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.