Diary

Starbucks CEO Howard Schultz Lies Like a Cheap Watch

starbucks-tax

Let’s peer behind the wavy green mask of Starbucks Corporation, the Seattle-based knight in shining armor defending all things liberal.

Starbucks CEO Howard Schultz, said last year at a shareholder meeting:

Not every decision is an economic decision….If you feel, respectfully, that you can get a higher return than the 38% you got last year, it’s a free country. You can sell your shares in Starbucks and buy shares in another company. Thank you very much.

The same company that hoisted the gay pride flag over its headquarters last summer has a dirty secret:  it’s a money-grubbing, for-profit corporation just like the rest of them, only Starbucks feigns lily-white innocence while Schultz bathes in Krugerrands.

Oh, they do make a boatload of cash selling overpriced brown drinks.  On March 18, they declared a 2 for 1 stock split after 2014 on earnings of $3.1 billion*.

“On behalf of our board of directors, the Starbucks leadership team and the 300,000 partners who wear the Green Apron globally, I am proud to announce this two-for-one stock split, the sixth in our 23-year history as a public company,” said Howard Schultz, chairman and ceo of Starbucks Corporation. “This split is a direct reflection of the past seven years of increasing shareholder value, enhancing the liquidity of our shares, and building an attractive share price. It also takes place at a time when Starbucks shareholders are experiencing an all-time high in value as we continue to deliver world-class customer service and, in turn, record profits and revenue.”

Now this has the EU tax auditors scratching their heads, as they’ve been doing for years, because Starbucks has shown year after year of losses in Europe.  And then, voilà, a profit materialized, as if out of thin air.  From the Wall Street Journal:

Last year, as European Union regulators opened a formal investigation, a profit materialized: €407 million ($446.6 million), reported by the company’s European head office in Amsterdam. The coffee chain has since moved its headquarters to London.

It seems that The Netherlands gave Starbucks a sweet tax deal, so they paid less than 1% in corporate taxes for profits for royalties received licensing intellectual property “IP” to their European units.  And the coffee?  It’s all bought in Switzerland.

The Swiss coffee-buying unit buys all of Starbucks coffee beans and sells them to the rest of the corporation worldwide, at a 20% markup.  The coffee-buying unit has what the rest of the business world calls a “monopoly”—and employs less than 40 people.  These few employees would be rich as Croesus if they weren’t part of a tax ruse.

BT-AB003_EUSTAR_16U_20150406185111

Starbucks isn’t the only multinational corporation exploiting European tax laws.

Starbucks is one of four multinational companies operating in Europe—along with Apple Inc.,Amazon.com Inc. and Fiat Chrysler Automobiles NV—whose tax affairs are being investigated by regulators in Brussels.

Above all, Starbucks stands out for its response: Rather than citing a duty to investors to minimize tax, as other companies like Google Inc. have done, Starbucks has repeatedly pleaded innocent.

“We do nothing—nothing—to avoid taxes,” [the company’s former chief financial officer, Troy] Alstead told British lawmakers in 2012.

This “who, me?” attitude smacks of the same disingenuous pandering that killed their dim-witted “race together” plan to introduce awkward conversations between twenty-something baristas and customers who just want to get their Vente latte and go.

If the topic is gays, guns, or race-baiting, Starbucks wants to be in the conversation**.  But turn the talk to taxes, and they go all mum.  When the Brits took real offense at this, and it cost real money, suddenly Starbucks’ altruism flew out the window.

The EU investigation comes after a tax furor in Britain led to store boycotts and a 2012 parliamentary hearing. The company’s U.K. annual sales fell following the furor, its first decline since it set up shop in the country in 1998.

At the time, Starbucks had paid £8.6 million ($12.8 million) of British corporate tax over 15 years despite sales exceeding £3.5 billion in Britain. It has since voluntarily paid an additional £20 million by forgoing certain deductions.

At the hearing, Mr. Alstead, who previously served as a director of the U.K. business, blamed the company’s persistent losses in Britain on “strategic mistakes,” including expensive property leases. “We are not at all pleased about our financial performance here,” he said.

British lawmakers weren’t convinced. “If you have made losses in the U.K. over 15 years, which is what you are filing, why on earth are you doing business here?” said Margaret Hodge, who chaired the hearing. “It just doesn’t ring true.”

According to corporate filings, Starbucks’s British business started making large royalty and license-fee payments to Amsterdam in 2003, five years after it opened in the U.K. Mr. Alstead last month took unpaid leave after 23 years with the company “to spend more time with his family,” Starbucks said. It said his decision to take time off was a personal one, unrelated to the corporate structure.

You can’t testify if you’re not around anymore would also seem to fit the circumstances.

And now everything’s hunky-dory in England, as long as tea-drinking Brits continue to pay high prices for their American vice.

Starbucks said that the U.K. business “is now profitable and as our turnaround continues, our tax payments will increase in line with our profits.”

Like Apple, Starbucks is a large, cash-rich multinational corporation posing as a social firebrand that actually cares about the liberal causes it promotes.  Schultz is a duplicitous hypocrite only interested in his $21,466,454 compensation package.

 

*From the Starbucks Corporation 2014 Annual Report and press release announcing the split.

**There’s one exception:  Starbucks went to great pains to denounce rumors that its CEO may have actually given money in support of Israel.  They posted on their website: “We do not support any political or religious cause,” which is, of course, total bulls**t.