For Starbucks Shareholders, Something's Rotten in England


"The baying mob is in full throat." So opens today's Lex column in the Financial Times about Starbucks' decision to pay more tax in the U.K., and I couldn't agree more. The company has followed all existing tax laws there, yet is being accused of tax avoidance. In response, the green mermaid has agreed to pay more taxes just to shut the whingers (British for "whiners") up.

When full compliance isn't enough
Just to be clear, those are my choice words, not the company's. Troy Alstead, Starbucks' CFO, put it more gently, telling the Times that complying with U.K. tax law "isn't enough right now."

So the company will pay $13 million-plus in taxes over the next two years, regardless of profitability. And that was at the heart of Starbucks' claim that it paid just $11 million in corporate income taxes since 1998: It isn't profitable in the U.K.

Oh, the immorality of it all
and Google had better watch their step across the pond, as well. Like Starbucks, they were recently named in a damning report by British lawmakers as engaging in "immoral" tax avoidance. George Osborne, Britain's Chancellor of the Exchequer, just announced plans for a $13 billion "tax-dodging clampdown."

Starbucks is a healthy company. It has $2 billion in the bank and just $550 million in debt, and 11% year-over-year revenue growth for the most recent quarter. Starbucks can afford this absurd tax payment, but it shouldn't have to.

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Fool contributor John Grgurich owns shares of Starbucks. Follow John's dispatches from the bleeding edge of capitalism on Twitter @TMFGrgurich. The Motley Fool owns shares of Google and The Fool owns shares of and has written puts on Starbucks. Motley Fool newsletter services have recommended buying shares of, Starbucks, and Google. Motley Fool newsletter services have recommended writing covered calls on Starbucks. The Motley Fool has a delightful disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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