The reputational cost of tax avoidance that PR teams need to shout about

Posted on: 2013-06-21 in Opinion   |   Tagged: industry watch jess matthias

Jess Matthias (@maticah5 and @wordville) a PR account director at London-based communications agency Wordville, recaps on the companies that hit the headlines for all the wrong reasons this week.

Corporate tax avoidaNamence was on the lips of the world’s leaders at this week’s G8 summit. For years it has riled honest business people the world over; various newspapers reported that tiny Surrey villages have handed over more to HMRC than the likes of Google or Apple. Whether the G8 leaders’ proposed measures – which include governments having automatic access to other countries’ tax affairs, and the identification of shell company owners – will restore the faith of law-abiding businesses across the country is yet to be known. However they are a step in the right direction.

While this week can arguably be seen as a positive week for the world’s leaders, there were – inevitably – several corporations that hit the headlines for all the wrong reasons…

As one of the more documented culprits of tax evasion, Google should really have kept its head down this week. However, it decided to announce its donation towards the prevention of child abuse images on the internet. The problem was not the concept, but the amount – £4.5 million. Considering the company turned over around £11.5 billion between 2006 and 2011 in the UK alone, this seemed particularly paltry. The internet giant probably spends more than that on bean bags. The fact that some tight-fisted financial director could suggest such a microscopic amount is one thing. What beggars belief is that this got past the organisation’s comms team. Surely someone advised the people at the top that such a donation would be seen as pathetic – especially for an organisation that effectively facilitates the circulation of such images – and would do the company’s reputation more harm than good? Apparently not.

Two people that shared some of the woe this week were Domenico Dolce and Stefano Gabbana, whose suspended jail sentence and $500 million fine for tax evasion was perfectly timed with the meeting of the G8 leaders. The impact this news will have on the Italian label’s reputation will no doubt be damaging; the scathing headlines have already started appearing. “Will prison stripes be next year’s look for Dolce and Gabbana,” asked the Express. “Black and white stripes could be huge on the catwalks,” quipped the Mail.

Dolce and Gabbana’s press team has hit the issue head-on by reeling in their celebrity chums for a bit of post-crisis love. Yesterday, they proudly announced that Bruno Mars will be sporting a selection of Dolce and Gabbana suits on his new tour. They also enjoyed more exposure for their sponsoring of the premier screening of 'Madonna: The MDNA Tour' at New York’s glamorous Paris Theatre on Wednesday. This hive of positive activity obviously created a bit of distraction for the label’s press team; it apparently was still busy drafting a media statement a whole day after the tax avoidance story broke. While long-term damage to the brand will probably be fairly limited (fashion is far superior to ethics for a lot of consumers, I’m sure), the short-term impression is that the company is so blasé about the issue (they still insist that taxes are “too expensive”… ironic coming from a company that charges $245 for a key holder) that they didn’t even think to prepare a statement before the news broke.

Not so sweet today is Cadbury, the latest firm to be added to the tax evasion blacklist thanks to its alleged ‘highly aggressive’ tax avoidance schemes. It was a former unnamed executive that blew the whistle, telling the Financial Times that the group did “a lot of things… to create an interest deduction out of nothing”. No doubt there will be a lot of ringing phones in the Cadbury press office today. However, the real dilemma for tax-evading companies like Cadbury is not what they say to defend themselves, but when they say it. The crackdown on tax avoidance is coming and, as a result, the reputations of many of the world’s most respected companies could end up in tatters. The real question is: will niceties like fashion and chocolate prove more important to their consumers than business ethics? For this reason companies such as Cadbury and Dolce and Gabbana will no doubt be fine in the long run, it’s those that offer a slightly less cuddly product that really need to watch their backs. 

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The B2B PR Blog is a resource for both PR professionals and people working in B2B industries on how to devise and implement successful B2B PR campaigns. The blog is managed by B2B PR specialist Heather Baker, founder TopLine Comms, an inbound marketingB2B content marketing agency and proud HubSpot partner agency and takes contribution from anyone sensible in the industry with something intelligent to say.  Follow Heather on Twitter @TopLineFounder or contact the B2B PR Blog editorial team via email on [email protected].


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