Is it evil to avoid tax?

Devil business manGoogle famously has the slogan “don’t be evil”. They are however embroiled in a worldwide issue – is tax avoidance evil? Not only have Google been dragged into the fray,  but Apple, Amazon, Facebook, Microsoft, Starbucks and even famous individuals such as Jimmy Carr have come under the spotlight for not paying their fair share of tax

Tax evasion is illegal, but avoidance is not. It is recognised that the more money you have, the more likely you are to be able to afford expensive accountants and lawyers to reduce tax. Apple, according to a study conducted by Millward Brown Optimar, for WPP is the most valuable brand on the planet, with Google second.

So how have Google only paid £10 million in corporation tax on revenues of nearly £12 billion, when they openly claim to make 25% profit? They carry out something called “Double Irish”. Their business is registered in Ireland where corporation tax is a lot lower and is allowed to move their profit offshore. In Google’s case this is the British Overseas Territory of The Cayman Islands, which has no income, capital gains or corporation tax. They end up with an effective tax rate of 2.4%. This obviously makes great business sense and if the British Government wants to change this arrangement they can obviously change the status of the Cayman Islands.

Google does indirectly pay tax though. All their employees in the country that they are working from pay income tax on their earnings, state taxes, national insurance and VAT. Google are also making a huge investment in the UK by building a massive HQ at Kings Cross in London, reputedly costing £300 million that will give much needed work for the construction sector. Once built it will directly provide jobs and indirectly give a boost to services such as bars, restaurants, shops, gyms, transport etc., in the local area.

Tax evasion is not illegal, so why all the fuss? At TomorrowToday we believe they are missing the point and are not taking notice of a major disruptive force; the opinions and power of the people within Generation X and Y. Even though Google was very famously founded by Gen Xer’s Larry Page and Sergey Brin they looked to a classic Baby Boomer in the form of Eric Schmidt to be the CEO of Google from 2001 to 2011 He was recruited to run the company under the guidance of Venture Capitalists that are in turn Baby Boomers. He went about his task to make the business more productive, more efficient and more profitable, because that’s what is expected; companies are there to make money and deliver returns to shareholders. As the CEO, it is his duty to reduce costs and if tax can be reduced, so be it. His systems are still in place even though Larry Page took over the reigns in April 2011. Ironically Eric Schmidt is part of Britain’s Prime Minister David Cameron’s Business Advisory Group. At Apple the CEO is Tim Cook, Microsoft is Steve Bulmer, Starbucks Howard Schultz, the list goes on of household names that are CEO’s of businesses that are not paying their taxes. All of these Baby Boomers might be great business people to increase productivity and decrease costs, but are they in touch with the values of the younger generations? The days are over of having only your shareholders to answer to. Today’s younger generations are more attuned to the creation of a fairer world that looks after the whole, not just the individual. If you want them to buy from you, you need to show how you care for the world and its people. People will vote with their feet (Starbucks) or more likely their fingers in today’s connected world if businesses are not trusted and do not contribute to society. Generation X and Y are not brand loyal; they will find another service or product that suits their needs and values.

Superstar businesses of today, be wary. Back in 2000 Apple wasn’t even in the top 20 companies and you had probably never even heard of Google. Already both Apple and Google have fallen out of the top 20 Most Trusted Businesses in the USA according to the Ponema Institute. Huge companies and famous brands such as Cisco, Yahoo, Myspace, AOL, Dell and Nokia have fallen from lofty heights. You are never too big or famous to fail (unless you are a bank of course, but that’s another story). Plug into the values of today’s people and ignore them at your peril. It would be a shame that worthwhile projects that are being progressed by Google co-founder Sergey Brin, to try and solve the worlds energy and climate problems were cut short because they were not in touch with the very people they are trying to help be rid of evils such as pollution, famine and poverty.

One thought on “Is it evil to avoid tax?”

  1. Graeme says:

    Spot on, Paul. Great insights!!

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