THE BLOG

How to Solve Google's Tax Problem

03/02/2016 12:07 GMT | Updated 02/02/2017 10:12 GMT

Adidas is clearly a brand that cares about its reputation. So much so that it recently cancelled its high-profile sponsorship of international athletics after a series of damaging stories about drug-taking amongst athletes, international cover-ups and even bribery allegations. The 11-year sponsorship deal was set to run until 2019 and was reportedly worth around £23m, although some figures suggest it's higher and that the loss of revenue to the IAAF will total around £20m.

For anyone familiar with the concept of corporate responsibility, its leaders clearly attempted to do the right thing. When the public became horrified by an ongoing scandal, the brand felt it mustn't be tainted by arrogantly burying its head in the sand and carrying on as normal. Its principled behaviour needed to reflect the values of its customers.

Which brings me on to Google. This is a brand which, we all know, doesn't 'do evil'. At least it says it doesn't but there's a huge difference between saying you don't do evil and actually not doing evil. Avoiding tax, for instance, is widely regarded as a pretty despicable thing to do.

It's ironic that a few days after Adidas actually did the right thing, Google said it would - but didn't. Having been caught underpaying its tax bill, it came to a cosy arrangement with the British Government to pay back £130m that it conveniently avoided paying for ten years. But the deal stank. Because during 2006-11, Google enjoyed revenues in the UK of £11.5bn, on which it paid just £10m in tax. That is a rate of less than 1%. This 'fine' means it has paid a rate of around 3%. Its annual British income is now over £4bn, a tenth of its global sales.

It means the company can continue to use a complex web of off-shore bases, legal contrivances and disingenuous press releases - 'Government makes tax law and tax authorities independently enforce the law, and Google complies with the law', is its latest statement - to pay grotesquely low rates.

And so I've been trying to figure out why the two globally-powerful brands behaved differently. Was it because the leaders of one have a more ethical corporate culture? Quite possibly. Is Adidas's driven by a clear set of moral standards that influence its decisions? One would hope so.

Or - and I think this goes to the heart of it - is Google so awesomely powerful, so gigantically omnipotent that it simply doesn't give a damn what anyone thinks? Adidas must be seen to behave in a responsible way because if it doesn't its competitors will be able to take advantage of any criticism that comes its way. Google, on the other hand, can do whatever it likes because it knows we our hopelessly addicted - and unfailingly loyal - to its brand.

When the Starbucks tax-dodging affair blew up, the coffee company had to take action because the High Street was full of competitive skinny lattes to seduce their customers. When FIFA was finally exposed as one of the world's most corrupt institutions it was partly because brands such as Coca-Cola and Visa feared their rivals would exploit such laissez-faire association and so demanded its appalling boss Sepp Blatter step aside.

Google, however, is immune to such behaviour. Like the school bully who's also the cleverest, best-looking person in the school and is captain of every single team and club, it can do whatever it likes.

Much like their other school-bully peers.

The only way of stemming its excesses is to provide competition. Yes, governments can attempt to impose punitive fines and rewrite tax laws but clever accountants can always circumvent that.

For corporate social responsibility to work it needs to run like a stick of rock through an entire company, leaders must stand up for what is right which will inspire their workforce and, in turn, the brand's advocates. Competition demands such behaviour.

For CSR to be even more authentic, it needs to be truly selfless.