In October 2012, the Reuters news agency published a special report investigating major tax avoidance by Starbucks in the UK. The investigation was prompted by the company’s practice of telling those who invest in it that the business is profitable while claiming that they are making losses in their financial reporting to the tax authorities. Since the company opened its first UK branch in 1998, it had earned more than £3 billion in sales of coffee. Yet, during these first 14 years of business, it paid only £8.6 million in taxes. In the three years leading up to the Reuters investigation, Starbucks did not report any profit and therefore paid no income tax on sales amounting to £1.2 billion. In contrast, a company, such as KFC, which achieved similar revenue of £1.1 billion, paid an income tax of £36 million. At the same time, transcripts of investor phone calls over 12 years revealed that officials from the corporation regularly referred to their business as “profitable”. Although there has been no suggestion that such practices are illegal, Michael Meacher MP went on the record to declare that the practice “is certainly profoundly against the interests of the countries where they operate and is extremely unfair ... they are trying to play the taxman ... It is disgraceful.

Using the case study of Starbucks as an example, this assignment will discuss to what extent ethics play a part in the success or demise of an organization as well as the measures the organization can take to ensure ethical practice.

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