Coffee & Taxes: Starbucks And The Art Of The 'Swiss Swindle' – CoffeeTalk

Starbucks’ ‘ethical sourcing’ initiative may mask a significant global tax avoidance scheme that transfers profits from coffee-producing countries to Switzerland, undermining local economies. While customers pay an ‘ethical’ premium, the scheme perpetuates poverty for farmers and deprives countries of revenue necessary for funding essential public services. Starbucks has been accused of labor violations, facing lawsuits for misleading consumers about human rights, while its CEO’s compensation is exorbitantly disproportionate compared to median workers.

The role of Switzerland as a tax haven is pivotal in enabling multinational corporations like Starbucks to avoid taxes and shift profits. Starbucks imposes an 18% mark-up on coffee beans sourced through its Swiss subsidiary, despite the beans not actually being processed there. This practice has reportedly shifted around $1.3 billion in profits to Switzerland over the past decade, significant for its impact on taxable income where sales occur.

This mark-up was only discovered after a 2015 European Commission investigation prompted by Starbucks’s previous tax dodging practices in the UK. While the investigation found illegal state aid in the Netherlands, Starbucks’ connection to its Swiss subsidiary remained less scrutinized, especially after structural changes that obscured financial reporting.

An evaluation of Starbucks’ Farmer Support Centers in coffee-producing countries reveals minimal investment and benefits for local farmers, contradicting claims of ethical sourcing. Rather than supporting farmers, the Swiss setup appears primarily aimed at avoiding taxes under low tax regimes, complicating efforts to collect tax from Starbucks where real value creation occurs.

The report advocates that coffee-producing nations should explore taxation options for profits booked in Switzerland and calls for global tax reforms to prevent such profit-shifting practices. Starbucks exemplifies the broader issue of how the current global tax system is manipulated, particularly harming countries in the Global South. To genuinely support its claims of ethical sourcing, Starbucks could utilize its Swiss margins to improve prices for farmers directly in their countries, while governments should take action against profit shifts to Switzerland and push for reforms in the global tax framework.

Read More @ Tax Justice Network