Starbucks and Amazon amongst others have found what seems to be legal loopholes in how to organise their European taxes and flow margin out of countries they operate in.
They had a rather clumsy back door PR, one of those new breed of rottweiler public lobby firms who pruport to be independent and expert, comaring their brand offering to a film bought from Hollywood.
However there seems to be a business principle to be established here, because it gives multinational firms a wholly unfair competitive advantage with national and local level firms.
The analogy to a hollywood film falls down in several ways: firstly the main value addition to a film is conducted in the greate LA area. A coffee shop adds most value by product and location. Brand, including "atmosphere" is not what is the main value addition but it does allow the firm to maintain a consistent image across outlets and of course to invest in something which is both pleasing to their target consumers and cost effectiveIn contrast, the delivery location of the film is not the essential value creation- usually an anonymous big steel shed on the outskirts of town.
Secondly to some extent at least, a film or a patented product for that matter, is not tied to it's own verticle delivery chain. Therefore there is an element of disconnection making the sale and purchase chain tax transparent and as a market, it should therefore work to benefit the end user in a trade off between the higher value created elsewhere and how it is delivered. The marketing and branding of product and location are to the largest extent separated.
Not only do starbucks and other companies treat their marketing costs as a saleable "royalty" to the most tax effective land, but also they sell themselves their own raw materials at a higher price than the open market: Starbucks from Switzerla. In these two ways they shift a lot of gross margin around on paper while still actually adding the most value at the point of sale, and accordingly the highest income at point of sale.
Amazon use Ireland due to the low tax, while their sellers create "export and import" deals in other countries for sellers and buyers.
So these are the issues being debated in the UK parliaments select committee and no doubt in Whitehall and Brussels. But with the vote in the USA away from oligarchical power, where corporates and the super rich can make policy and influence it's interpretation and implementation, the public and even the Conservative governments in EU lands smell blood and will not have US corporates shuffling paper money around while national and even cross EU firms cannot compete and expand strategically because of their honest approach to reporting margin and paying taz on profits.
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