Google, Amazon and Starbucks in the tax limelight

Photo by James Callan

Photo by James Callan

Starbucks buckles to media pressure – but doesn’t get its PR quite right

Last month, three of the biggest success stories in international business – senior executives from Google, Amazon and Starbucks – were dragged before the UK’s Parliamentary Public Accounts Committee (more-or-less the equivalent of the House Budget Committee). All three companies had been accused of using Byzantine mechanisms to avoid paying corporation tax in Britain. Though legal this has become increasingly difficult to manage from a PR perspective.

The committee’s report was disastrous for all three companies, but Starbucks has come off worst by far. Consumer dissatisfaction against the coffee giant had been brewing (pun very much intended) for some time and Starbucks has been a perennial target for boycotts from environmental groups and tax activists. This time is different, though; this time, the UK’s main stream media is going for the jugular as well, with sections of Britain’s press openly advocating Christmas-season boycotts of the three companies.

Starbucks fan and prominent journalist opts to boycott

Normally, Starbucks has excellent customer loyalty. A few weeks ago, Ann Treneman, the UK Times Parliamentary sketch-writer, who owned up to an “embarrassing” annual personal spend of £1000 ($1600) at Starbucks alone, publicly joined the boycott. That’s a grand Starbucks won’t be getting next year.

Starbucks marketing department realised that that could be just the beginning. Action was needed.

Starbucks pencilled in a meeting with HMRC, the UK tax authority, to discuss their ‘tax approach’, resulting in the company agreeing to pay “up to £10m” in tax this year.

It was the right PR move for Starbucks. Or, at least, it was for a few hours.

Staff suffer

A second set of announcements came the day after Starbucks proposed the HMRC meeting. Since its inception, Starbucks has pushed the corporate responsibility angle. Its website refers to their employees as “partners” and CEO Howard Schultz’s biography of the company, “Onward”, is subtitled “How Starbucks Fought for Its Life without Losing Its Soul”. That kind of hyperbolic marketing can come back to bite you – and it has.

The feel-good atmosphere achieved with the tax announcement, was lost the very next day. Starbucks announced that its employees ( sorry, “partners”) – would have to sign new and revised employment contracts that, among other things, cut paid lunch breaks.

The changes, which the company says that have been in the pipeline for a number of months, eliminate many expensive employee benefits, such as free Starbucks-branded baby grows and bibs for new mothers and ‘Congratulations’ cards to employees when they reach four years of service.

There is absolutely nothing wrong with proclaiming a company’s corporate social responsibility credentials – on the contrary, it can be vital to building brand reputation. But, as any good PR will tell you, a single chink in those credentials can have a devastating impact on a company’s reputation and, as the case of Starbucks shows, customer loyalty.

The timing is awful; it produced the wrong story line. Rather than appearing to be a company concerned with slimming down costs, Starbucks emerged as wanting to mitigate the potential damage of an increased tax bill – “If you make us, we’ll pay some taxes on the money we earn in your country, but we’ll take it back from the staff we employ there” is a bad narrative. As we pointed out in last week’s post, timing is everything in PR and what may appear perfectly reasonable one day can cause a severe communications headache the next.

In this case, a particular piece of timing has snatched defeat from the jaws of PR victory.

Posted by: Alistair Walker @ IBA


One thought on “Google, Amazon and Starbucks in the tax limelight

  1. Pingback: It’s all about brand management | The SpinBin by IBA

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