is surely not a testament to the incompetence of its management but to the commitment Starbucks has to the UK, where it can make a lot of money without paying much tax.

At any rate it is no doubt currently entirely legal. But the Chancellor’s statement promises a tax on such ‘diverted profits’ (the ‘Google tax’), so that it could be less worthwhile. At the moment the details of the proposals are not at all clear. But it will have to rest on far more transparency over where profits are made and tax is actually paid. At the moment this information is very hard to come by.

Yet that does not mean it is hard to produce. Vodafone has done this. So whether the tax on diverted profits flies or fails, it will be down to the relative strength of two forces: political will versus commercial won’t.



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