Digital tax: Are tech giants right to be staying quiet?
Recently the subject of digital tax has reared its ugly head yet again. A contentious issue over the last few years after tech giants have come under heavy criticism for being able to legally avoid paying large swathes of corporate tax in the countries which they do most of their business. This has caused multiple countries, the UK included, to attempt to levy their own digital tax in efforts to crack down on this extra revenue which is escaping their borders. In recent years, there have also been international efforts to try and close this loophole most notably from the OECD but however, agreement still seems a long way off.
Tech giants now find themselves in an interesting position of facing somewhat of a lose, lose situation. Either they stay quiet on the issue of digital tax while the debate rages on, therefore being subject to the media shaping public opinion, or they face criticism for picking one side over the other. Reputation is invaluable, but in this case is it best protected by proactivity or restraint?
Current loopholes are causing frustration
Technology companies, due to the nature of how they operate, do not have enormous headquarters in each country where they sell their service. Therefore, they pick and choose the countries with the lowest corporation tax (like Ireland and Luxembourg) to base their operations and subsequently collect their profits. However, this practise of profit shifting has left other countries feeling short-changed causing the media to focus their attention on digital tax and the ‘tax dodging’ tech giants who are not paying their way.
Growing governmental pressure
Both governments and supra-national bodies have been making moves to address this imbalance. After rising pressure from the public and media, we see governments (including France, the UK and Spain) responding proposing digital taxes as a way of saying enough is enough, time to pay up. Furthermore, international efforts to change the way technology companies are taxed globally are underway from Organisation for Economic Co-operation and Development, with commentators expecting a result by the end of the year.
Suddenly, these companies’ reputations were getting called into question by not only the media, but governments as well. However, whilst this argument is sullying their names, why are the tech giants are remaining quiet?
Do you dare take a side?
Mark Zuckerberg was the first to stick his head above the parapet. He recently spoke out stating that he understands “frustrations” about the amount of tax Facebook are paying in Europe and he believes the company should be taxed at a higher rate. He claims that he “wants the OECD process to succeed so that we have a stable and reliable system going forward”.
Despite apparently getting ‘on message’ with the global opinions around digital tax, there was a reason why none of his compatriots had done the same. Critics have argued that with the increasing inevitability of higher digital tax in Europe, Zuckerberg has accepted the predictable outcome and is now selfishly trying to influence the discussion.
Critics have argued that Zuckerberg will do best out of the OECD plan rather than individual countries levying their own taxes. Therefore, rather than having the desired effect of being seen as a company reflecting qualms of the people, helping to fix the system, they are now standing accused of being a self-interested party, again trying to get away with paying the least amount of tax.
Action vs Restraint
Working with companies in the public eye teaches us that it is often imperative to stay ahead of any issue which may be contentious. Most of the time good practise in PR dictates that it is better to help shape the argument than let it become a beast that you can seldom control. After all, silence can often speak louder than words.
Nevertheless, matters like these remind us that sometimes it is right to exercise restraint. Stepping out from the crowd makes you an easy target for criticism especially when the issue is widely covered by the media. Considered restraint can be the preferred path and help protect a company’s invaluable reputation until an opportunity presents itself to help constructively mould the argument.