One of the advantages to being overseas is that you get to see news that you might not otherwise. So, here in Europe, (although I imagine it will soon get play in the U.S. if it hasn’t already) Starbucks has been under fire because of how it has structured its business operations in a way that helped it avoid paying taxes in England. The key thing to note here is that everyone, including the British politicians who have been the most vocal critics, agree that Starbucks’ tax structures are completely legal. I am not a tax lawyer (and I will leave it to those experts to get into the details of any of the tax technicalities) but if everyone, including Britain’s parliament, its tax authorities and, of course, Starbucks is calling their actions legal, then I think we can safely assume that it is. Then what is the source of the fuss? Well, the UK is undergoing severe austerity measures right now. The fact that Starbucks operations are not contributing to the UK’s income stream is being seen by many as unethical.
The fascinating issue about the Starbucks controversy is the action that the company has taken. About an hour ago, the company announced that it would be paying a multi-million dollar contribution to the UK government over the next two years. The reason the payment was framed as a contribution should be obvious – the company is trying desperately to make sure that its action today will not be used as a basis for accountability tomorrow. Indeed – given the fact that the critics of Starbucks tax structures were the people who had the power to change the favorable tax environment – Starbucks proactive strategy was probably very shrewd. Nonetheless, Starbucks’ actions have very heartening implications from a business and human rights perspective. The reason? Well, over and over again, as this story was unfolding, one of the most often returned to themes was the apparent hypocrisy of Starbucks – commentators pointed out how Starbucks prides itself on being a progressive company that works with local communities to improve the status of the people living in those communities. Yet, here is a community that is facing severe cutbacks and could desperately use the income from taxes that Starbucks would bring, and yet the company made sure to avoid those payments.
One of the greatest criticisms of the UN Guiding Principles is how it does not create an accountability structure for TNCs. And yet, if the Global Compact is any indication, thousands of companies over the world have publicly endorsed the spirit embodied in the Principles – respect human rights by doing no evil. Certainly, if a company were to be found violating these principles while publicly espousing their words, then this would provide affected communities with ammunition to mount a very public case against them. Of course, this “naming and shaming” tactic has been used countless times before. The difference is that now I think there are enough people in organizations like the UN (and at various national governments) who have also publicly endorsed these principles that can leverage their relationships with the offending companies to make a change.
Let me put it this way: if the outrage over Starbucks in the UK had only been taken up by some protestors at Trafalgar Square, I doubt that the company would have made its unprecedented move today. Having the UK government at the heart of the storm made all the difference in the world.
Another heartening moment – The Financial Times reports that a Starbucks spokesman, in making the contribution, noted that ” ‘the decisions were the right things to do’ adding that doing the right thing did not only mean doing what was right by shareholders.”
Good news indeed for BHR activists.
