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Tax Law

Can You Distinguish a Tax From a Ransom Payment?

... In case you missed it, Starbucks managed to legally pay no income tax in the U.K. over the course of several years, despite operating more than 700 thriving coffee shops across Britain. All its taxable income (yes, every penny) had been shifted to related entities in other countries. That caused the activist group U.K. Uncut to organize a series of sit-ins. Starbucks eventually promised to voluntarily transfer funds to the British tax authorities above what it legally owes - which is zero - but only because the protests drove away clientele resulting in empty stores.

The response from headquarters had nothing to do with tax compliance. Starbucks owed no back tax. In fact, the envisioned payments are not a tax at all; they more closely resemble a ransom paid to shut up the activists. And the ransom worked; the activists went away and customers returned to the coffee shops.

This should come as no surprise. As previously discussed, the corporate tax is premised on antiquated concepts of residence and source that no longer fit the modern world.


View Bob Goulder's opinion in its entirety on the taxanalysts® Blog.

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