Mark Ritson: The age of accountability is still far from a reality

How do tech giants’ reputations manage to remain intact despite questions over tax?

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You are probably familiar with the scandal of global tech firms who generate billions in UK revenue but pay only a fraction of this to Her Majesty’s tax authorities. The methods for tax “optimisation” are shrouded in secrecy and often acquire distinctly dodgy sobriquets like the “double Irish” or a “Dutch sandwich”. UK revenues are spirited around the globe through Ireland, Switzerland and Bermuda in an attempt to legally limit tax payments. The subsequent savings are eye-wateringly impressive if you believe in tax minimisation and enragingly huge if you are a regular tax payer who believed that, along with death, tax was impossible to avoid.

In 2013 Apple paid just £11.4m in corporation tax despite UK revenues estimated to be in excess of £10bn. Amazon achieved a similar feat in 2013 by paying £4.2m despite revenues of over £4bn. Google paid about £20m that year despite revenues above £3bn and eBay’s bill was £620,000 despite £1.3bn of revenues.

With all those billions and millions it’s hard to spot the degree of saving taking place, so let me put it in personal perspective. The average British marketer pays annual income tax of about £5,500 on their salary of £37,400. If they were to follow the precedent of the likes of Apple and eBay, that tax payment would come down to just over £100 quid a year. Where do we sign up?

Tax minimisation flies in the face of much of these brands’ values and much-vaunted brand purpose statements. Rarely has marketing been so hypocritical. Google might boast of “making money without doing evil” and Amazon claim it “contributes to the communities where employees and customers live”, but at the most fundamental operational level of tax-paying these brands come up short. Apple CEO Tim Cook can tell graduating classes that Apple is “about improving other’s lives” and about how he follows his own personal “North Star” to ensure he does what is right, but much of that is, I think, total horseshit. If it was true then Apple would pay, like the rest of us, its fair share of UK taxes.

Unsurprisingly, Chancellor George Osborne has grown increasingly frustrated with the billions of pounds going missing from the British tax coffers. Late last year he sent out a warning shot when he announced: “Some tech companies go to extraordinary lengths to pay little or no tax here. If you abuse our tax system you abuse the trust of the British people.”

Harsh words but the only flaw in Osborne’s critique is that the British people appear utterly unconcerned about what is taking place.

Last year, Google paid a tiny fraction of its corporate revenues in tax yet featured in the annual Y&R league table of Britain’s most trusted brands. Google was ranked the fourth most trusted brand in the UK. We learned this week that Apple once again sits on top of Millward Brown’s global brand valuations. And yet in many of the countries where its brand dominates, the company is minimising its task obligations to a disgraceful (albeit legal) degree.

But the biggest conundrum here is not the irresponsible chasing of corporate profits at the expense of societal responsibility. It’s the absolute lack of commercial culpability that has resulted from these actions. With soaring brand equity, corporate trust and global revenues it would appear that the tech giants are getting away with the reputational crime of the century.

The good news is that Amazon announced this week that it had started declaring its income on UK sales and would no longer funnel its revenues through Luxembourg. This change in strategy came not from consumer pressure, reputation risk or a decline in brand equity. It came because the UK Government has announced a new “Google Tax”, in which companies that are shown to be using offshore routing to minimise tax payments could be fined 25% of their annual revenues.

So much for living in the age of accountability, where brand equity and corporate reputation are important. It was good old-fashioned legislation that sorted out the issue. I fear that sometimes we exaggerate the potency of brand and overstate the impact of the consumer in the real world of business.

Hide Comments2 Show Comments
  • Al King 29 May 2015 at 7:48 am

    Sad but true.

  • Richard 31 May 2015 at 8:11 pm

    My theory is that the benefit that customers perceive that a business provides for them personally is inversely proportional to the benefit they expect that business to offer the public at large……most of us will happily get pissy with an investment bank for its infractions but will equally happily buy an iPad air finished in lightly tanned orphan skin.

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