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Tax-dodgers and advertising threats

23 Feb 2016  |  Bob Wootton 
Tax-dodgers and advertising threats

What use are 'corporate social responsibility' claims when the likes of Google and Facebook play it so fast and loose with tax?

Best I come clean for starters. Many of you might know by now that I'm leaving ISBA on April 22, exactly twenty years to the day since I joined the advertiser body. It's been a really good innings, but all good things must come to an end.

I'm looking forward to a portfolio existence combining industry-level and non-executive work with some pure consulting, so I shouldn't be too idle.

The guys at Mediatel have kindly suggested that they might be prepared to suffer my continuing to write for them as long as it's any good [we're hoping you'll be set off the leash - Ed].

So while my ISBA franchise fades, I retain my knowledge and experience and can sometimes be rather more independent and perhaps less circumspect. Read on and you'll see why I needed to set the scene first...

Trust

You can't pick up a newspaper or watch TV news at the moment without seeing reverberating concern about various multinationals' tax bills and arrangements.

Centre stage we have Google, now the world's most valuable company, which has just agreed with HMRC to pay £130m corporation tax on an estimated UK ad revenue of ca.£4bn. That's a rate of some 3% against the 20% 'required'.

EMEA president Matt Brittin's fail before the Commons Select Committee's irrelevant questioning last week served to work the splinter of doubt further into Google's own flesh and the media feasted on it.

Then there's Facebook, which famously paid £4,327 on estimated UK revenues of £105m while giving its 362 staff here share bonuses totalling £35m and taking their average salary to £210,000. £4,327 is close to a month's income tax for quite a few readers of this column and is about half of what will be deducted each month from the average Facebook employee though PAYE.

The Sunday Times ran a piece entitled "Six of biggest 10 firms pay no UK corporation tax". Almost all the companies mentioned are significant advertisers. There's no suggestion here that laws are being broken but each has installed elaborate arrangements which enable it to sidestep much UK tax and pay a lower rate in other jurisdictions like the Cayman Islands, Bermuda or Zug (?!).

Each also has a pretty serious 'corporate social responsibility' programme in place which it trumpets at any opportunity. How does this square with their approach to corporate tax? Or to put it more plainly, will anybody believe their CSR claims when they're playing it so fast and loose with tax?

Quick to defend themselves, companies point to the amount of inward investment and employment that business fosters. They also reference the amount of income tax that their thousands of often highly-paid employees contribute to Her Maj.

Hmmm. If I were one of those employees, I'd be wondering why and how my employer was getting away with paying far less in tax than I did. It wouldn't make me feel any better about them.

It's even worse if you consider this from the point of view of millennials, notorious for their demands of and challenges to their employers. They're the next generation of senior management, so they can't simply be ignored as they up sticks to go globe-trotting because they're not getting enough training or because they don't like the morals their employer displays.

So net, it's not illegal and it is 'fair game' within one of the most complicated tax systems in the world which successive Governments have done nothing to address.

But it's also all out of whack in peoples' minds. I've written before about how some companies wipe out the value of their marketing through poor customer service. Now there's another big, high-profile reason not to like or trust corporations. Campaign's Gideon Spanier has written eloquently on this too.

Business is as important to society as Government, if not moreso. Society is not in good shape if its leaders - be they politicians (expenses) or corporations (tax) don't set the right example.

HP vs FT

It happens from time to time, thankfully not very often. A commentator in an influential medium challenges a company's behaviour, and suddenly it's a charged exchange escalating to threats of withdrawal of advertising.

There was a high-profile spat of this kind about a decade ago when Marks and Spencer, then and now a major advertiser with the Daily Mail, took umbrage over some less than favourable editorial. M&S were understandably upset, but hamfistedly threatened to withdraw advertising support.

It's a very American and, in these times of media oversupply, a very modern tack, but it also resembles a storyline from Mr Selfridge.

Trouble was, they misread the balance of power. Although they were (and are) a big high-street retailer and household name, they overlooked the fact that the Mail had a large readership, considerable influence and was probably their very best communications route to market. As I recall, the Mail dug in and M&S returned, tail between legs.

Today's spat involves FT journalist Lucy Kellaway's less than gushing comments about US Republican candidate and HP CEO Meg Whitman (apparently she's got time to do both). Once again, things have already moved on beyond what was said and whether it was justified. So where's the balance of power this time?

Well, HP's a very big corporation, but not one without its troubles. And the FT is the global business paper of record, not some struggling trade rag. HP's CMO Henry Gomez is the man in the line of fire. Whether he stepped up or was stepped up, I don't hold out much hope for him.

And finally, an advertisement

Regular readers will be delighted to know that I've assembled a compilation of my first two years of rants into a souvenir paperback book. Entitled "If It Ain't Broke, Fix it", it's available here. Hurry, hurry, while stocks last!

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