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Will Brands' Popularity Take a Hit Over Taxes?

Posted by: Graham Hales on Thursday, October 18 2012 08:43 PM

In these difficult times, armed with their digital voice, we can quickly see the changes in public sentiment. Getting on the wrong side of the mood of the moment can prove expensive.

Take something we all feel emotionally about: taxes.

In the UK recent studies showed that public sentiment quickly turned against celebrities who have taken advise to minimize their tax bills. Such schemes are often totally legal, but still feel wrong to the public. After all, the general public has no such access to the expert pin-striped financial advice and see no option for themselves other than to pay their fair way and therefore contribute proportionally to public services.

The comedian Jimmy Carr was a recent notable case. He had not violated tax laws, but he allegedly used a tax avoidance scheme that was deemed inappropriate in the court of public opinion. He spotted that misjudging public sentiment could be costly to the value of his celebrity and more expensive mistake than paying his perceived tax obligations outright. Carr quickly apologized and recompensed the public coffers.

But what of corporations that use sharp tax practices to avoid paying taxes in the countries where they derive income? Doesn't this have the potential to be perceived as even worse in the public eye?

Brands benefit from their popularity across the globe. They can also be harmed when consumer sentiment turns.

As reported in brandchannel, US companies doing business in the UK, including Starbucks, Facebook, Google and Amazon, are now finding themselves in the hot seat for paying staggeringly low tax rates in the UK. Accordingly, the risk of public wrath for the customers in the UK who help create wealth for these brands could be staggeringly high.

The corporate world has had public image and trust issues for many years now. If much beloved celebrity entertainers such as Jimmy Carr can be compelled to be contrite and publicly apologize, what are the dangers to brand value it has taken companies years to build?

Risk managers and tax advisers would do well to engage in listening to public sentiment and consider its potential damage to brand value. The lesson from the Shareholder Spring, the Occupy Movement and the rise of consumer power in the post-digital age is that there is little acceptance of separate rules for companies and individuals when it comes to rights and responsibilities. Being a good citizen matters for brands and consumers alike.

Starbucks, Facebook, Google and Amazon are all top 100 brands on our Best Global Brands 2012 report because, as Interbrand's CEO Jez Frampton notes, they have demonstrating an understanding of "the role they play in peoples' lives and respond accordingly — building on successes and making up for mistakes. They are constantly nurturing their brands to keep pace in a rapidly changing world; they know that every market is different, every interaction counts, and every individual matters. Quite an achievement in such turbulent times." But in this instance, on this issue, they appear to be teetering on the brink of a PR disaster that without an appropriate response will evidently unfold in the not so distant future.

Brands need to remember they have the power to change the world. And are expected to be good citizens within it. As Jimmy Carr found, misjudging public sentiment is no laughing matter. Playing fair and remembering how savvy consumers are in a world with constant global information are keys to building better brands now. As Tom Zara and Peter Cendella note in Citizens All: The New Rules of Corporate Citizenship, "It’s about the credibility of a company’s culture of citizenship."


Graham Hales is CEO of Interbrand London.

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