We haven't really addressed the hot populist topic of 'fair taxes' here at C@W: I am guessing it is a non-issue for most of us. The law is the law: no-one seriously suggests Starbucks et al are guilty of tax evasion, it's rather basic avoidance they are all up to (plus exploitation of folk's willingness to overpay for the product), and the politicians had better legislate if they don't like it.
(In the case of a business-model based on a globally-traded and market-priced commodity like coffee ("the defining symbol of capitalism" - BQ), it should be pretty simple to clamp down on transfer-pricing tricks - oil taxation, for example, has long been based on market pricing to prevent the obvious transfer-pricing games that vertically-integrated oil companies might otherwise play.)
Bizarrely, however, Starbucks now proposes to pay 'tax' it doesn't owe to the Exchequer, as a sop to public opinion. They must reckon the 'fair taxes' notion has some traction with the Man On The Clapham Omnishamble. So I thought it might be interesting to look at the 'fairness' concept as it has existed in a country with a less capitalistic, more socially-oriented public ethos in the business sphere, with a tale from Old Drew's Book of True Stories. Draw up a sandbag, swing the lamp, and harken to Nick ...
Some years ago I worked for a large energy company (no, not the Crooked E this time) that had operations all over the place, including a very profitable one in Germany. The company's natural instinct was to remit substantial dividends, as it was legally entitled to do, but it had been solemnly advised that in socially cohesive Germany, where everyone had conveniently forgotten where the 'Saxon' comes from in 'Anglo-Saxon', there were 'social norms' as to how much dividend was appropriate for different types of business. Thus, for risky entrepreneurial concerns, high dividends were 'socially sanctioned': but for the energy business, catering for a basic human need, it was somehow 'understood' that only modest dividends were appropriate.
A pretty tangible notion of 'fairness', one might say - just the kind of thing that presumably wins the approbation of woolly-minded Guardian writers. But we're not finished with the story. The same German advisers who counselled against a norm-busting dividend also pointed out that financial reporting standards in that country are a good deal less stringent than those of the despicable Anglo-Saxons (which remains true to this very day, see below), and that nothing could be easier than to spirit the earnings away unobserved. By the expedient of establishing an affiliate in a convenient island location, the desired funds were channelled to said affiliate and thence to the ultimate parent's coffers.
How was this simple trick not picked up and reported upon consolidation of the German affiliate's books ? I just told you: German reporting standards are lax !
What, then, of the social norm on dividends ? Why, it was ostensibly observed for the edification of the German public, of course, and flouted freely in practice. Readers who may wish to deploy this tale as a metaphor on German morality in general are welcome to use the comments section, but as this is C@W I shall content myself by recalling that the first 2 European banks to go under in the present crisis were not feckless Spanish outfits or even Northern Crock: they were German Landesbanken, supposedly models of provincial probity and conservatism, but in fact playing the mortgage derivatives markets for all they were worth (quite literally), via - yes, you guessed - under-reported (and uncontrolled) overseas affiliates ...
To hell with your 'fair taxes'. Legislate, or shut up.