Google accused of being evil, doing evil by UK politicians

May 21, 2013

Do no evilGoogle stands accused of acting in a way contrary to its slogan “do no evil”. This continues a debate over tax avoidance, tax evasion and corporate social responsibility


Last week [May 18th 2013] Google’s European leader Matt Brittin appeared before The Commons Public Accounts Committee in London to defend his Company’s tax arrangements in the UK. A pivotal point was the practice of declaring sales were completed in another country [Ireland] with more generous Corporate taxation arrangements.

The Chair of the Committee, Margret Hodge, was particularly vehement in her criticism of the firm’s methods of tax avoidance in the UK. The criticism had moved on from tax evasion (illegal) to tax avoidance (legal) in a way that amounts to serious departure from the corporate claims of good citizenship.

The Guardian reported that

“[The] Commons Public Accounts Committee Members reacted in disbelief on Thursday [16th May 2013] after it emerged that they paid just £3.4m of tax on £3.2bn of sales taken from UK customers last year as their sales were technically “closed” in low-tax Ireland.”

Writing in The Observer a few days later, Google CEO Eric Schmidt noted:

“It is tempting for every government to assume that they will benefit if and when the current [tax] structure changes. But in reality, it’s probably only a significant increase in corporation taxes globally that would make every country a “winner” – and the consequences of that would likely be less innovation, less growth and less job creation. That said, the UK government has the perfect opportunity to take the lead in shaping this complex debate at the G8 summit next month. We hope George Osborne seizes the initiative and makes meaningful tax reform one of the top items on the agenda.”

It’s a Tax Dodge, says Hodge

Margaret Hodge had made clear her view at the Committee investigation, telling Google’s European CEO Matt Brittin, that his company’s behaviour on tax was “devious, calculated and, in my view, unethical”.

[Mr Brittin] had been recalled by MPs after being accused of misleading parliament over the firm’s tax affairs six months ago. Hodge said: “You are a company that says you ‘do no evil’. And I think that you do do evil.” Hodge was referring to Google’s long-standing corporate motto, “Don’t be evil,” which appeared in its $23bn US stock market flotation prospectus in 2004.

Do no evil image

Image from grokdot

To be continued

Starbucks’ tax arrangements store up trouble for the brand

October 16, 2012

This week Starbucks was identified as a company that has used creative accounting to avoid paying any tax in the UK for three years, a period in which sales reached £1.2bn, and when its senior executives were on record as praising the UK financial performance

A special report by Reuters explains how the accounting scheme works:

We have identified three cunning, although legal, methods by which Starbucks has been able to avoid paying taxes to Her Majesty’s Revenue & Customs (HMRC), Britain’s tax authority. They involve payments between companies that fall under the greater Starbucks corporate group. By charging subsidiaries high-priced royalty fees on intellectual property, requiring chunks of funds be allocated to other subsidiaries in the supply chain, and shifting money to low-tax areas via inter-company loans, Starbucks has been able to essentially make its reported profits in the U.K. vanish into the foggy London air.

The practice of charging royalties on intellectual property is a method pioneered by tech companies like Google and Microsoft, and is used by Starbucks to drastically reduce the amount of taxable income it must report. Starbucks charges its international operations, including its U.K. unit, fees in order to use various elements of the corporation’s intellectual property, such as its brand and business processes.

Starbucks’ high ethical standards

LWD had been following Starbucks as an example of a company placing diversity at the heart of its corporate values. Its own website reads:

“Aside from extraordinary coffee, Starbucks has made a business out of human connections, community involvement and the celebration of cultures. We’re committed to upholding a culture where diversity is valued and respected. So it’s only natural that as a guiding principle, diversity is integral to everything we do.

Starbucks is dedicated to creating a workplace that values and respects people from diverse backgrounds, and enables its employees to do their best work. We honor the unique combination of talents, experiences and perspectives of each partner, making Starbucks success possible. As such we expect our partners to act with a spirit of kinship, tolerance and humanity toward all customers making our brand welcoming to everyone.”

The welcoming brand

Starbucks places ethical standards at the heart of its operations. It leaves it more vulnerable to damaging attacks on its integrity through stories of its global financial arrangements.

MPs face public fury: The morality of crowds?

June 9, 2009

Sharon Bedford

Sharon Bedford

The unfolding drama at Westminster sees British MPs forced to resign after public meetings which have demonstrated the anger of the public against their elected representatives. Are we seeing another facet of group behaviour which could be termed the morality of crowds?

The wisdom of crowds

There is understandable approval for the ideas that crowds exercise ‘group smarts’ that go beyond the judgement of an elite few. This concept was popularised and the opposing view rejected by James Surowiecki who noted

“No one in this world, so far as I know, has ever lost money by underestimating the intelligence of the great masses of the plain people.”
-H. L. Mencken

H. L. Mencken was wrong.

In [his] endlessly fascinating book, New Yorker columnist James Surowiecki explores a deceptively simple idea that has profound implications: large groups of people are smarter than an elite few, no matter how brilliant—better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.

The fury of crowds

The appeal of Surowiecki’s idea should not blind us to the evidence of the fury of crowds, and the potential for this fury to be exploited by popularist leaders. One of the criticisms of the power of charismatic leaders, is the apparent impact of a powerful well-delivered speeches.

The morality of crowds

Crowd behaviour exhibits other tendencies. I have recently been struck by the manifestation of righteous indignation in the public mood against their elected representatives.

Public outrage in the UK, a month ago directed at anyone implicated in the credit crunch, has been partially redirected toward the new villains, our own appointed parliamentary representatives

Perhaps righteous indignation contributes to public displays of anger against the immorality of others and the justification of direct action against the targeted individuals.

The case for tax avoidance

Western society has developed (evolved if you like) mechanisms through which individuals seek to contribute as little as they are obliged to, towards the State. A complex set of scrutinizers are engaged by the State on one hand to oversee the individual payments, and individuals hire another complex set of advisors to help them avoid paying more than they have to. Financial advisors are taught the principles and practice of tax avoidance, as one of their professional skills.

Sharon Bedford, an accountant, outlines the subtleties of tax avoidance in an interesting article on the BBC website.

While MPs have now been forbidden to [claim tax allowances on second homes through their Parliamentary allowances] this tax break is still available to anyone who has a second home, and who has the means to fund relatively short- term property gains … However, the ability to sell a second home, avoiding tax on all the recent capital gains, relies on a new bit of the tax law which was extended during the last recession to help individuals forced to move home to find work.

Bedford demonstrates the way in which the system permitted claims which have been revealed as far too advantageous to those MPs willing to make them. Bedford also shows a rationale behind ‘second home’ allowances, and warns against hasty and ill thought-out new legislation

An ancient morality tale

Once upon a time there was leader who led a revolution against injustice. He was able to channel the anger of his people so successfully that an oppressive regime was brought down. The people called for justice against those who had wronged them. The leader worked diligently to convince the people that there was a path forward which addressed both needs for justice over past wrongs and commitment to shared goals in the future.

But that was just a dream wasn’t it? It couldn’t work today.

…Or could it?