Joined: Feb 17 2002 Posts: 28357 Location: MACS0647-JD
Sal Paradise wrote:Are you seriously suggesting we should have a "Little England" for corporation tax purposes? This would potentially have a negative impact on corporation tax revenues as whole. Are you also suggesting British companies trading abroad pay their fair share in the countries they operate as well rather than pay into the UK HMRC - just plain barmy.
No, I was not suggesting any of those things. I was suggesting those things that I wrote.
Sal Paradise wrote:Starbucks employs thousands of people, pays millions in tax/rent/rates and you are suggesting they should pack up - do you not think the country would lose more if they packed up? - yet another barmy proposition.
I can see from your repeated and overexcited use of "barmy" that I am getting under your skin, but still need to draw attention that you are back to your straw man.
Starbucks does not pay millions in tax. That is the whole point. In the last three years Starbuck has paid Nil in tax. This is not millions.
Whatever Starbucks pays in rent is, assuming the figures and arrangements aren't contrived, tax-deductible to whatever extent allowed by tax law.
Whatever Starbucks pays in rates is, assuming the figures and arrangements aren't contrived, tax-deductible to whatever extent allowed by tax law.
Starbucks would not pack up. They make too much money to pack up. Secondly, I reject your basic premise, that them packing up would harm the net revenues. The market for coffee houses would not shrink and I should imagine other competitor companies would rapidly move in to take up the slack.
Other established businesses, such as Costa, may well be interested in taking over many branches, complete with experienced staff.
The people who go for coffees etc to Starbucks would not, I think, abandon coffee but would spend their money at other establishments and those establishments are unlikely to get away with paying no tax on their profits.
And even if no Starbucks customer ever bought another coffee, unless you seriously suggest they would put the money saved into savings account, that money would all be spent elsewhere to the benefit of other retailers and traders.
Last edited by Ferocious Aardvark on stardate Jun 26, 3013 11:27 am, edited 48,562,867,458,300,023 times in total
Mark-ups in coffee are high, there was a 2006 paper analysing the coffee market: http://www.unc.edu/~mcmanusb/CoffeeMay06.pdf, in table 3 on p33 it had estimates of the price-cost margin which were 100% for drip coffee, 153% for regular espresso, 170% for sweet espresso.
Coffee is quite a cheap good to produce and there is plentiful supply - which is why despite 'fair trade' arrangements etc, coffee farmers generally get paid very little, because there is such a large supply of coffee beans coming from many farms in many countries. The staff working in coffee shops don't get paid much either so the price includes a large mark-up, which goes partly to the owners of the coffee shop and partly to the owners of the land the coffee shop rents. You will hear the owners of the coffee chains complain that they don't make as much profit as people think - because the coffee shop market is all about location, and the owners of the sites they rent (typically around train stations, city centre high streets) know this.
Because it's all about location, this effectively creates a barrier to entry. It's not that expensive to start up a coffee shop but it's expensive to rent a coffee shop in a prime location where you will get a lot of the type of people that buy coffee - because those big chains have bought up all the prime spots and the rent is so expensive a small firm wouldn't be able to get in.
If you tax Starbucks out of the UK, then as Fercious Aardvark says, the other big chains like Costa, Cafe Nero or Pret a Manger would take their market share so nobody would notice much difference. If you taxed all those big firms out of the UK then the difference would probably be that there would not be many city centre coffee shops in the key commuter hubs that you see today. However there would probably be more small independent coffee shops starting up - just they would be in places where the rent was more affordable so they would be in less busy places. Real coffee drinkers would still be able to get their coffee, in fact they would probably notice a fall in prices, they would just have to walk a bit further to get to them. People that just like their quick fix while waiting for a train/en route to a meeting etc would probably just spend their money on something else other than coffee.
Mark-ups in coffee are high, there was a 2006 paper analysing the coffee market: http://www.unc.edu/~mcmanusb/CoffeeMay06.pdf, in table 3 on p33 it had estimates of the price-cost margin which were 100% for drip coffee, 153% for regular espresso, 170% for sweet espresso.
Coffee is quite a cheap good to produce and there is plentiful supply - which is why despite 'fair trade' arrangements etc, coffee farmers generally get paid very little, because there is such a large supply of coffee beans coming from many farms in many countries. The staff working in coffee shops don't get paid much either so the price includes a large mark-up, which goes partly to the owners of the coffee shop and partly to the owners of the land the coffee shop rents. You will hear the owners of the coffee chains complain that they don't make as much profit as people think - because the coffee shop market is all about location, and the owners of the sites they rent (typically around train stations, city centre high streets) know this.
Because it's all about location, this effectively creates a barrier to entry. It's not that expensive to start up a coffee shop but it's expensive to rent a coffee shop in a prime location where you will get a lot of the type of people that buy coffee - because those big chains have bought up all the prime spots and the rent is so expensive a small firm wouldn't be able to get in.
If you tax Starbucks out of the UK, then as Fercious Aardvark says, the other big chains like Costa, Cafe Nero or Pret a Manger would take their market share so nobody would notice much difference. If you taxed all those big firms out of the UK then the difference would probably be that there would not be many city centre coffee shops in the key commuter hubs that you see today. However there would probably be more small independent coffee shops starting up - just they would be in places where the rent was more affordable so they would be in less busy places. Real coffee drinkers would still be able to get their coffee, in fact they would probably notice a fall in prices, they would just have to walk a bit further to get to them. People that just like their quick fix while waiting for a train/en route to a meeting etc would probably just spend their money on something else other than coffee.
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Joined: Feb 27 2002 Posts: 18060 Location: On the road
Ferocious Aardvark wrote:No, I was not suggesting any of those things. I was suggesting those things that I wrote.
I can see from your repeated and overexcited use of "barmy" that I am getting under your skin, but still need to draw attention that you are back to your straw man.
Starbucks does not pay millions in tax. That is the whole point. In the last three years Starbuck has paid Nil in tax. This is not millions.
Whatever Starbucks pays in rent is, assuming the figures and arrangements aren't contrived, tax-deductible to whatever extent allowed by tax law.
Whatever Starbucks pays in rates is, assuming the figures and arrangements aren't contrived, tax-deductible to whatever extent allowed by tax law.
Starbucks would not pack up. They make too much money to pack up. Secondly, I reject your basic premise, that them packing up would harm the net revenues. The market for coffee houses would not shrink and I should imagine other competitor companies would rapidly move in to take up the slack.
Other established businesses, such as Costa, may well be interested in taking over many branches, complete with experienced staff.
The people who go for coffees etc to Starbucks would not, I think, abandon coffee but would spend their money at other establishments and those establishments are unlikely to get away with paying no tax on their profits.
And even if no Starbucks customer ever bought another coffee, unless you seriously suggest they would put the money saved into savings account, that money would all be spent elsewhere to the benefit of other retailers and traders.
Seems I am getting under your skin - Starbucks paid no tax in the UK - not no tax period, they paid close to 500m in corporation tax.
If Starbucks left then Costa and other chains would not pick up their shops - Costa/Nero don't want two shops next to each other. You would very likely end up with even more empty retail outlets. For consumers that would also be bad you restrict their choice and one thing would surely happen - prices would rise as competition ebbs away.
Your job is to say to yourself on a job interview does the hiring manager likes me or not. If you aren't a particular manager's cup of tea, you haven't failed -- you've dodged a bullet.
Sal Paradise wrote:If Starbucks left then Costa and other chains would not pick up their shops - Costa/Nero don't want two shops next to each other. You would very likely end up with even more empty retail outlets. For consumers that would also be bad you restrict their choice and one thing would surely happen - prices would rise as competition ebbs away.
You wouldn't get empty retail outlets in the type of prime location sites that Starbucks occupy, as they are worth a lot of money for the type of drinks and sandwich/snack shop that Starbucks is, targeting commuters/workers on the move or looking for lunchtime snacks. You might not get other coffee shops filling them you could end up with Greggs/Subway type places or other kinds of cafe/smoothie/soup shops. Consumers might actually end up benefiting from increased diversity of products.
These type of organisations don't face competition from online sellers or large supermarkets that have forced lots of other high street retailers to close. Some of those changes are just structural changes in the economy and how people like to shop, the economic downturn has sped up those changes by forcing unprofitable shops to close. Consumers have actually got lower prices.
As for your prediction that prices would rise as competition ebbs away, this is unlikely because it is relatively easy for a business to set up a coffee outlet to supplement its usual activity. If you remove all the Starbucks and businesses think there is a space in the market for serving coffee then those sited round the former Starbucks can start to enter the market which will stop Costa and Nero from hiking up their prices. If Starbucks were serving something with a patent or with high barriers to entry then their removal would give rivals a chance to increase prices but it would be difficult to do that with coffee because the prices are already so much above cost of production, given low set up costs for existing firms it would be easy to undercut rivals by just accepting a slightly smaller margin.
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Ikea are adopting the tactic of charging a franchise fee to its UK operation which I think is a joke. Ikea UK is not a franchise.
An interesting comment in the above article was this:
Oakeshott said there was a simple way for customers to punish companies. "Consumer resistance is one way of going ahead. Don't go to Starbucks, go to Costa or your local."
And funnily enough I had already decided not to visit Starbukcks myself again. I am no great coffee drinker anyway but when you think their loyalty reward scheme changed recently to make it once in a blue moon where you ended up with a free cup whereas at Costa even an infrequent customer like me wracks up enough points to get one its a no brainer to frequent Costa given they do pay their taxes here.
Well it seems the anger against companies doing this is mounting with ebay and Ikea now coming under scrutiny:
Ikea are adopting the tactic of charging a franchise fee to its UK operation which I think is a joke. Ikea UK is not a franchise.
An interesting comment in the above article was this:
Oakeshott said there was a simple way for customers to punish companies. "Consumer resistance is one way of going ahead. Don't go to Starbucks, go to Costa or your local."
And funnily enough I had already decided not to visit Starbukcks myself again. I am no great coffee drinker anyway but when you think their loyalty reward scheme changed recently to make it once in a blue moon where you ended up with a free cup whereas at Costa even an infrequent customer like me wracks up enough points to get one its a no brainer to frequent Costa given they do pay their taxes here.
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