StarbucksHere is a question that I posed on Twitter yesterday…..

Imagine that companies had 2 prices for all products – a lower price that was the result of them avoiding paying tax and a higher price that included their tax contribution – which product would you choose to buy?

Vote now and feel free to discuss.


    1. Exactly. That’s what the real question is here. Do you want to pay a tax or not?

      No matter how the government taxes, it’s always the end consumer that is paying bill. How it gets into the public irrelevant.

  1. I would pay the lower price, so that the company would sell more “coffee(?)” as a lower percentage of a higher number could equal the higher percentage of a lower profit.
    They would also need more employees, so pay more Employer’s NI to HMRC (and reduce unemployment). They would pay more VAT to HMRC (assuming the “coffee” was hot). They might need more outlets, so would pay more rates to the local council. They would need more local services such as refuse collection, cleaners etc.

  2. If the products were exactly the same, I’m afraid I would plump for the lower price. And although I’m sticking my head in the sand, the tax issue is none of my business. It’s between their accountants and their consciences.

    1. David Dredge makes an interesting point. If the price difference was minimal (let’s say a coupld of quid) and I was aware of the tax thing, I might go for the higher price. I was thinking of bigger products; but if it was (say) a cup of coffee, I’d probably pay the extra.

      This reminds me of a place in Cambridge where you have two coffee machines in a communal area, exactly next to one another. One is Fair Trade coffee and one is unspecified. A colleague asked me if I’d choose the Fair Trade. I joked back, ‘No, I think I’ll have a cup of child slave labour coffee this time.’ And it wasn’t much of a joke, I grant you, but it did make me wonder why both machines were there. You would actually have to make a decision NOT to choose Fair Trade if you were aware of its presence. It was bizarre.

    2. This is a very important point. The customer isn’t evading tax, the company is. They are the ones who presumably assume the risk of not paying tax.

      If there was a good chance they would get caught and prosecuted for evading tax, and I hated the company for some reason, I would totally buy the cheaper product. I’d be the ones reporting them to the authorities, too.

  3. It isn’t for me to pay their tax; it’s for them to pay them to pay their tax.

    Anyway, I don’t use Starbucks, in the same way that I avoid McDonald’s.

    1. *facepalm* So who do you think pays the 20% VAT that is added to prices by every other (legitimate) vendor?

    2. This doesn’t really apply to VAT, Dave. Their clever schemes give them no way around paying that.

  4. From a risk-reward standpoint, I’d buy the lower-priced one. Reminds me of a concept I read about recently called the prisoner’s dilemma.

    In this case, paying more for the company that does things legally is theoretically a sacrifice for the greater good, because if everyone rewarded companies that provided lower prices by skirting taxes, our government couldn’t function and provide the numerous services we receive from it on a daily basis.

    Now if you make the sacrifice for the greater good, and everyone else does too, it’s a perfect scenario where everyone benefits. Now if you make the sacrifice for the greater good and nobody else does, you lose out doubly: the government falls apart, AND you spend extra money on coffee.

    If you buy the lower-priced coffee, you can possibly still benefit and in a worst-case scenario not lose out worse than anybody else. If you choose tax-evading goods for their lower price and everyone else does, the government falls apart from a lack of funding, but everyone loses in that scenario. If you buy the lower-priced items and nobody else does, you reap the benefits of a functioning government, though the government’s not as close to fully funded as it could be because it’s not getting your tax money from the coffee you bought.

    So the reward isn’t AS strong as it is when you make the sacrifice and everyone else does too, but the consequences of not making the sacrifice when everyone else doesn’t make it aren’t AS bad as when you make the sacrifice and nobody else does.

    This coffee scenario may not be the most realistic application of the prisoner’s dilemma because your individual coffee purchase doesn’t make that big of a difference, but when you take the options’ consequences to their farthest possible conclusion, you get an interesting social model.

  5. Well, I’d pay a higher price for the privilege of knowing that my money wasn’t being used to make bombs to drop on innocent civilians half way across the world, so paying less for this reassurance is an obvious choice.

    1. if your country is at war (afghanistan, iraq, whereverstan) the guns, equipment, ammo and support services is your tax dollars at work. it really isn’t hard to grasp as a concept if you know how taxes and governments work.

    2. But if you live in America, your taxes ARE going to make bombs to drop on innocent civilians half way across the world with drones.

    3. Poccio: I *do* know how taxes and governments work (as you put it), which is why I asked Miko if he would mind expanding on his findings. I did so politely, which is more than I can say for your response to me. I wasn’t asking for an essay; I simply thought he might have more information than I have.

  6. Well, if not paying the tax meant that the tax man would eventually catch up with the establishment and shut them down, and I really liked this place, then I’d consider paying the tax. Otherwise, no chance. I pay too much tax already.

  7. Obviously people will buy the lower priced item. That is possibly because this is the wrong question. What about the question that the large companies, whether Amazon or Waterstone, are able to avoid paying taxes, thereby take over the high-street and close down the independent shops. Check out the shopping centres throughout the country: only those who can afford the expensive tax accountants remain and that is the problem. We should be taxing financial transactions within the country (i.e. payments made) rather than profit, which would significantly eliminate most of these loop-holes.
    Throughout this debate, it appears that most of us (including many BBC’s reporters) have forgotten tax avoidance is perfectly legal and a sign of responsible management. Recently on Radio 4’s “Today” programme, it was stated that benefit cheats are named and shamed, but companies are not – but this is not comparable. At a personal level, it is the equivalent of someone deciding to move from Buckinghamshire into Northamptonshire because the cost of housing and local taxes are lower.

  8. I guess I’d pay the lower price because I would benefit from that. However, in the case of Starbucks, their prices are the same as other companies who are paying their tax. So the money they should be giving to our beloved (!) leaders to use for their expense accounts is instead going in their own pockets. So, interesting question, but not applicable to the Starbucks / Amazon / Google tax fiddly diddly.

  9. There is a difference between tax avoidance – which is legal – and tax evasion – which is not. Newspapers blur the distinction and governments play to this confusion. Tax avoidance is merely paying the minimum tax the law demands. Only a fool pays every bit of tax that could be taxed and many such fools would find themselves trading insolvent and bankrupt very quickly if they did not seek to minimise their contributions. There are legitimate expenses that can be claimed – and should be claimed. These include things like travel expenses and the use of a domestic telephone, electricity and gas for business purposes. All of these should be discussed with an accountant at the beginning of the business year. By informing Revenue and Customs of legitimate expenses, one gets a reduction in taxes. This is termed tax avoidance. Tax evasion, however, is the practice of deceiving Revenue and Customs by – for example – accepting payments in cash and not recording those payments and declaring them. Lots of businesses do this and it is tax evasion, pure and simple. But if a company were able to advertise that they had a lower tax because they avoided paying tax, there would be no deception. For example, if the company had very low profits and said, “We do not make much (or any) profit on our products and services so we pass that saving on to our customers” it would be foolish to refuse to buy their products and services just because they were not paying as much tax as a company that made big profits and thus had a bigger tax bill. If a company were somehow able to run the two streams side by side (perhaps by having a low profit subsidiary) this would not necessarily be illegal or even immoral. The question itself is just silly.

  10. As long as its tax avoidance and not evasion it’s the responsibility of the government to tighten their laws and not give companies these options. I just have very little expectation of companies to be moral when it comes to money. I’d rather they were moral in other more important ways

  11. To be perfectly honest, I wouldn’t go into these shops anyway because they’re overpriced even whilst avoiding paying tax. I’d rather go into an independent or less ridiculously priced shop. Although, if I had to, I would choose the lower priced product avoiding tax solely due to the fact that I don’t have the disposable income to be moral on behalf of others. If I had money, however, my answer would most probably be different.

  12. I am fortunate that I can pay higher prices to buy local, buy independent, buy fair trade and make other middle-class feel-good ethical choices, and I do so most of the time but not always. However, the points made above are good, in particular the point that there’s not a straight line between higher prices and higher profits, and the point that increased taxes mean the customer bears the burden, not the owners of the company or the company itself.

  13. If you think it through the question really is: ‘do you want to pay the Government more tax than you are obliged to?’ Starbucks is merely the conduit for the tax. Since the ‘shortfall’ in Corporation Tax is already baked into the Treasury model you could argue that taxpayers are already paying the tax avoided elsewhere.

    Plus I don’t like Starbucks coffee.

  14. I voted to pay the higher rate, but, in all honesty, I just wouldn’t go there. Agressive tax avoidance isn’t responsible management, it’s taking the mickey and it is unfair competition
    I avoid, as far as I am able, companies that don’t pay their way.
    As for Starbucks, words fail me; one of their chief execs last week, while trumpeting how much tax they pay, included in the figure the amount of PAYE that the employees pay.
    So, whoop-dee-doo, Starbucks are talking to HMRC about paying more tax and at the same time they are slashing employee benefits. No more paid lunch breaks, no more sick payvfirst the first day off and no more little niceties from the management for maternity etc. Pay more tax, but screw the employees to do it.

  15. I am regularly confronted with electricians, plasterers, carpet fitters, etc giving me a lower cash price and a higher price if I pay by cheque. The difference can be about £ 100. I always pay the higher price without question. The tradesmen look at me as if I’m mad when I do, but dodging tax is both illegal and immoral.

    1. It is illegal for sure, but is it immoral only because it is illegal, or do you feel that giving money to the government over and above that which they legislate for is a duty?

  16. The answer strongly depends on the Country as well as on the company…
    VAT is in germany 19%.. that is for a coffe thsi won’t be much…
    Funnily in Germany fast food restaurants ask you if you eat the food in the fast food temple or if you take it away. The VAT for take away is 7% while the VAT for in restaurant food is 19%…
    Any take away results in 12% more profit for fast fooders…
    Since then i always choose indoor dining at fast foot temples…

  17. Far as i can tell as unhappy American, only wealthy republicans would go for lower price rather than paying their taxes. Does anyone in Europe know that only the rich can afford to get sick here? Or else die? If I weren’t ill and poor ,would in a second move to England ,France ,Canada if they let me & I had money. U.S . only for rich-yes ,I have BA, MFA all free due to intelligence-dosn’t count unless doctor or lawyer for example.

  18. I’d pay the lower charge!
    I have always understood that the management of a company has a statutory duty to act in good faith, in the best interests of the company. Paying tax over and above that required by law I would have thought could be deemed a breach of that duty. Parliament has the power to change the law (that is what it is there for I thought), if it wishes companies to act in a different way it should legislate. The problem may arise that the membership of the EU does not allow them to do this, but that is no reason to fall back on “ethical” arguments, that are highly subject to the Guardian’s or Daily Mail’s opinions of the day.
    I have seen little consideration for the bodies that would be burdened with an “ethical” charge – which will fall on the consumer (higher prices), the owners (which may include your pension fund) and the workers (in terms of lower pay or fewer jobs). Remember companies are a legal construction! .

  19. Depends on how big the difference is, I’d love to be all moral and contributing, but I suspect I’d go for the lower price if it could save me some money. so I answered low price, which is , I feel , the most honest response, so that means I’m moral , right? Swings and roundabouts!

  20. … yep, I can vouch for that if you are talking about cash-in-hand! But I notice they never lower the price to reflect the VAT (21%) or the tax (about 50%) that they wouldn’t pay as a result.

  21. Surely the point about tax is that, while no-one wants to pay it, most accept that it must be paid. So while I’ll vote for higher taxes and happily pay the extra as long as everyone else is I’m not about to play the martyr. As such the question as asked seems to me to miss an important point.
    Were the question ‘there are two companies one of whom charges slightly more for their product but doesn’t indulge in tax avoidance, one of which charges less but avoids tax which do you buy?’ then I buy the former. There is still the problem of ‘free riders’ – those who get the product for less because they’re not bothered about the social consequences of their actions – but the comapny itself now has to ask whether it is actually in their interest to avoid tax. With the question as it stands nothing is really achieved by paying the extra beyond, perhaps, feeling virtuous (and a few extra pennies to the Treasury).
    We’re not going to persuade these companies to stop avoiding tax out of compassion – they’re just following best business practice – what we have to do is persuade them that not avoiding tax is best business practice. The obvious way to do this, of course, is to withhold our custom.
    Starbucks is not rethinking its policy because it has suddenly grown a moral conscience but because circumstances have made the veneer of a moral conscience economically important.
    It is interesting that so many people on your survey would pay the higher price, I wonder if they’ve actually thought through the futility of that gesture in view of how the question is phrased. I’m not buying either product – I don’t want to be a free rider and I don’t want to be a martyr, I want everyone to pay the top price, or no-one.

  22. l would not buy from them. They would be asking me to make the ethical decision as to whether or not to pay taxes when that should be their decision to make. They would know that many people would pay the lower price, thus absolving them of the responsibility to pay abfair rate of tax

  23. In all honesty, I’d probably go for the cheaper one most of the time. I suspect if enough people went for the tax-free version it would simply become normal. “Do you want extra tax with that?” “Er, no…”

  24. For inexpensive products, there is not much difference anyway (although in my country it is 16%!) but I wouldn’t dare to buy a car, or a laptop, or some other pricey item without paying all the taxes.

  25. We’re lucky here that we don’t pay taxes on what our state deems necessities (food and clothing) but in other states I’d choose the lower tax. However that hinges upon my supporting the business; Starbucks initially appeared to be paving a path towards sustainability that benefited us all; making superb spill-proof reusable mugs (they still do), incentives for customers to bring their own containers and offering shade-grown coffee. Sadly they stopped selling shade coffee thus their benefits have declined and I no longer support them or their choices.

  26. One point I haven’t seen anyone make is that the tax is avoided by these global companies by “moving” part of the profit to another country, where there is a lower rate of corporation tax. If this were not possible, surely the other country’s economy would lose out as less tax would be collected there.

  27. You used to have something like that option on some products sold by Amazon. Small value items could be imported from Guernsey VAT free, so you could choose to buy some items from Amazon Guernsey, and pay a bit less. I think they fixed that loophole now.

    The recent argument has been about Corporation Tax, and CT does not arise on the sale of an item, so I don’t really think you could realistically give someone a choice of two identical items with or without CT.

    Personally I think they should abolish CT – or at least greatly simplify and reduce the rate of it – and increase the rate of VAT a bit. You’d want to crack down on the methods used to extract money from companies without paying full income tax on it, but that isn’t a new problem. CT avoidance is more or less impossible to prevent.

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