google

“We have great teams who are making a contribution to the overall profits of Google, but identifying what the economic activity, what the added value in the UK is, is a difficult business and that is what we have been working out with HMRC over the years,” he explained on the Andrew Marr show last Sunday.

Barron is missing the point. The nation is enraged about the compactness, not the complexity, of Google’s responsibilities. Most estimates put Google’s tax payments over the last decade at £200m and its UK profits, and I underline profits, to be around £7.2bn.

If Google wanted a simple answer to its tax conundrum it could do what the rest us do and follow the tax code. The corporation tax rate is 20% on all UK profits. There you go Peter, I just sorted out the “difficult” business of your tax debt – you would owe £1.44bn. If you can have a word with California and get that wired across we can consider the matter closed.

Of course, it’s not that simple. It’s “difficult” because Google has built an organisational structure that funnels revenues from the UK through Ireland and into Caribbean tax havens to make life easier and a good deal more profitable.

At this point, let me make it very clear that none of this is anything other than legal. But that is not my point. Between the thick line of legality and green pastures of ethically responsible trading there is a large grey hinterland. Google is legally allowed to pay only £200m in tax, but is it right that it does so?

What makes all of this depressingly fascinating is what it tells you about the value of corporate reputation in 2016. Despite what an army of PR morons might say about reputation management and the need for corporate social responsibility (CSR), the reality is that none of this matters one jot. If it did, Google, a company that just announced operating profits of $23.4bn (£16.2bn) for its core internet businesses, would have carved off 10% of that sum to handle this very public, egregious saga.

Instead, Google sends Barron on TV to claim that calculating one’s tax burden is terribly difficult. In 2013, Google sent its amiable northern Europe boss Matt Brittin (since promoted to president of EMEA) to face MPs and, in one of the most shameful acts of corporate tap dancing ever recorded on film (below), argue that a customer buying something from Google in the UK is clearly buying it in Ireland. While marketers continue to bang on about the importance of reputation and responsibility, the biggest brand in the world by market capitalisation sticks up its multicoloured fingers and continues its highly unsavoury, highly legal business model.

And who is to say that Google has not made the correct strategic choice? The markets continue to send the company’s share price into the stratosphere. Both B2C and B2B customers continue to patronise the brand. Things have never looked better.

Google is certainly not alone. Apple, approaches its own international tax liabilities in a manner no less legal, or unpalatable. One recent estimate calculates that the company has saved $59bn (£41.2bn) in tax payments in the US through its offshoring practices. Chief executive Tim Cook told American chat show host Stephen Colbert recently that he has a picture of Dr Martin Luther King on his desk and asks himself every day “what are you doing for others?”. Unless the answer he gets back each day from that black and white photo is ‘not paying enough tax’, his leadership, like Google’s, is superficially ethical at best.

Both Apple and Google have highly publicised CSR programmes. Apple offers matching funds and will double any charitable donation made by an employee. Google cites its own “active philanthropy” and investments into education and poverty alleviation. In both cases, tens of millions of dollars have been donated. But this is a tiny fraction of what these companies could have paid in tax. I would argue their CSR programmes operate as a source of societal support, but mostly as a form of corporate camouflage.

At marketing conferences around the globe Google and Apple executives are venerated and treated like minor royalty. Are these really the brands we aspire to emulate? A century ago George Cadbury paid all his taxes and then built houses for his employees with the profits that remained. The inheritors of his empire, Mondelez International, paid not one pound in corporation tax last year, despite UK revenues of £2bn.

And they tell us that this is the age of brand purpose.

  • Couldn’t agree more. But let’s also not forget these companies’ professional advisors. EY, for example, claim to be “building a better working world” and to have ‘integrity’ as one of their core values and to be people who “build relationships built on doing the right thing”. And as they count Google, Amazon, Facebook and Apple among their clients, who am I to argue?

  • The organisations of Google and Apple exhibit both good and bad across the broad church of their operations. All of those actions and decisions contribute to their resulting brands. Their approach to corporate tax is but one aspect of those operations and they are hardly alone on that front. I’d argue that there is a much better reason to not aspire to be them than their (legal but questionable) use of tax laws – every organisation should build their brand shaped by their own purpose and values.

  • Timm

    This whole subject of corporate tax avoidance is extremely irritating but we are all hypocritical in some sense; I have to admit that I am. While I despise Apple and Google (and Facebook and Amazon etc) for not paying their tax dues, my iPhone is important to me, so is the search engine I go to without thinking. There’s no question that as my Apple equipment wears out, I’ll replace it with newer models.

    Corporations such as these have made themselves indispensable to multiple millions of people by transforming the way they / we work and communicate with one another. So it could be argued (and probably is) that their economical contributions are already many times greater than their tax liabilities.

  • Jonathan Bramley

    What’s really depressing / interesting is whether the shareholders would actually object to a more ethical stance on paying tax. If 5 years ago you invested in Apple its shares were $50. Today they are just shy of $100. Google’s shares were $320 and today they are $720. Both great investments and even without side-stepping tax liabilities would still be amazing investments. I appreciate the need for R&D war chests, rainy day funds etc but if these companies cannot manage these requirements (which I’m sure they can) then what hope for ‘normal’ businesses? It would be interesting to hear from people that own shares in these companies…

  • Mark,

    Unlike last weeks post couldn’t agree more with this weeks. Your solution epitomises for me something that I always use to judge exceptional marketing strategy and implementation. Namely so bloody simple yet effective, it makes everyone go “shit” why didn’t I think of that!

    It also shows that most global companies for clearly self centred reasons are more interested in “Creative” accounting than “Creative” marketing. The world without question is all the worse for that.

    However we all need to take some responsibility, we have relied too long on faceless bureaucrats and career politicians, who clearly have no real experience of life, strategy or business to be run rings around, by some of these massive corporations.

    My solution is to champion what I call “Enlightened Capitalism” which is about the “creative mavericks” of this world joining forces to show a better way. If you or anyone else is interested you can find it on my fuelledbyche blog under the main posts entitled a “new way.” Your view and thoughts very much welcome.

  • Neil

    Yes – they are fantastically innovative companies. The tax issue – generally you get the behaviours you incentivise. In this respect, blame lies squarely with HMGov as it is they that set the rules. As you rightly point out, neither Apple nor Google are breaking the rules. So change the rules. Don’t do special deals as Osbourne has just tried and seemingly failed to do with Google. In addition, the culture of “shareholder value” has to be changed – all the while this i.e. Wall Street and “The City” demand their pounds of flesh, then this will be a major motivator of behaviour.

  • Shanghai61

    You can tut all you like, but don’t think you’re not personally complicit in this.

    The share prices of these companies are supported by the investment in them, and that’s probably you, through the vehicle of your pension fund.

  • Curvingthunder

    Another thought might be to what degree should marketers aspire to be unlike

    Google and Apple?

  • That stung.