Are companies ignoring reputation in favour of avoiding tax? Article icon


The Paradise Papers exposing the tax and investment arrangements of some of the world’s most high-profile people and companies have dominated much of this week’s news. Stories of tax-free private jets and questionable royal investments are going to attract attention at the best of times.  But with a backdrop of stagnating wages, rising living costs, rising interest rates, and public services demanding more funding to avoid collapse the outrage is understandable.

However, those at the sharp end of the accusations can all point to one fact: what they are doing is legal. There is nothing more to say. You may not like it, but there is not much you can do about it and those involved seem to come away unscathed.

Or that’s how it might appear on the surface.

Recent research we conducted with the Legatum Institute into attitudes toward the economic environment shed light on how the UK public view big business and politics. You can read the whole report here, but three core findings struck me

  1.  Capitalism is seen as ‘greedy’, ‘corrupt’ and ‘selfish
  2. Businesses shouldn’t be focussed on profit alone       
  3. Government should do more to regulate how businesses behave

There is clearly significant ill-feeling towards those companies who are seen to be taking advantage of the rules, if not actually breaking them. If they’re not going to sort themselves out then the Government should step in: look no further than betting companies and fixed odds betting terminals, or the much debated price cap for energy industry.

Apple was just one of the companies named in the Paradise Papers, apparently moving much of its money to Jersey to avoid paying billions in tax elsewhere. The company was keen to point out that it is the biggest payer of taxes in the world, but that misses the point. Paying the most and paying what people feel is correct are two very different things.

This is not the first time Apple’s tax affairs have been scrutinised. Last year it was fined €13 billion for tax irregularities in Ireland between 2003 and 2014. This could explain the company’s relatively low performance in Populus’ Reputation Credit Score where it ranks well behind companies like Google and Samsung, nestled between BMW and Nissan. Apple’s lowest score across all the tracked attributes was for being seen as a responsible company.

It is hard to argue against the financial gains to be made from diligent, legal management of one’s tax affairs but to ignore the impact on reputation and a growing sense of ‘something needs to be done’ is to not see the whole picture. To distance yourself from your customer base is possibly the biggest risk of all.

How many sales is Apple missing out on from people who refuse to buy from a company they deem to be acting irresponsibly? They may not outweigh the benefit of paying less tax but nor does it mean they should be ignored.