Monday, March 25, 2013

Starbucks Scandal

I'm not sure if the Starbucks Tax Scandal has made the news in the States, but it is a big deal here in the UK. It won't surprise many of you that Starbucks comes up in my conversations fairly frequently (since I love coffee and like Starbucks a lot). So, for the last six months, every time it comes up I have heard a little more about the scandal. I actually don't know tons about it, but apparently Starbucks took advantage of a tax loophole and has not been paying income tax in the UK. There have been protests and boycotts. It's big news.

What my siblings and I call the "Green Circle of Pleasure," just the sight of which gets the serotonin flowing!
My immediate question the first time I heard this was, "So wait, did they do something illegal?" to which the answer was, "No."

Americans think very differently about taxes than Brits do.

This difference is something I am convinced is deeply true, and this is just one small example. American companies' first obligation is to their stakeholders, particularly their customers, employees, and shareholders. They are, obviously, bound to obey the law, but I don't think many Americans would consider it immoral to not pay taxes which are not required by law.

In England, though, this is a very different thing. In the UK, taxes are used for things which people highly value, like the National Health Service (NHS) and benefits meant to create equal opportunities. There is an expectation that the State can and should care for its citizens and a high value for government programs.

We (typically) feel so differently about this in the States. I realize that I come from a conservative background in America, and I also realize that I live in a particularly liberal part of the UK. But even with this acknowledgement, I think that there are longstanding cultural value differences stemming back to the founding of our various nations.

In a monarchy, there is an expectation for the king or queen to take care of his/her people. My theory is that this translates much more easily into a state with large and strong social services, because whether or not it works perfectly the people have a value system which allows for this. And because the system is relatively consistent with the values of the population people feel comfortable making it work. Paying taxes is a huge part of making the system work. Starbucks, therefore, seems to have committed a moral wrong in the perspective of the British value system.

However, we Americans have a very high value for individual achievement and we tend to distrust large structures, especially the government or those mandated by the government. I think this goes back to the American Revolution, the outcry against "taxation without representation," and the entire political system that developed out of that. We tend to think more about keeping it in check than in making sure it gets its dues. If there is a tax loophole, we all want to know about it so we all can take advantage of it. I think this is why tax accounting is such a huge business. We figure that it is the government's responsibility to close up the loopholes (we probably would consider if immoral if they don't). I have every expectation that the companies I invest in are not paying taxes that they don't need to. I would be very unhappy if they were.

I find it interesting that a company like Starbucks, which has a reputation of taking the high moral ground on issues like health insurance for part-time employees and etc, has ended up in this scandal. I think that it is a very interesting matter of cultural value mis-match. I am guessing that they never saw the public outcry coming.

For me personally, it is another reminder of the difficulties of cross-cultural living. There are phenomenal opportunities to have our values and expectations challenged. Maybe what I've always thought isn't actually right after all. Or maybe what I thought was an absolute is actually more a matter of opinion. Or maybe my culture is right on this thing or that, and I need to remain committed to it even when it's not popular in another context.

It's kind of nice to know that massive companies commit cross-cultural faux pas too. Somehow, it makes mine feel a little more understandable.


  1. Hey Laura, I'd suggest that you have a look at Chris Howson's blog to see a little bit more as to why it's such a big deal when corporations don't play by the rules

    I'm interested in what you say about differing historical make up and it may well play a part but the modern UK welfare state came out of the Trade Union movement after the second world war

    Personally I won't be going to Starbucks, partly because they have not been paying tax appropriately but largely because they don't have fair trade coffee as a norm and as a huge cooperation I'd prefer to spend my money on a local business rather than a multi national

    I think I'm writing in a more harsh way than I feel but I don't think I can be any clearer at this time of night, sorry :)

    1. Thanks for your comment, Helen! I read the article you linked to and do understand why people feel so strongly about this. I think that there are many Americans who would agree with his article, but there differences in the way Americans would expect it to play out. The value for institutional ethics is shared, but there are differences about the role of government in society, and therefore differences in even what institutional ethics look like.

      I don't mean to criticize either culture. Like English people, many Americans have a strong moral compass. In this case, it's not as if Americans don't have a perspective on what morally good behavior (even for institutions) is. There are just differences about what that is and how each culture believes it should play out in society. These differences are seen between parties within each country but are magnified between the two.

      To be honest, I don't know a lot about modern British history, and am sorry if I overstepped my knowledge in anything I said here. I do know that we have differing perspectives on the role of government which I didn't begin to really understand until I got pretty deep into this culture (aided by experience in Israel & Palestine and a few others). There is a lot I still don't understand. America is unique in its passion for freedom and individualism. We don't realize that until we get out of the States.

      Thinking about this has helped me to recognize both the strengths and weaknesses of my own culture and come to terms with some of the big ways we misunderstand each other's way of doing things.

      As for Starbucks, I am also not an expert on the scandal. In this case, as an American learning about what an American company did, I see the mistake they made with a different lens than most of my British friends. They were in the UK and should have realized how things work here. It is my belief that as the guest, we should bend to the rules of our host. However, we will never do it perfectly and we are often blind-sided by rules we never knew existed. I don't know if they did wrong intentionally or not. I hope that makes some kind of sense.

      This post was really not meant to be a commentary on anything other than the difficulty of operating in another culture. Whether one small person or a big organization, it is trickier than it seems.

  2. Laura,
    I think that we Americans eschew large entities due to our inclination to self reliance than leaning on the benevolence of others for survival. I believe that comes from our nations founding by pioneers, who for 200 years leading to the founding of this experiment, and nearly 200 years after made due and even prospered without a welfare state. That would be enough to grow skeptical to its need. That is not to say that a welfare state cannot exist and fairly treat its subjects.
    Regarding these "loopholes"...I am not sure how that term is defined in the UK, but here in the USA it is a horribly defined term that is to imply wrongdoing. Tax laws are written to confiscate the prosperity of the fortunate to aid those less fortunate. This goes back to the dawn of civilization, be it tribute, protection, or taxes, they often have come with exemptions. These exemptions, like us, aren't perfect and have unintended implications and beneficiaries. If a corporation obeys the letter of the law then they have not done wrong. It could be that they have done harm though as the recipient of the tribute did not receive as much as they expected. But doing harm does not equate doing wrong, else every parent should be held criminally responsible for every act that was done with proper intention but poor outcome.

    That said, corporations are no different than people, and no one wants to give up more of what they worked hard for than is required. Unless it was willful charity.

    1. SuperFast, thanks so much for helping to articulate the American perspective here. That's what I meant about the American perspective and I appreciate the help clarifying it.