Republik: Starbuck’s Swiss tax trick

Swiss independent media outlet, Republik reports on Starbucks, ethical sourcing and CICTAR’s research

The investigative journalist Karin Wenger has published a long-read in the digital magazine, Republik, looking into the coffee giant Starbuck’s claims to be an ethical purchaser.

Drawing on evidence from CICTAR’s research, as well as on-the-ground investigations in Colombia. she questions the corporations ethical credibility and concludes that: ‘Of the billions in profits of the US company Starbucks, almost nothing ends up with the coffee farmers’.

As well as talking directly with coffee farmers and those directly engaged in the supply chain in Colombia, the article uses CICTAR’s research (here and here) to explain how Starbucks is using Switzerland to route it’s entire global coffee supply through a subsidiary there. All the while applying a substantial mark-up to ensure that profits are booked, and tax is dodged, in the famous tax haven.

This arrangement is justified by Starbucks on the basis that the Swiss subsidiary coordinates a global system of ethical sourcing and farmer support, thus adding value to the beans. Yet the evidence on the ground, and in the (little) financial information available, suggests that this is a mere smokescreen. The amounts spent on farmer support, and the impact on the ground seem relatively tiny in comparison to the profits booked, and tax saved, in Switzerland.

“This has nothing to do with ethical coffee sourcing,” says Jason Ward, chief analyst at the Centre for International Corporate Tax Accountability and Research (Cictar), an international research center for corporate taxes. “It’s about profit maximization through a tax loophole.”

And, as the article further notes, Starbucks is not a unique example. Many other corporations are still playing the same games, despite global attempts to crack down. “Switzerland is a central hub in a system where profits of multinational corporations are systematically shifted to where they are taxed as low as possible,” says Dominik Gross, an expert on international tax policy at the Alliance Sud Development Competence Centre.