Lidl supermarket yesterday hit back at allegations of a lack of transparency in its financial affairs by saying that it was proud to pay tax.
The low-cost supermarket chain said: “At Lidl we believe that every company has a social and economic responsibility to pay tax in correspondence with its earnings.
“Furthermore we do not engage in any tax-avoidance schemes, nor do we have any subsidiaries in low-tax countries.”
They also announced they paid £25 million to the UK tax authorities last year.
Now, as any lawyer will tell you, a simple story like that can hide a multitude of meanings. To know whether Lidl is paying its fair share of tax, you would need full, open access to its accounts.
What value is there to a brand in being seen to pay its tax?
On the face of it, this positive message on tax is an encouraging statement. It also raises an interesting theoretical question which has applications for the brands operating in poor developing countries where ActionAid works.
Could being seen to pay your tax actually give you a commercial advantage, especially in an ultra-competitive sector like supermarkets?
Would an approach which says – “we are proud to pay our tax and proud to show how much we pay” – actually enhance a brand?
Would consumers vote with their feet – as they did by boycotting Starbucks – when they are shown one brand resorts to complicated and opaque structures to avoid tax while competitors do not?
With the growth of tax justice campaigning in the UK over the last few years, these are the questions many boardrooms may now be weighing up, on whether perceived benefits of avoiding tax outweighs the value to a brand of paying its fair share.
It’s just a question. But with the growth of tax justice campaigning its a question many boardrooms may now be weighing up, on whether perceived benefits of avoiding tax outweighs the value to a brand of paying its fair share.