Starbucks Tax- My Open Letter Response to Kris Engskov
Kris Engskov, thanks for your letter today in the papers. I wanted to write back. I applaud you for the announcement. It’s great that Starbucks UK has committed to pay at last £20m in tax over the next 2 years, regardless of profit levels. However, I think something more significant can be done, so that Starbucks is not just seen as caving in to public pressure and you are able to re-establish trust with us, your loyal customers.
Bit of background on me as your customer. I visit Starbucks on average 10 times a week, and don’t use any other brand coffee shop. I would be considered a loyal advocate of yours. I check in constantly through Foursquare, have a Starbucks card and use the app to find nearby stores in London.
Many years ago, I strongly disliked Starbucks due to how you sourced your coffee, but as a company, you listened to our concerns about Fairtrade and I’ve been hooked on your lattes ever since. I’m loyal to you because you have given me a cost-effective environment to work and meet clients, with good reliable one click wifi and a comfy armchair. Firstly thank you for all Starbucks have done for me and the ways you have blessed me with your service. (PS. You also make me laugh most days, as when asked for my name, I always come up with random weird names (Zeebee, Moowee etc) which always makes me laugh- it’s the simple things in life!).
OK. You’re a busy man. I’ll move on. There is a loophole in the tax laws that enable Starbucks to reduce your tax liabilities. The Government has allowed that, and they need to be held to account for that. They’re pledging upwards of £70m to investigate further how to clamp down on companies going forward, but they wont be able to retrospectively get this tax back. It’s good that following this announcement Starbucks will not be claiming deductions for the royalties Starbucks pays in 2013/2014, for the coffee Starbucks buy, interest Starbucks pay on inter-company loans and for capital allowance deductions. Well done for these changes, and based on Starbucks past performance of listening to customers, I don’t believe you will look to cut corners there.
The problem is I don’t think the £20m extra payment to the Government works for your customers, as it’s clear that the Government has allowed this to happen for so long. Putting aside politics, with any government, there is always an uncertainty about where all the money goes. On the same day that we’re hearing that the tax payer is picking up a failed West Coast train bill of circa £48.9m due to government wastage, in all honesty, I want the contributions I’ve made on all my past lattes to go somewhere else.
With the past savings Starbucks has made by taking advantage of this loophole, I’d want you to make an investment into society to reflect the previous years where this didn’t happen. It’s the £8.6m in corporation tax in the last 14 years that people find hard to swallow. Therefore the £20m future tax payment feels a little hollow. That’s why the argument being levelled at you is a moral one, and why the £20m will anger some as it doesn’t address the past.
I appreciate it may be a hard one for Starbucks to engage with, as it opens up a can of worms as to how far back you go with this, and people’s perceptions of morality differ. But I think the rigorous thinking and engagement there is needed, because your desire for integrity was one of the reasons that made you choose fair trade coffee, and it’s Starbucks values that keep people loyal to you. I’ve read Howard Schultz’s books. Please don’t throw the moral argument out when it gets a little awkward, as I think Starbucks can work this through in a way that’s appropriate.
People get a feeling when something doesn’t seem right or fair, and Starbucks has a chance to not just be seen as ‘caving’ in to public pressure but instead to be trailblazing what businesses should be doing for society. Starbucks is committed to doing business responsibly and investing in to the local community…..So here’s my David to Goliath request- Please redirect your past ‘tax savings’ to the poor, by helping local entrepreneurs/organisations who want to build businesses/projects that impact society.
The gap between the rich and the poor continues to grow, there’s growing unemployment and underemployment and many are unable to afford basic food. A growing number of old people are dying from the cold weather as they cant afford the heating bills. As was seen by last years riots there is a level of disappointment and anger from many who feel disengaged from society, a distrust of police and forgotten by politics and business.
There is so much capacity and potential for entrepreneurial growth amongst these communities. There are cuts from the government towards the poor, with a desire that business plugs the gap, and your investment here could be significant and transformative, fulfilling the moral responsibility that companies have to serve society.
Here’s my Top 7 Suggestions On How Starbucks Can Regain Trust and Impact Society
1. Put a large sum in to a charitable trust pot that is there to help entrepreneurs and community organisations from poorer communities. There are many social entrepreneurs in the making, who are not able to get the opportunity or helping hand needed to grow businesses that will impact their communities.
2. Lobby Amazon, Google, Facebook and others to do the same. If you get buy in, create a banner that other businesses can get behind; perhaps ‘Business Loves the UK.’ Be the Warren Buffett for charities. He has successfully campaigned for billionaires to pledge their money to change the world, and recognises the impact this money can have. Campaign for businesses to make charitable donations that reflect past tax savings. The media spotlight is not yet on other companies who have legally avoided paying much tax. They will be profiled soon and we will see ongoing stories of companies being boycotted by people power. Others can therefore be proactive about this, and move this away from a witch hunt in to something positive and transformative.
3. Aim to raise £50m from all such companies and look to give 4000, £10,000 grants with a further £10m given to training, coaching, mentoring and supporting these businesses and employing an appropriately paid Chief Listening Officer to run the scheme.
4. Have a website built where people can upload their business idea (or do a deal with Kickstarter or Seedrs to white label there sites). The business proposal needs to show how they will succeed and how they will positively impact society. The companies who have given to the scheme highlight the campaign from there own sites, making the application process simple and accessible. Customers vote, leave reviews on the ideas, and each month for an initial 3 years, 100 grants are awarded publicly. Awards are based on 50% of community vote and 50% of advisors vote. The grants are awarded and cheques given locally in a local Starbucks store with local media and bloggers invited. At each event, the company awarded the funds 3 months prior would be given a chance to platform themselves to show the progress made, and win potential customers. Request 10% of each new companies profits to be re-invested back in to the ‘Business Loves the UK’ pot, so that it’s a replenished and ongoing growing pot that’s available. The local businesses/organisations can be profiled and championed on the local noticeboard. (Alternatively- you could work on a minimal viable proposition and lean start up approach, and have 50- 10k investments, 10- 25k second investments, 5- 50k investments as concepts are proven).
5. Collectively with your partner organisations, listen to your customers. Each company will have it’s own individual listening process, but when you collectively hear from people outside of your own culture, you get a more balanced, objective viewpoint. Host these in Starbucks on the same day as the launch for a period of 12 months. These helps give a public face to these corporations and would be invaluable to fully engage and understand the culture. Not being aware of how much this news has angered consumers, shows that there needs to be more listening, as you are disconnected from how individuals feel. Appoint a Chief Listening Officer to move around these communities listening, making connections and joining the dots.
6. Work in partnership with other incubation spaces to direct training, mentoring and support available to them, and invest part of the additional £10m to them to further the support there. The Chief Listening Officer is involved in maintaining and growing these relationships.
7. Engage in ongoing dialogue with your colleagues in the other large corporations that sign up. Dream together of how you can transform society together. Collaboration is always more exciting and has the potential for more impact, as opposed to people who work in silos.
Kris, you have such an incredible opportunity to change the landscape of how business is perceived and what a business looks like when people love it.
I love Starbucks and believe your news today is a great step in the right direction. But more can and more needs to be done. As they say, you have a chance to turn every crisis into an opportunity. This is a great opportunity for you, for Amazon, Google, Facebook and the poor within the UK.
I’d be delighted to talk further on this should you get to read it and want to. As one of Starbucks most regular customers, I hope I can join the many who want to influence Starbucks to do something incredible. I believe you can surpass our expectations, and make your customers love you further.
Look forward to hearing from you 😉