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Cameron The Brand Slayer

January 25, 2013

BorgIf it weren’t for the fact David Cameron watches so little television, I would be forced to conclude he has been modelling his recent behaviour on Borg, the Viking Himbo now fronting Tesco’s advertising.

How else explain his assault on multinational brands in recent days – which has all the subtlety of Thor laying about him with his hammer after a particularly drunken binge?

Last week, it was Coca-Cola that got stomped all over, when Cameron told the House of Commons that he regarded it as his solemn paternal duty to prevent his children consuming “excessive” amounts of the sugary beverage.

This week he was at it again, telling the World Economic Forum in Davos that brands which avoided paying their fair share of corporation tax needed “to wake up and smell the coffee” – an unvarnished reference to Starbucks and those other egregious “tax dodgers” Amazon, eBay, Facebook, Google (and, er, Coca-Cola). And the tirade didn’t end there: so sick and tired is the British public of the multinationals’ fiscal chicanery that Cameron has decided to make clamping down on corporate tax-avoidance a central plank of our G8 Group presidency later this year.

Whoa, Dave. Is this your idea of a soft close? Britain shut for business before you oblige us to pull out of the EU?

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Witch-hunt against corporate tax dodgers can damage jobs, as well as brands

December 3, 2012

StarbucksThere’s a grave danger that the witch-hunt against global brands who fail to pay their “fair share” of UK corporation tax will boomerang on the political class that has instigated it.

Google, Amazon and Starbucks have been chief whipping boys in an excoriating grilling by the powerful parliamentary Public Accounts Committee, headed by former Labour government minister Margaret Hodge. They are but the frontline of a phalanx of household multinational names – eBay, Facebook and Ikea prominent in the second rank – which are being prepped for humiliation in the court of public opinion. And behind the PAC’s bullying is a fully complicit Treasury – its head, George Osborne, desperately aware that falling corporation tax is contributing to the ruin of his re-election strategy.

Of course, what these brands are up to is hardly ethically defensible. To quote but a few examples, and bearing in mind that UK corporation tax on larger companies is currently levied at 24% of profits: Google claims to have a global profit margin of 33%, but its UK unit paid only £3.4m in tax last year; Starbucks paid just £8.6m on 13-year UK turnover of £3.1bn; Amazon’s UK tax bill last year was £1.8m on reported sales of £207m; and in 2010 eBay paid £1.2m in tax on UK sales of £800m.

Not the stuff of sincere corporate citizenry, and – consumer brands being peculiarly vulnerable to criticism – these companies are deservedly squirming as the rock is lifted from their unedifying activities.

But because we don’t like their behaviour that doesn’t make it illegal. Tax avoidance is something we would all get up to, if we had an army of tax accountants at our disposal. And maximising profits is one of the fundamental tenets of capitalism, as germane to the micro-entrepreneur as the multinational corporation. What hurts is the unfairness of it all. We small folk must contend with HMRC harassment, escalating fines and a brutal bailiff when we don’t pay our tax bills; big corporations, by contrast, merely cut a highly advantageous deal with the UK tax authorities who, to all appearances, are sycophantically grateful for anything they are given.

Margaret HodgeSo, what politicians are doing here is stoking the politics of envy: pitting the grievance of the many against the privilege of the few. It’s an easy populist game to play and amounts to a form of blackmail. You, Amazon, Starbucks et al, pay up or we will whip up a consumer boycott against you. Already, Osborne’s deputy, Danny Alexander, is “abstaining” from Starbucks coffee (although, in fact, admitting to only drinking tea) and Hodge (above) has knocked Amazon off her Christmas shopping list. How they’re going to hit Google in the googlies I’m not too sure, but the elements of a national campaign are there. Starbucks, for one, is already buckling and (in the words of the inevitable headline) waking up and smelling the coffee.

But wait. Enormously satisfying though this condign corporate punishment may be, could it not become a little, well, counter-productive if the trend really takes wing? Corporation tax, even if levied at the notional statutory level, makes – or would make – a fairly small contribution to the Exchequer when weighed against the other, less high-profile, benefits these companies bring to the national economy. Profitable companies create jobs, and the people who occupy these jobs pay income tax and national insurance contributions, which are of vastly greater importance as tax receipts. Though no economist, I’m tolerably certain that anyone who did the modelling would find that  “zero-tolerance” enforcement of higher-level corporation tax is inversely related to job creation.

As for stirring up a consumer boycott, it’s merely killing the goose that lays the golden egg. Politicians, have a care.


Google plots m-commerce takeover of local sector

July 1, 2011

As a headline grabber, it isn’t quite up there with the search giant’s big news of the week – ‘Google and Heineken seal ad partnership landmark‘.

That deal, which involves a sizeable chunk of Heineken’s €2.1bn global advertising budget being poured directly into Google inventory such as YouTube is indeed a ground-breaker. And a deeply worrying one at that for ad agencies, who must now face up to the possibility of other major packaged goods companies “disintermediating” them with extreme prejudice from the digital deal.

No, this was a much smaller scale event, but in its way just as significant. It demonstrates the skill with which Google micromanages the digital ecosphere, as well as macromanages it.

I’m talking about the launch this week of Google Mobilize at the annual ThinkMobile jamboree (now soaring to 500 attendees).

What is this product? It’s a remarkably simple means of SMEs creating their own mobile sites free of charge (including analytics), thanks to an almost foolproof Google template.

Unimpressed so far? Well let’s look at some of the thinking behind this low-key launch. As you will know, mobile traffic is soaring. Here are some key statistics, which I quote courtesy of Ian Carrington, Google’s UK mobile advertising sales director (so bang up to date, really). Last year, mobile traffic quadrupled. The number of handsets in circulation doubled from 500m to 1bn. In Q4 last year, smartphone sales surpassed sales of PCs for the first time – 2 years ahead of the forecast by the world’s most respected expert on the subject, Mary Meeker. Last year, 36% of the UK mobile-owning population (pretty much everyone) had a smartphone, up from 24% the year before; this year penetration is expected to hit 50%.

You get the picture. Sales of smartphones, especially Android-powered ones, are going gangbusters. And, not surprisingly, people are increasingly using these objects of desire to make purchases on the hoof: 28% who own a phone have done, or have tried to do so, I am told. Ebay has risen to this challenge magnificently. Last year it did over $2bn of e-commerce via smartphones. It even manages to sell 4 Ferraris a month over via m-commerce.

Alas, most retailers can’t keep up with this heady pace. The number of mobile-enabled websites is, I’m told, criminally small. Google claims only 17% of its top advertisers have “mobile-optimised landing pages”. Most retailers still rely on a boiled-down version of their PC website, which is not very user-friendly of them. So Google is helping them out, with a loss-leader. However, the “free” part of the deal applies only to SMEs (the butcher, the baker, the candlestick maker). Bigger companies will have to to dig into their own pockets. By swamping the local market with free and easy-to-use product, Google hopes to pre-empt any third-party competition and “own” the SME m-commerce sector.

Awesome, as they say over at Mountain View – and just another example of the search giant’s crafty attention to detail.


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