11 Nov What is Tax Shaming?
For a long time, companies have had complicated tax structures, but the stories that have emerged in the last decade have highlighted several tax-avoiding large businesses that are not seen to be playing their part. For example, in 2011, coffee chain Starbucks had sales just in the UK of 3.35 billion pounds, but it only reported a ‘tax expense’ of £1.8 million. The same year, UK’s Google unit paid just £6 million to the Treasury on their UK turnover of £395 million.
However, everything these companies are doing is technically legal. It’s not an evasion, but an avoidance. Yet, the tides of public opinion are turning, and their discontent is growing. There is a clear sense of outrage that is going beyond a small group of protesters, and the people are willing to show it. So, the idea of tax shaming came up. But what is tax shaming? After employing numerous measures against tax avoidance, which were mostly in vain, Non-Governmental Organizations (NGOs) and the public have resorted to the old-age punishment of naming and shaming.
Tax Shaming In Simple Terms
We can define shaming as all social ways of expressing disapproval with the intention of evoking remorse in the person (in this situation, a company) being shamed and condemned by others who become aware of tax avoidance. So, tax shaming is when interested parties publicly name and criticize companies that are believed to have rejected to contribute to their society by not paying their share of taxes to the public good. Over the past couple of decades, the NGO’s and the public, aided by media institutions, have been shaming multinational companies and corporations suspected of not paying their taxes to the state in which they operate.
For the company in question, tax shaming poses a risk of negative image and buyers’ market reactions. The public rightfully can pose a question: ‘does this company have the same disregard for me as it does for taxes?’ Tax shamed companies who are unwilling to correct their wrongdoings can even experience permanent reputation damage.
How Effective Is Tax Shaming Anyway?
The idea that large corporations like Starbucks would willingly pay more tax than it legally needs to would seem fantastic on the surface and a powerful argument for the tax shaming approach’s effectiveness. However, some marketing experts claim that even reputation damage is difficult to determine due to buyers’ loyalty to such companies, and it can easily dissipate. Many can boycott the brand, but the actual number of people ready to take direct action is reasonably low. The only thing that can pose a genuine threat for companies is social media and the power of hashtags (such as #boycottstarbucks).
Is Tax Shaming Justifiable?
Companies like Amazon or Google have been minimizing their tax liability for decades, but this doesn’t mean that individuals aren’t doing the same. However, the problem arises when people feel that a certain company has crossed a line. For tax-paying companies (and citizens), it is about fairness.
If you still need some additional information about tax evasion that wasn’t covered in this blog, make sure to check our other blogs or contact Golden Tax Relief directly – we want to hear from you!