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Companies need to consider ‘what is right’ as well as tax law, says WPP boss

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Companies seeking to build ‘long term brands’ need to make judgments as to what is right or wrong in managing their tax affairs, the boss of the world’s largest advertising group has told the BBC.

MPs will debate corporate tax avoidance next week, and a number of UK business leaders have expressed disquiet in recent weeks over the way in which the international tax system allows some multinationals to use tax havens and low tax jurisdictions to gain a competitive advantage over businesses operating wholly in the UK.

As Tax Journal reported in November, Justin King, chief executive of Sainsbury’s, has declared that ‘corporation tax, to all intents and purposes, is an elective tax’. King told Sky News: ‘Quite simply, companies can choose in which country they’re going to pay their corporation tax.’

On this morning’s Today programme Simon Jack said that ‘Starbucks, Google, Amazon among others’ had come under attack for ‘paying minimal amounts of corporation tax, despite generating billions in sales in the UK, by using offshore subsidiaries to redirect money’.

He asked Sir Martin Sorrell, group CEO at WPP, whether ‘paying UK taxes – as some people have alleged – is in effect voluntary’.

Sorrell said: ‘If you want to build long term brands you won’t do things that are wrong environmentally, you won’t do things that will upset consumers. What you do is you build over the long term things that people want.’

Jack suggested that Sorrell could not possibly be saying that tax was a [corporate social responsibility] issue, ‘like sponsoring schools’.


Sorrell replied: ‘There are the rules. Let’s say the government left the rules as they were. If then companies choose – just as they choose to do environmentally sound projects, or sustainable projects, or socially responsible projects – if they choose, in terms of building their long term brands, to make a contribution to all the stakeholders on a long term basis, all credit to them.’

He added: ‘Every company we deal with knows that doing good is good business, not because it’s legislated but because they know that consumers, and the people who work … I know that the 163,000 people that work in WPP in 110 countries enjoy, and get a tremendous amount of social and moral satisfaction out of what they do, that helps communities and stakeholders around the world.'

Asked whether shareholders of a company paying more tax than necessary might object to the company’s management ‘wasting money’, Sorrell said: ‘People who run companies have to make judgments as to what is right or wrong.’

Recession in the western world had made the environment much more difficult, he said: ‘The point is this. If you went back 15 or 20 years, the way that people ran companies was very different.’

WPP is returning its headquarters to the UK, after four years in Dublin, in response to changes in UK tax law. ‘We were very transparent about this,’ Sorrell told Jack. ‘We moved our headquarters. You don’t have to move your headquarters out of the UK to achieve the same result.’

Sorrell pointed out that some companies operate in more than 200 countries. ‘You can have a procurement department in an offshore base. You can have a branding operation in an offshore base. The criticism of some companies, for example Google or Starbucks or Amazon, is because they have done just that.’