"If the rich paid their tax, you wouldn’t need to make a single cut to any essential service”.

 

It’s an arresting argument, one that on 4 December the staff of the Oxford Street Vodafone store were able to mull at their leisure, given that it was on a placard in their store for the best part of five hours. 

 

Believe it or not, people trying to buy a mobile phone from a Vodafone store in central London would have found it even more difficult than normal. The much-grumbled-about obstacles of incomprehensible talk plans and employee surliness would have been the least of customers’ worries. On 4 December – one of the busiest trading days of the year – just getting into the store was a struggle. And all because of a new tide of popular discontent that is shining a torch in the faces of corporate brands and revealing accounting practices that some campaigners say are unethical.

 

Whatever your take on tax avoidance, it’s an issue high in the public consciousness, and one that has the potential to disrupt far more than Saturday trading. When venerable UK brands are now branded ‘tax dodgers’, the reputational repercussions can be vast.

 

“Recession has, unsurprisingly, led to greater interest and awareness among consumers regarding business behavior,” says Peter Roberts, senior associate director in Hill & Knowlton’s Issues & Crisis team. “Subsequently, there’s a justification to put the company accounts to the same scrutiny and rigour that apply to other aspects of the organisation.”

 

PR firm Burson-Marsteller says anger about corporate tax fits into a wider distrust of big business. It recently conducted a poll which suggests Britons’ trust in multinational firms has dramatically worsened because of the global financial crisis, plunging 46% in the last two years. In contrast, small and local firms remain far more trusted.

 

Anger is real and widespread. At the vanguard of protest is a loose collective known as UK Uncut. It was they who organised the picketing of Vodafone stores. Aggressive, well-connected thanks to an army of social media supporters and capable of mobilising thousands of fellow protestors at a stroke, they are now a force to be reckoned with in the debate over corporate tax avoidance. 

 

UK Uncut’s argument has been given greater heft by the fact that the vast sum of unpaid tax is being grotesquely mirrored by the cuts in public sector funding. The public see themselves suffering while their friendly neighbourhood brands sit pretty.

 

(UK Uncut declined to be interviewed for this piece, other than commenting: “Tax avoidance is a big issue and we believe this is the alternative to the cuts the government are making.”) 

 

Vodafone is certainly attracting the most negative publicity. Accusations initially published in Private Eye magazine suggest that HM Revenue & Customs wrote off a tax bill in excess of £6 billion. Revenue & Customs strenuously denies this.

 

But it’s not the only brand in the firing line. Arcadia has been targeted by similar flash pickets, its flagship Topshop stores closed amid mass demonstrations. The accusation is that the Arcadia group is registered in the name of his wife, Tina, who is legally resident in Monaco. She picked up a dividend of around £1.14 billion in 2005, thereby avoiding paying £300 million tax that would have been owed had it gone to Phillip Green directly. 

 

Later in December, HSBC found itself the target of protestors’ ire. UK Uncut argued that HSBC was trying to reach a settlement with HM Revenue & Customs which would reduce its tax bill by £2 billion. By way of response, 23 activists staged a sleep-in in central London branches while another 20 occupied a branch in Liverpool.

 

The list goes on. Barclays stands accused of diverting revenues to overseas tax havens, US food group Kraft is said to have relocated certain Cadbury’s operations to Switzerland; the owners of Alliance Boots moved its tax domicile to the same tax-friendly country.

 

It’s a fact that tax is becoming a reputational weak spot for many companies. A host of them are weighing up whether they are vulnerable to attack and how they should respond if they become the target of a campaign.

 

Mike Truman, editor of Taxation magazine, argues that companies must challenge the perception that what they are doing is in breach of the law.

 

“Difficult though it is, it is important not to let the protestors run the argument, because some of the claims made have been fundamentally dishonest,” he says. “The idea that Barclays have only paid £113 million in tax on £4.6 billion of profits has become a ‘fact’; the explanation that this is mainly due to losses brought forward, timing differences when tax is paid, and a tax exemption to which they were clearly entitled came too late to make much impact.”

 

The direct action and online activism of organisations such as UK Uncut has already provoked a reaction from PR consultancies with several including Weber Shandwick and Hanover making senior appointments to their corporate practices. Specialists in crisis management and issues management are in demand.

 

The question remains, however, what should a targeted brand’s argument be? Should communicators be attempting to reframe the conversation away from evocative terms like ‘avoidance’? Amid the furore, after all, it’s often overlooked that tax avoidance is perfectly legal. But that’s cold comfort to corporate communicators who are tasked with presenting the case for the company.

 

Or not, as the case may be – because the comms approach for those accused of tax avoidance seems to be tight-lipped at best. Vodafone declined to comment for the piece, as did both HSBC and Arcadia. Even a line of questioning that steered clear of the tax issue to focus on their respective communications responses met with short shrift. 

One communicator who asked not to be named admitted that public sentiment has become so hardened and the argument so emotive that there is little to be gained from entering the debate. Moreover, there are barriers to putting the kind of details that are given to tax authorities into the public domain, not least that it might strain the bounds of taxpayer and commercial confidentiality.

 

Vodafone’s tax policy neatly sums up the dilemma for brands. It says “the maximisation of shareholder value will generally involve the minimisation of taxation” although “due consideration” should be given to issues of reputation, brand and corporate and social responsibilities.

 

Ironically, Vodafone is one of the more transparent brands – in 2005 it decided to give a detailed breakdown of tax provisions on its balance sheet. The move hit its share price but went a long way to explaining the settlement of its tax dispute. 

 

More recently, it received a commendation for transparency in PwC’s tax reporting awards. Joel Walters, Vodafone’s group head of tax, has spoken at conferences on how multinationals justify their tax planning stance. “It can create an emotional reaction,” he said in 2008. “But the fact of the matter is businesses are under enormous competitive pressure, and tax is increasingly something boards are looking for us to manage.”

 

The upshot is that campaigners are finding more creative and damaging ways to frame their arguments, suggesting for example that paying tax is an expression of social conscience. An unwillingness to pay tax demonstrates a lack empathy with the wider community.

 

It was this line of criticism that in 2002 forced US toolmaker Stanley Works to abandon plans to move to Bermuda for tax purposes. In the wake of the 2001 terror attacks, paying tax was deemed a demonstration of patriotism. 

 

Others argue that it’s unfair and unrealistic to expect competitive organisations to willingly hand over revenue or even to publish accounts for individual countries (which would highlight how tax is being avoided) in order to display CSR credentials.

 

Christian Aid has been one of the more affecting voices in the debate. As part of its Trace the Tax campaign it has cleverly singled out four household-name UK brands.

“Our biggest companies have the power to help end poverty,” it says. “It’s one of the best-kept secrets there is. And we’re calling time on secrecy.That’s why we have hand-picked four FTSE100 firms: Vodafone, Unilever, TUI Travel and Intercontinental Hotels Group. Not because we’re accusing any of them of dodging tax themselves. Rather, we feel they are perfectly placed to lead from the inside and raise the call for new global accounting rules that will help poor countries and their citizens trace the taxes they’re owed.”

 

In this case, the approach of Standard Chartered is interesting. It has managed to position itself as a responsible player without losing competitive advantage by calling for legislative change that would level the playing field. Dan Mobley, head of government relations, says: “We cannot justify spending a lot of resources if our competitors are not. We need civil society to push on this.” 

 

While the tug of corporate responsibility adds an interesting dynamic to the tax debate, Tim Purcell of CSR consultancy CO3 isn’t sure that brand’s ethical credentials are being hugely damaged. 

 

“This is because most people (including me) don’t understand how personal and corporate tax works in this country. Most people are ‘mystified’ rather than ‘outraged’. However, publicity of this sort is clearly unhelpful particularly if the organisation owns a portfolio of well-known consumer brands.” 

 

However, he doesn’t believe the pursuit of shareholder value is necessarily at odds with the idea of being a good corporate citizen. 

 

“The vast majority of the UK population is signed up to the idea that capitalism is a good way of developing society and the economy,” he says. “We think an approach that most people will have sympathy with is one that ensures that a company is not paying unnecessary amounts of tax.” 

 

Some companies believe they have a good story to tell on tax overall and are increasingly trying to turn the spotlight towards the full range of the taxes – such as employment, environmental and indirect tax – they pay or generate. 

 

“The stance taken by those who have been brave enough to defend their positions thus far has talked of wider corporate contribution, including employment numbers and payroll,” agrees Hill & Knowlton’s Peter Thomas. “This is not wrong. However, I do believe there’s a need to move the debate on, as was tried by the Treasury’s David Gauke recently who argued that corporation tax fundamentally affects employees, who have to foot the bill.” 

 

But while simply presenting tax payments in the best possible light may not silence the critics, Richard Neve of CitySavvy argues that brands can make headway by talking up the other benefits their business brings to the community. 

 

“Being a good corporate citizen is more then paying corporate tax,” he says. “Companies contribute in so many other ways to society: local, regional and national. They employ staff, who pay taxes on their incomes. Yes, companies try to pay as less tax as possible and as long as it is legal they’re entitled to. That will keep them in the city, in the region, in the country and in the end that is key to continuity in economical development.” 

 

He urges targeted companies to continue to tell their story but insists any attempt at spin is too risky to consider. 

 

“Wordplay and avoiding the word ‘avoidance’ is not effective,” he says. “People will know what you’re talking about and because you try to make it sound better, people will think you have something to hide. Be upfront and say: ‘Yes, we try to pay as less tax as possible and we do so to be able to build our company and invest in the economy in many ways. That is the way we contribute to society.’”