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.


Buy an IKEA bed and have it away in Thailand. Promise

June 5, 2012

And now for something in the great tradition of Opel cars that break down, but only in Spain – and Pepsi Cola that brings your ancestors back from the grave, if you’re Chinese.

The IKEA Redalen bed, on sale in the global furniture retailer’s recently opened Bangkok superstore, is apparently a lot more seductive in Thailand than Sweden – Redalen sounding suspiciously like a word meaning advanced foreplay. Presumably, the bed can be bought in a job lot with the Jättabra plant pot, which appears to offer seventh heaven into the bargain. Bewildered Thais could not be blamed for attempting to invoke the local version of our Trade Description Act on discovering the products were not, after all, vested with mysterious aphrodisiac powers.

Product names getting lost in translation is an increasing problem for companies as the whole world becomes a potential market. Some other recent corkers:

The Mitsubishi Pajero: the car company noticed too late that pajero means “wanker” in Spanish. It was later renamed Montero.

When Sharwood’s spent millions of pounds launching a new curry sauce in 2003 called Bundh, the firm was deluged with calls from Punjabi speakers who said the new offering sounded like their word for “backside.”

In China, Microsoft’s search engine Bing sounds like “illness” or “pancake” when spoken in local dialects. Microsoft executives expertly changed the search engine’s Chinese name to biying, which also referred to a longer Chinese expression ‘you qui bi ying’, roughly meaning “Seek and Ye Shall Find.”

IKEA’s solution to the problem has been to employ a team of local Thai translators who purge the furniture names of stressful double entendres.


Humorous IKEA ad doesn’t pull its punches

April 2, 2011

My tip for most creative-but-overlooked ad of the year? This integrated one for IKEA has to be a candidate, although I am of course guessing about the overlooked bit.

It may lack the pizzazz of a Billy Joel backtrack and beautiful, soft-focus production values, but it hits the spot in other ways. “Peace, Love and Storage”, devised by Mother, cleverly exploits our fascination with the war of the sexes to highlight IKEA’s natty storage solutions.

Vodpod videos no longer available.

Like most good ideas, it’s very simple. Four stand-up comedians, of both sexes, out-quip each other across a studio bedroom demarcated like a battlefield. Who are messier, men or women? By the end, we’re none the wiser, but we’ve had a good chuckle, acknowledged the verité behind some of the badinage and are left in no doubt that IKEA is chock-full of suitable storage solutions.

The show within a show, where a long ad dominates the break (this one is 60 seconds), is not in itself new. Many years ago, Rainey Kelly Campbell Roalfe exploited the idea to great effect with Miller Time, hosted by Johnny Miller (a spoof on the Johnny Carson Show, for Miller Beers, which actually lasted 3 minutes), but it’s refreshing to see the theme in action again. And the planning insights are spot on.

Sarah Rabia, strategist at Mother, is quoted as saying: “Mess in the home is the third most common cause of domestic arguments – after sex and money. We have too much of one of them, not enough of the other two.” So now you know.

UPDATE, MAY 17, 2011: It’s heart-warming to note I was wrong on at least one count. This Mother ad will not be entirely overlooked, as IKEA has just romped home as Advertiser of the Year at the Cannes International Advertising Festival. It should be noted that Mother will not be the only beneficiary, as its client uses a wide roster of agencies. Among them are Lida (in the UK), Swedish agency Forsman & Bodenfors, Dutch agency Lenz and French agency La Chose.


A tale of two retailers

May 8, 2009

 

A Dickens of a dilemma

A Dickens of a dilemma

It was the best of times; it was the worst of times. It was the age of wisdom, it was the age of foolishness.

“The old adage is: make your move in a downturn and profit in an upturn,” says Andy Street, managing director of John Lewis. Street and his boss Charlie Mayfield are putting their money where his mouth is by launching up to 50 “pocket” stores in the midst of the recession. We don’t know what they’ll be called yet, but we do know that they will contain electrical goods, furniture and kitchenware, aimed at taking share from the likes of Ikea, DFS and Currys.

Now compare and contrast Best Buy, the giant US electrical retailer that owns half of Charles Dunstone’s Carphone’s retail outfit. Best Buy’s aggressive European expansion strategy seems to be shrivelling before very eyes. The plan was, you’ll recall, to open 100 mega consumer stores in the UK by 2013, starting this year. First we’ve had the plan postponed to next spring, now we’re told it is to be scaled back to 80 stores. Robert Willett, chief executive of Best Buy International, is still talking the talk, but this looks like a serious tactical withdrawal to me.

Either Willett is right to be cautious, or Street is right to be bold. OK, they appeal to slightly different markets, but there is overlap. One of them must be wrong, but which?


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