Saturday 21 November 2015

"Doing a Geoffrey" - Do Consumer Boycotts Work?

This time last year I finally gave in and decided to do some Christmas shopping on amazon. (I know the FiRe community is very down on "stuff" but everyone has to spend a little on it at Christmas don't they?) This capitulation followed several months of trying to do the right thing and boycott  them due to their tax avoidance (their treatment of employees being allegedly none too great either.)

I had been buying at local independent bookshops and feeling much better for it, but Christmas loomed, time was short, amazon deliveries are generally timely and prices competitive. I took the easy way out, felt pretty bad about the whole thing but did it anyway.

Today, with the Christmas shopping fast approaching yet again I decided to take another look at amazon to see what had changed and if I could feel a bit better about using their services this time around . It appears that things are on the move. Diverted profits legislation passed this year has forced the company to pass all it's UK business through HMRC for the first time since 2004. However:

"That development is unlikely to lead to a leap in Amazon’s UK tax bill, however, as the company continues to use further controversial structures to shift profits out of Amazon EU Sarl – which reported a loss last year – and back to the US."

So the answer to whether or not I can feel any better about shopping at amazon is "sort of", but not really. The ethos/character of the company hasn't changed, they're just finding it harder to do the same things and will keep on trying until all the loopholes are blocked. In fact their employee relations has been back in the news again. There is no evidence that they have any intention of reforming themselves into good guys any time soon.

So it's obvious that I can't persuade myself that it's now OK to go ahead and buy from them without guilt. However is boycotting them the best way of making my feelings about all this known or even really hitting them where it hurts?

Of course it's not easy to calculate how effective boycotts are as it's very difficult to count how many people didn't buy things, but last Christmas amazon anonymous had pledges from over 11,500 people to spend more than £2.5 million elsewhere. This was a very high profile boycott with backing from Ethical Consumer, probably just as effective a boycott you're likely to get, still the monetary effect it seems to have had doesn't look immense. In addition it didn't seem to have any impact on amazon's basic modus operandi as they only began to change when legislation forced them to do.

The trouble is that not enough of us were bothered enough to do something about it, and that is overwhelmingly the case where a very popular, convenient and high profile service/product like amazon is concerned. Boycotting amazon won't work, a small minority will put their money where their mouth is, whilst the majority will just make the right noises.

Apparently however, that "noise" is what companies should fear more than the slight fall in sales a boycott can produce. In fact the 2014 Deloitte global survey on reputation risk goes so far as to say:
"According to a study by the World Economic Forum, on average more than 25 percent of a company’s market value is directly attributable to its reputation"
The evidence suggests that companies should take the tag-line "It's got our name on it" very seriously indeed and Jefferey Bezos would be wise to be concerned about the reputation of his company. The fact that he rushed to its defence following the allegations this August proves that he knows this.

In the end though reputation is one thing and character another (the reputation of Volkswagen was obviously built on fairly sandy ground), and there must be serious doubts that the "character"/ethos of companies that continually fall foul of public opinion is sound. This is why our strongest weapon against immoral business practises isn't always in our purse, but in our democratic ability to influence legislation via our politicians. Collective conscience forcing standards of behaviour on business is far more powerful than individual action in this situation.

So, I will be going ahead and buying from amazon this Christmas. However I will also be moaning about them to anyone who'll listen whenever I'm given the opportunity. This post being a case in point :-)

(Oh and by the way, of course I realise that amazon's cheap prices are partly down to the very business practises which put it in the news, but there's also a lot of individual profit involved (for shareholders too, of which I am undoubtedly one). In 2014 Mr Bezos paid himself over the equivalent of £11 million. Paying a little more to get things right is sometimes necessary, and I would argue that people would see this if they are given the full information and choice about what they're actually buying - so long as they're not on the breadline of course.)

18 comments:

  1. I have a big half-written post on why I think the idea of boycotting Amazon is really misguided -- not from the point of view of it not changing anything, but from the point of view of it not being in our interests to change anything!

    Fully accept this post will look at the situation from a very different perspective to yourself, so will try to remember to link back here when I finally get it written. :)

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  2. Sorry, that was me -- not sure why it defaulted to that old Blogger account. :)

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    1. Thanks - look forward to reading your take on this.

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  3. I doubt any government can fight globalisation with local tax laws. Trying to do so seems to me to be a bit of a King Canute situation. What might work better is realising the global landscape is changing and working with the tide rather than against it. I suspect there are a number of strategies that might work better, such as multinational tax harmonisation, thereby removing any advantage of moving profits to other jurisdictions.

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    1. Thanks Ric, There does seem to be some movement towards investigating a global system of taxation but I'm not sure that's what you meant by "multinational tax harmonisation"? In any case you're right to say that things need to change :-)

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  4. I don't see why they would divert profits to the US: corporation tax rates are much higher there than here. Unless of course they have some nice sweetheart deal ....

    Their reputation is for investing on a huge scale so that it consumes much of what would be their profit anyway.

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    1. Hi dearieme

      It looks like it's due to the fact that "Amazon EU Sarl pays large fees to its parent, a tax exempt Luxembourg partnership called Amazon Europe Holding Technologies SCS, for the right to use Amazon patents." - more details here

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    2. The first figures given in the article are plain deceitful: they imply, quite wrongly, that you can judge how much tax a company should pay by looking at its revenues rather than its profits. In fact Reuters imply it twice: consider "authorities across the continent could not use its sales revenues as a basis for assessing tax.' They'd be breaking the law if they did any such thing.

      Eventually, after considerable obfuscation, we learn that Amazon Europe Holding Technologies SCS is tax-exempt. At last, the nub of the issue - but bloody Reuters don't tell us why it's tax-exempt, so they have added not a shred of enlightenment on the issue. That is a pathetically bad article: it fails even to demonstrate that there is a scandal. Poor, poor stuff.

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  5. Hi Cerridwen
    I've been a customer of Amazon for many years and was dismayed when it was revealed how much tax they were not paying. But for the sheer convenience, for price and because many of my friends and family continue to give me Amazon vouchers I continue to be a customer of theirs. My Kindle is linked to my Amazon account so I'll be forever tied in that way.

    That's not to say that I am happy with what they are doing, how they treat their staff etc and yes, if I am able to, I do mention the taxes they don't pay and it's pretty much all you can do.

    Those loopholes need to be closed so they can't be exploited.

    If I could avoid paying tax and it wasn't against the law, I would do it too!

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    1. That's all very true weenie - boycotting companies like amazon is very difficult even if you want to. For example I use them extensively for bibliographic information for a book-related website I help out with.

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  6. Hey Cerridwen, thanks for your thoughts and the many links you've provided. I had an almost argument (slightly heated discussion) with my father-in-law last week about this very thing. He won't buy from Amazon anymore because of all the tax stuff. I mentioned to him dearieme's point that so much of their profit gets reinvested anyway, but he couldn't seem to see the light. They also employ over 150,000 people - which is a pretty enormous workforce - and will also reduce their tax bill significantly.

    It's sneaky but totally legal what they do - not saying I think it's nice, but the British tax code in particular is crap. It is ridiculously complicated and ridiculously long. I'm not in favour of global taxation or tax harmonisation, in fact, the problem with amazon and other companies trading in the EU and getting away with crazy tax setups is due to EU law allowing it (EU law in general being about 100x worse that the crappiness of our own tax code), so maybe they will try to bring in some kind of tax harmonisation... but I doubt the member states will agree to it!

    Anyway, surely it's facebook we should be boycotting?! <£5k in tax paid is truly shocking

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  7. @M and @dearieme - the complexity of the tax laws coupled with the deliberate sketchiness of amazon's (and facebook, google et all's) disclosure of their dealings means that no-one really knows how their affairs are ordered.

    The latest situation seems to be that they were finally "obliged" to meet with MEPs last week but still seem to be doing their best to skirt round the issues and avoid giving details of how their business works. There's a debate on the outcome on 25th Nov.which may prove interesting. More details here

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  8. I've often wondered if a lot of these "technology" companies are not in fact just ways to avoid legal obligations in the countries they operate in. Take uber - uber is just a minicab service, yet it does not employ its drivers and magically it pays no tax

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    1. If uber is a company that makes a profit in Britain it is obliged to pay corporation tax. If its profit is all made in Luxemburg, then it will have no British tax to pay. That's EU law.

      Meantime, what of those MEPs to whom Amazon is expected to grovel?
      "Under a new regime, which came into effect in 2009, MEPs are exempt from having to pay national taxation. Instead, they pay a rather notional ‘Community tax’, equivalent to a flat rate of less than 15 per cent." Mote and beam, eh?

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    2. Uber is certainly a company with "reputation" issues,. Personally I don't like the idea that those who own/run a company think that they are above saying and doing what they like purely because they're making a success (money) out of their business. Uber's directors come over as brash and arrogant. Minor points maybe, but the behaviour of the "top" people sets the tone for the whole business environment - not a company that I would want to give my business to.

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  9. Two of the many reasons I despise the EU and almost everything it stands for...

    Anyway here's a link to a potentially useful article for you Cerridwen:

    http://divhut.com/2015/11/socially-responsible-investing-3-funds-that-are-beating-the-market/

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