What’s a Reputation Worth?

Private companies exist to make (legal) returns for their shareholders. I think I’m right in saying that capitalists believe that letting these companies do this generates the most wealth; that in turn will lead to the most jobs & therefore the most all round prosperity.  In this context, of course companies will organise their finances to minimise the tax that they pay – so why have we all of a sudden so many headlines about companies avoiding tax?

Well I suppose that it’s fairly obvious that in straightened times governments would look to maximise their tax returns, and it’s tricky modelling a tax system that maximises payment, and appears ‘fair’. Especially when as soon as you change, say, corporation tax, other countries make counter moves, and at best you’re back where you started.  And no one believes that getting global agreement on tax levels is achievable, or even necessarily a good thing.

So it looks to me like the British and the US governments have both decided that taxing profits or sales is just too difficult – so they’ve decided to tax brands/reputations instead.  Look at all the companies that they’ve picked on so far – Google, Apple, Amazon, Starbucks, Marks and Spencer – they are all brand names that have worked hard to build up a certain reputation.  So how much is that reputation worth per year?

In effect some people may say that this looks a little like a protection racket – ‘pay us £Xm per year and we’ll stop dragging your good name through the mud’ – did Starbucks blink first by offering a discretionary payment to the HMRC? They reportedly saw a change in buying patterns when the powers-that-be started highlighting their tax operations.  Is that just because they are in such a competitive market place? – it’s so easy to go to one of the other nearby coffee chains.  Google is market dominant, Amazon is so convenient (& cheap because they pass on their tax savings), Apple has such huge cash reserves and a seemingly loyal customer base – will it work as well with them?

Also, is it a good/fair/appropriate way for a government to behave?  I think that Good Will is the intangible asset that gets reported in company accounts – could a tax system be designed that would look at that directly instead?  That way it isn’t just business-to-consumer companies that get hit, and the whole thing might just feel a little less grubby?

Of course, I’m a careers adviser, not a tax expert, or an economist, or an academic, so I don’t have any particular insight or answers here – what do you think?

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