Thursday, 20 June 2013


Charlie has been watching Prime Minister's Questions (h/t Rebecca), which yesterday included a revealing reply to a question from Caroline Lucas, the UK's one Green Party MP.
Caroline Lucas (Brighton, Pavilion) (Green): The Government’s own research shows that there is a link between the portrayal of women as sex objects in the media and greater acceptance of sexual harassment and violence against women. That being the case, will the Prime Minister join me in trying to get our own House in order and calling on the parliamentary authorities to stop The Sun being available on the parliamentary estate until page 3 is scrapped, and will he have a word with his friend Rupert Murdoch about it while he is at it?

The Prime Minister: I am glad the hon. Lady got her question asked after the dazzling T-shirt that she was wearing last week failed to catch Mr Speaker’s eye. I am afraid I do not agree with her. It is important that we can read all newspapers on the parliamentary estate, including The Sun
(Text from Hansard.)
The contrast with Cameron's approach to other questions is striking.  The political point-scoring from Labour members he answered with point-scoring of his own, but other questions he dealt with courteously.  Here for example is his reply to a question for Labour MP Hazel Blears about unpaid internships:
The Prime Minister: The right hon. Lady is doing some important work in this area. It is a difficult area to get right, because we all know from our own experiences that some short-term unpaid internships—work experience—can be very valuable for the people taking part. On the other hand, unpaid interns should not be employed instead of workers to avoid the national minimum wage. That is the balance that we have to get right, and I commend the right hon. Lady for the important work that she is doing.
It's as if he thinks that stopping exploitation of interns is important, but violence against women is an issue best addressed by making jokes about what one's questioner was wearing a week ago.

Rather than read the text, one can watch PMQs on video.  That takes much longer than is merited by what is said, but one can enjoy the demeanour of the front benches.  In this broadcast, Theresa Villiers, sitting four to the left of Cameron, is the one to watch when she comes into shot.  She seems reasonably enough to think she's got better things to do than listen to boys calling each other names, but she does her best to listen politely.  At 4:17 she smiles at Cameron's cutting remarks about Ed Balls.  At 10:19 she smiles in support of his congratulations to Edward Leigh on his knighthood.  At 16:49 she looks bored with Cameron's reply to a question about child poverty (he blames Labour and the Speaker cuts him off), and at 20:21 she's no more interested in an exchange about William Cash's Gender Equality (International Development) Bill (Cash invites Cameron to support the Bill, and Cameron does so, but not to the extent of encouraging anyone to vote for it).  At 26:02 she's interested enough in a question about the Health Service to exchange a few words with Jeremy Hunt, the Health Secretary.

Lucas asks her question at 26:10.  At 26:56 Cameron steps back, having finished his reply, revealing Hunt and Kenneth Clarke smiling at his jest, and Villiers between them glowering stonily.

I'd like to think that she had a quiet word with him after, pointing out that he could have expressed his abhorrence at violence against women while still supporting freedom of the press and the right of MPs to inform themselves by looking at the pictures in The Sun.

Wednesday, 5 June 2013

Starbuck's Profit

At the end of last year there was a hoo-hah about the Starbucks coffee chain, which doesn't pay corporation tax in the UK because its accounts say it makes no profits here. Kris Engskov, Starbucks' UK Managing Director, quieted the row by promising that in future the UK company would reform its accounting practises such that profits made here would no longer be transferred to Starbucks' operations overseas by means of brand royalty payments, mark-ups on coffee beans and high rates of interest on intra-company loans.

Meanwhile, Lisa Pollack at the FT published a series of articles on Starbucks' tax affairs, looking at its apparently inconsistent statements of profit and loss, its transfer payments, and its offer to pay more tax.

Having examined the transfer payments, Pollack wrote that
So that’s a £33m loss less £26m of royalties less £2m of interest, which gets one to a figure of £5m… which is still a loss. Some of the mark-up from the Swiss bought coffee would have to go too to get the company near profitable in the UK.
Which makes the punchline — that Starbucks has agreed to pay £10m of ‘tax’ voluntarily over the next two years — even weirder.
This analysis was seized on by commentators hostile to corporation tax in general.  But Pollack, in an otherwise informative series, has made a mistake.  The profit and loss for reporting purposes is not the same as the profit and loss for corporation tax purposes.  (I started on a post about this at the time: real life supervened.  But Tim Worstall has today repeated the claim, so I'm going to try to put things straight.)

The £33m is Starbucks' reported UK loss for 2010-11.  Pollack's point is that even if it reported results £28m better it would still be making a loss, and so (she implied) not paying corporation tax. But as the Financial Statement makes clear on page 19, some of the items contributing to the stated loss - depreciation and impairment in excess of capital allowances, and non-deductible expenses - are not allowable for corporation tax purposes.  They come to about £16m apiece.  Adding these back in, Starbucks' UK loss is reduced to £1m.  So with the £28m in royalties and interest payments the company would have a taxable profit of about £27m.

Two additional points for clarity:
- the numbers on p19 are the affect of each item on corporation tax payable, which was 27% of the gross
- Starbucks has got past losses available to set against future profits.  So it may still not need to pay corporation tax.