A TAXING PRIVACY PROBLEM

“Those with nothing to hide have nothing to fear.” 

That’s the view of those who want more people in the UK, particularly those paid from the public purse, to publish their tax returns to show which side of the ‘we’re all in this together’ debate we’re really on.

Under duress, the Prime Minister is said to be coming around to the idea of publishing his tax return. If and when he does, his Cabinet colleagues will no doubt be challenged to do the same causing some to misplace their good natures.

The pressure intensified after Boris Johnston and Ken Livingstone published their tax details in the race to become the next Mayor of London. Despite neither appearing to have broken any laws, Ken in particular is now carrying a meaningful electoral injury.

The debate materialised after the Chancer of the Exchequer reduced what was a temporary top tax rate from 50% to 45%. Publishing the Cabinet Ministers’ tax returns, those lobbying for transparency argue, will also show whether any Ministers benefitted directly as a result of the tax rate change.

Personally, I have not an iota to hide but all of this gives me mild heartburn. I fear we’re losing perspective on an individual’s right to privacy.  What’s more, if such a change gains momentum, the toothpaste will be out of the tube and we’ll all have to live with the consequences.

It’s ironic that it’s against the law to ask a job applicant her age or date of birth but perfectly acceptable to ask people how much they earn.  Where will it end? Tax returns disclose more than salary: they include details on earnings from dividends and the sale of shares or property, details that we rightfully consider private matters.

How far a jump of the imagination would it take to envisage electoral candidates publishing their medical records/sexual history/levels of alcohol consumption when running for public office? We don’t always get the best and brightest coming into politics.  Further scrutiny is unlikely to help this.  Frankly, it’s a tabloid editor’s charter.

Corporate Officers in public companies have the detail of their salaries and benefits published each year, a requirement under stock market rules to help investors make decisions about where to place their bets. It is a well-known obligation before one becomes a director of a public company.  Tax affairs, however, are a matter between the individual and HR inspector of Taxes. Like our bank account, it’s a discussion the general public has no right to engage in.

As head of public relations in the dim and distant, it was my job to fax any press cuttings that merited attention to the CEO’s rural weekend retreat.  When nothing required an interruption, a simple ‘enjoy your weekend’ text message sufficed.  That was over a decade ago, before everything became available easily online.

We’d just published the company’s annual report and the details of his £multi-million salary, particularly given a number of corporate challenges we had at the time, made it big news. “Isn’t it embarrassing Dad,” asked his youngest daughter after she too had read the articles, “… when everyone knows how much you earn.”

“It’s not embarrassing when you earn as much as dad does,” was her older sister’s response.

How a recession changes our outlook.  Seeking the publication of tax returns is little more than an attempt to embarrass the higher paid and successful when we need their drive and determination more than ever.

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INSTAGRATIFICATION

It used to be said that to make a small fortune all one had to do was to start with a large fortune and buy a newspaper publishing business.  That was in the days before the Internet had begun to erode the health and wellbeing of the traditional newspaper industry.

Facebook is closing in on a large fortune when it lists on Nasdaq later this year.  If you believe the hype, the social networking company will be valued between $80 and $100 billion. Such a valuation requires an unshakable, quasi-religious belief in the prospects of a business that has yet to turn $1 billion of annual profit.

Instagram is a photo sharing and social media business. It is yet to celebrate its second birthday and has 13 employees.  It has no revenue or profit to speak of.  It has benefitted from relatively modest levels of capital investment. What is does have is around 30 million users across the world and the potential to steal some of Facebook’s lunch.

Facebook plans to acquire Instagram in a cash and share deal that is understood to value Instagram at $1billion.  If the price is accurate, it values the business at more than the New York Times, one of the world’s best known and highly respected newspapers. The New York Times has been publishing since 1851.

Some of the cash to pay for the acquisition will doubtless come from the impending Facebook floatation, while the shares that Instagram’s investors receive in Facebook will be worth whatever the market determines they’re worth when they’re passed out.  A cynic might suggest that the shareholder cash coming Facebook’s way is already burning a hole in its pocket.

Despite the hype, despite the levels of participation and the valuations being bandied around, social media is a remarkably immature industry.  Is Instagram worth $1 billion?  I have no idea. Neither does anyone else.

Silicon Valley is full of very smart people and the cycles of market dominance are considerably shorter in the digital world. There’s little about Instagram’s technology or business model that aren’t easily replicable. Remember AOL?  Remember Yahoo?

I am a firm believer in the enduring influence and importance that social networking will have in our lives and in business in the future.  I’m less convinced, however, that the leading players today will still be leading in five or ten years from now.

In the late 1990s, people got confused between the Internet’s gift of cheap, instantaneous communications with an ability to generate profits quickly, while the sale of one start-up at an eye-watering price made people in similar start-ups’ eyes water too.  When the bubble burst, many people found themselves considerably poorer than they had been, or thought they were.

It would take a very brave or very stupid man to put his hand in the fire a second time.

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REFLECTING ON AUSTERITY

Long before anyone thought of fashioning chocolate into the shape of an egg, Easter signified the end of Lent, an austere 40 days of fasting, self-denial and reflection that Christians observe before celebrating the resurrection of Christ.

Religious our not, we’ve all been enjoying a bit of Lentish austerity of late, thanks mostly to our friends in the banking industry and our elected representatives in Government.  It’s almost four years since Lehman’s collapsed, ushering in an era of austerity that the sternest Catholics might consider a bit, well, worthy.

While it would be insanely and irrationally optimistic to suggest that the global economic recovery has begun, there are early signs that suggest we might be at (or just past) the worst.  If we are, maybe it’s time businesses reflected on a global economic resurrection?

Many businesses have acted honourably throughout the tough times, looking after their customers and employees as best they can.  Others haven’t.  All businesses have had to make difficult decisions – the difference is that some did so because they had to; others did so simply because they could and thought they’d get away with it.

Politicians know better than business leaders that the decisions they make today will either ennoble or bite them in the future. It’s the thing that keeps political parties awake at night.  Voters have long memories and scheduled elections help them exercise those memories.  Trying to explain away the sins of the past is a key reason electoral candidates walk the streets and knock on our doors.

Customers, partners, shareholders and employees have long memories too. Just because they don’t vote in business elections doesn’t mean they’ll forget.

If you’re a bank, did you cancel lines of credit for perfectly solvent businesses, just because you wanted to improve your balance sheet?

If you’re an IT company recruiting staff, did you treat those that applied for the jobs they badly needed with contempt, because you felt it was a buyer’s market?

If you’re a mobile phone company, did you inflate your monthly contract costs without warning just a week after a new customer signed up on a two-year contract, and then point to the smallest of small print to justify your decision?

A business’ brand and the values its brand represent should be honoured whatever the weather. Just because the economy turns stormy and revenue, profits and cashflow come under pressure doesn’t mean that brand values can be parked out of view somewhere until the storm passes.

That means that if your business brand identifies improving the experience it delivers for customers as a key differentiator, don’t jack up prices every time revenue looks likely to fall short of the market’s expectations.

If your business brand identifies people as its most valuable asset, don’t insult them with 0% pay rises simply because you know that the state of the economy makes it highly unlikely they will go on strike.

If your brand is predicated on building long-term relationships with its customers, don’t leave them in the lurch at the first sign of trouble.

If ethical sourcing and treatment of suppliers is a differentiator, don’t make your suppliers wait beyond the contractual limit before paying them simply because you know your to important for them to do much about it.

If you have responsibility for the brand or reputation of your business, ask yourself whether you business has been making difficult decisions during difficult times because it needs to, or because it can.  If it’s the latter, maybe this week is a good time to start a new conversation with your boss?  Who knows?  Maybe corporate resurrection will follow?

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