Will Starbucks Win More Tax Breaks from Congress?
After Starbucks (NASDAQ:SBUX) watched its earnings increase in Q1, the coffee giant has taken to Capitol Hill to score an even more favorable tax rate. The company’s lobbying wing is taking issue with royalties paid to overseas operators as well as the general tax rate it has been paying as Congress works on a full-scale tax system overhaul.
The Financial Times story emerges shortly after the revelation that the company had effectively paid no taxes in the UK for three years running. In a response to a noisy public backlash, Starbucks paid 20 million pounds to the British Treasury as a peace offering and hoped the commotion would not reach U.S. shores. Unfortunately for the coffee company, Ways and Means Committee members on Capitol Hill are using that example to guide the debate moving forward.
Starbucks is approaching the issue from a variety of angles. The company believes the current corporate tax rate of 35 percent should come down; that certain coffee bean sales overseas are worthy of agricultural exemptions; and that royalty payments from overseas franchises should only be taxed when entering the U.S. As debates about fairness in tax policy continue in Washington, Starbucks is hoping it can convince lawmakers of its case while voter sentiment seems to point the other way.
Gallup polls taken following the April 15 U.S. tax deadline show fewer Americans believe the tax system is fair today than in many years past. Coupled with polls taken among small business owners with regard to current corporate tax policies, it would seem a majority of Americans are in favor of higher taxes on both corporations and the country’s wealthiest citizens.
Yet as the losing battle for gun control exhibited, a majority — even an overwhelming majority — of support for a policy does not equate to a win for the interested party. Starbucks posted better earnings than expected in its recent report and upped its forecast for the year following the news. The coffee mainstay hopes it can continue its great run by paying fewer taxes as the laws get rewritten. With the right touch on Capitol Hill, it may win that fight, too.