Virtual Consumer Jan-Feb 2013

Rule breakers

Virtual Consumer column from Ethical Consumer magazine Jan-Feb 2013

A recent analysis by the Guardian found that with combined sales of £3.1bn, Google, Facebook, Amazon and Starbucks had managed to get away with paying just £30m in UK tax over four years. In the growing row about loopholes used by multinationals to minimise their tax bills the Daily Mail and others singled out Starbucks, which has not paid tax in the UK for the last three years. This has perhaps obscured the curious fact that the remaining three are the pre-eminent giants of the Internet age. When taken together with Vodafone, accused by UK Uncut of avoiding £6bn tax in a deal with the UK Government, and Apple, which has paid less than 2% tax on profit made outside the US, newer technology-led companies seem to be setting the pace in (legal) tax avoidance.

The UK government lays some of the blame with e-commerce, which makes it easy for companies to base operations in countries with low tax regimes - even more so when the trade is in non-material products like software and digital content. These are the core of the Google and Facebook business models and (with iTunes and Kindle), a growing source of revenue for Apple and Amazon. Apple runs its European iTunes operation from Luxembourg, with an effective tax rate of 0.4% according to the Tax Justice Network.

Aside from their use of e-commerce, there is a striking similarity in the image of companies like Apple, Google, Facebook and even Starbucks. With its famous ‘1984’ advert directed by Ridley Scott, Apple created an image as the ‘alternative’’ computer company, David against Microsoft’s Goliath, the brand for cool rebels. Now it has overtaken Microsoft to become the world’s most valuable company, it cannot present itself as the little guy, but it still wants to look progressive and green and reacted defensively to criticisms about labour conditions at Foxconn where many of its products are manufactured. Google started as a challenger to Yahoo, turning the established ‘portal’ model on its head with a minimalist search screen. It is well known for its motto ‘do no evil’. Facebook is proud of its perceived role as catalyst for the Arab spring. Starbucks says its mission is “to inspire and nurture the human spirit”. Amazon is arguably less self-conscious about its image but it flew in the face of received wisdom when it established itself as first mover in e-commerce and then with e-books.

In short, you could say that what links the image of these companies is in their origins as rebels, as rule breakers. Perhaps that’s why they think they don’t have to play by the rules and pay their taxes like the rest of us.