Doing the right thing

As it says here - I like to try and do the right thing.

This starbucks things has led to a lot of debate. I am confident that if what they are doing is legal, then they are doing what is expected. I feel the reaction to this is all wrong. We don't see people campaigning outside the other high street shops that do the same. Lots of companies do what starbucks do, and they do it because they are quite rightly trying to maximise profit for their shareholders.

So I was trying to work out what is in fact wrong here (morally, as it seems that this is legal). After much debate it seems that people feel it is wrong that money earned in the UK results in tax paid to another country.

I agree that this seems wrong. But what do you do about it? The issue is with the government, and not starbucks. Should the government do something?

My first issue is understanding why it is wrong and how far that principle goes. After all, tax is paid at many many levels. From the very front end like VAT on sales (which goes to the UK); direct costs like employers NI; more indirect things like fuel duty on delivery trucks fuelled in the UK; and finally corporation tax, which multinationals can move. But there is more. Ultimately those shareholders have personal tax on dividends and then get taxed when they spend their money with things like VAT and fuel duty and stamp duty, and the whole things goes full circle.

Even forgetting the tax, where does the money go? Imagine I ran a small business selling coffee in Bracknell, but as shareholder I lived in Slough, and that is where I spend my money. That would mean hard earning people in Bracknell paying for my coffee see profits diverted to benefit all those shopkeepers in Slough. That can't be right? Or is it fair to say "it is my money, I can spend it where I like". Can a corporation say the same?

Anyway, so what should the government do? I am not a politician or macro economist, but I can see two obvious fixes...

(a) They can make laws meaning that corporations are less able to move profits out of the UK (and presumably to move profits in to the UK either). Outcome - UK becomes a worse place to do business, and less multinationals operate here meaning less tax. Remember, a lot of the tax starbucks pay does go to the UK.

(b) They could reduce corporation tax making UK more appealing so companies start moving profits to the UK. Would that work? Of course, sadly, UK companies with UK shareholders end up paying just as much tax as it is all down to personal tax on the shareholders dividends. But the UK would get tax from other countries. Of course, if this whole thing is morally wrong, it is just as morally wrong when we (the UK) are the benefactor, surely? Or would the campaigners morals suddenly change then?

I suspect the answer is much more subtle, and one has to understand international economics to work it out.

Ultimately, we live in a global economy and governments have to operates a competitive set of laws and tax regimes that encourage businesses to trade in their country. Starbucks paying tax elsewhere is not really "wrong", it is more of a "lost sale" for the UK. So maybe we just need to make the UK more attractive, and be more competitive.