In that scenario the new franchisee would pay its tax and in your "idea" we would still not get anymore tax from Starbucks worldwide profits.
No company in its right mind would invest in the UK if they were then going to be hammmered on its worldwide profits. Why would Nissan for example build a new car plant in the UK instead of Poland, or why keep its current plant here instead of moving elsewhere. The jobs and money lost won't be taken up by uk businesses.
The problem is not companies obeying the law they do, to the letter. Its the tax laws that allow them to minimise that tax level and the international competition between countries to get those companies to invest in their country and not others. Unless you have a global agreement then your idea is just pie in the sky and avoids the reality of the real world.

You are missing the point. It does not go after worldwide profits, but the UK share of those profits which may have been transfer priced out of the UK. So if 25% of sales were here then 25% of profits would be nominally earned here and so be liable to tax. Those profits earned elsewhere would not be touched.

Unfortunately while it is easy to say companies should not do it it’s very hard once you start thinking about it to stop them

If we keep with Starbucks v an Independent
Lets say
- both sell coffee for £2 a cup
- (fixed) running costs = 50p / cup (rent, salaries etc)
- £1.50 must cover the cost of the coffee and profit
- Corporation tax 23%

A Starbucks shop sells 100,000 cups p.a.
– Buys coffee from Starbucks (Switzerland) cost (of beans) is £1.49 / cup
- Profit £0.01 / cup
Total Profit £1000 = Tax of £230

Independent – also sells 100,000 cups p.a.
- Buys coffee on open market cost (of beans) is £1.00 / cup
- Profile £0.50 / Cup
Total Profit £50,000 = Tax £11500.00


Starbucks can say that the extra cost of its coffee is due to its superior beans / roasting technique etc
How the do you tax this?

I expect your figures are well out of skew here - I doubt that Starbucks makes a profit that small on a drink. Drinks can have a massive markup value in the catering industry.

I think, though, we all know that the Switzerland part of this equation is going to be a massaged figure to ensure that profits made anywhere where the tax rate his high ensures a very small tax outlay.

The main question is - how do you ensure parity between the tax your independent pays and the tax that Starbucks pays? To the man in the street, a shop that has hundreds of outlets across the country, where it’s bloody hard to find a seat, and is NOT making a profit is either acting in an underhand way, or at the very least doing something odd to keep going.

Your independent would at the very least be buying beans closer to the source of production (ie not though a royalties company), and should therefore be getting a better deal per cup. A clever or wily manager would be looking for special blends, roasts (or the digestive system of a civet perhaps) to add value to the drink. The problem here is the skewed and uneven market where the multinational is getting away with blue murder on the tax front, while the independent knows that if he doesn’t cough up that £11,500.00 he’ll be in court. He certainly won’t be able to have a meeting with HMRC and say “you know what, I’ll write a small number down on a bit of paper - that’s how much tax we’ll volunteer to pay”. http://www.bbc.co.uk/news/business-20632398 (Starbucks to pay £10m corporation tax a year)

We need to seriously look at how big multinationals operate in this country, and ensure that if they are going to do business here that they are not being favoured by their ability to move money out of the country using clever accounting trickery before they’ve handed a proper amount over to the treasury. If we lose some, the so what? A clever ex-Starbucks franchisee would know enough about running a coffee shop to set up on his own. To be truthfully honest, if we had more independents and fewer big chains, the variety and quality of tea and coffee on the high street may well improve.

HMRC can do audits based on discrepancies with profits. They can also assess you as making a profit even if you fiddle the figures and declare a loss. The fact is that the HMRC have not being using their powers properly and allowing any sweetheart deal should result in prosecution of the HMRC for corruption.

Also the HRMC could fine Starbucks 100% of their profits for discrepancies. A unitary tax will simply make such transfer pricing schemes irrelevant.

The numbers were just to give some meat to the example and have no basis in any fact
BUT the point I was making was that as a business I only pay tax on my profit and not on my turnover. If I am a good business man and able to get my beans for £0.75p / cup then I will make mre profit (and so more tax) than the independant shown above. However in this case Starbucks are using a totally legitamate mechanisum to reduce thier tax to basically zero

Yes but apportioning profits on sales also stops abuses like the ones with Starbucks and many others. Companies can only hold themselves responsible if governments react to companies tax dodging.