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Comment by jrnx | Hacker News Reader

you're ignoring the 20% VAT on those 3bn sales, which provided 600m tax revenue. Why is it so important that they paid 7m in corporate tax instead of any other amount? Their business apparently has high cost of sales (like stores, personnel etc.), where by the way also taxes occur, e.g. for wages...

So I suggest to think twice if you want to paint the picture that Starbucks does not contribute it's fair share to taxes in the UK.

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VAT is paid by the consumer, not the business. The business merely collects it in behalf of the tax office. Starbucks contributes 0 taxes by collecting VAT. Look up the definition of consumption taxes as opposed to corporate income taxes.

If you want to give other examples of ways companies contribute you can mention property taxes on owned properties, or jobs created which usually also have some part of pension etc contributed by the business, vehicles paying excise tax and fuel taxes, but I don't think VAT is a correct one to use.

> VAT is paid by the consumer, not the business

This doesn't matter.

It's like saying "the employee doesn't pay employee tax; the business does". The cost is still there for the business, who could otherwise be paying you it. Or using it to employ more people. Tax is tax.

In this case, the business could charge the same amount but keep what is currently the VAT portion. It's still tax revenue generated by a business doing work, paid by a consumer who does taxed work elsewhere to get the money, and all the government does is collect the money. Doesn't really matter which tax it is.

It obviously matters.

Because VAT is only applied on consumers.

If business A buys from business B which buys from business C...Only the end customer pays VAT on the final transaction, none of the entities before do.

Corporate tax is also paid by the consumer. They raise prices by exactly the amount of their corporate tax.

Or not. If their competition doesn't raise prices, maybe they won't either.

If the tax raises all of their costs and it's a competitive market then they'll all have to raise prices, because competitive market = competitive pricing and it has to come from somewhere.

The most common case where it doesn't raise prices is when they don't have any competition and are already charging the monopoly price, so the money has to come from the company because if there was any more to extract from the customer, the monopolist would have done it to begin with. But we don't really like those markets or want to promote their continued existence.

What this doesn't depend on much is the form of the tax. If it's a competitive market then VAT and corporate income tax are both getting passed on to the customer. If it's a monopolist then either one will typically come out of the monopoly rent, because charging the customers more would bankrupt them or cause them to extend the life of used goods instead of buying new ones etc.

However, corporate income tax is generally easier for multinational corporations to avoid than VAT, so they have a pecuniary interest in making people think that VAT is worse than income tax.

There's a third option: they're competitors are small business that don't have the means to do the clever tax optimization/evasions, so they were already paying full tax. So now Starbucks if it were to pay full taxes, would have to either raise their prices (but then competitors could stay at the same price, because they've already been paying those tax rates), or they can lower their margin.

It's true that these taxes make things more expensive for local businesses, but also for all businesses, as they have to employ very expensive tax lawyers to figure out the best places to put their businesses. What a waste of mental effort that could've gone into more productive careers. But that's corporation tax for you.

Their competition also needs to pay these taxes. There's no free money - adding to corporate taxes just makes things more expensive for the consumer.

My understanding is that the VAT exists independently of Starbucks paying UK income tax or using various strategies to avoid doing so.

The object here is to avoid recognizing income in nations with a higher tax rate as much as possible.

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