...Mr. Cameron said companies must "wake up and smell the coffee" over tax avoidance... [Starbucks] has been criticized for not paying enough corporation tax in the U.K. Reports said Starbucks could suspend 100 million pounds ($158 million) investment earmarked for new branches in the U.K. due to the perceived slight...This relates to a quandary that we've been discussing in class: mobile capital and the incapacity of states to capture it in a global economy.
The puzzle: Starbucks is a US-based multinational corporation that does a lot of business in the UK (and everywhere people are willing to pay $5 for coffee with milk). The UK would like to tax Starbucks' earnings (as most states do with most businesses). Starbucks, if it chooses to do so, can simply move its capital out of UK if it doesn't like the deal that Britain offers the multinational.
So, what is a state to do? How should the UK respond to Starbucks' threat to cease new investment if they are forced to pay higher taxes? Read the article and share your well-reasoned thoughts in the comments for participation points.
