More of the Emperor’s new clothes vanish as Scotland faces the cost of Diageo’s irrevocable decision to jilt Kimarnock at a cost of 700 jobs in the area.
A leading business analyst has branded the company socially irresponsible. This particular act of social irresponsibility is not about Kilmarnock and Port Dundas in Glasgow where a further 200 jobs are to go – but about Diageo’s UK tax avoidance.
An article in todays Times Online quotes William Hopper – author of The Puritan Gift: Reclaiming the American Dream Amidst Global Financial Chaos – as saying:
‘Diageo is a company run brilliantly by bean-counters, and the chief financial engineer is its chief executive, Paul Walsh. Unsurprisingly, there are some distasteful aspects to its activities, not least that it earns most of its profits in the UK but pays most of its taxes overseas; scarcely the behaviour of a good corporate citizen’.
As For Argyll has previously reported, between 2000 and 2006, Diageo transferred billions of pounds worth of brands — including Johnnie Walker and J&B — to Diageo Brands BV, a Dutch subsidiary. The Netherlands offers the significant tax advantage of profits accrued almost tax-free.
William Hopper is a former director of merchant bank Morgan Grenfell and a respected business writer.
He is also querying the level of salary paid to Diageo’s CEO, Paul Walsh, also Chair of the Scotch Whisky Association. Hopper’s point is that Walsh’s £3.6m annual package is over 100 times the average pay of Diageo’s 23,000 employees where the multiple in a comparable Japanese company is just over 10.
Hopper then asks the pertinent question: ‘Is British senior management 10 times better than its Japanese equivalent?’ The bigger question is how far Diageo actually qualifies, in any real sense, to be thought of as a British company.
It has had, on average, annual pre-tax profits of £2 billion for each of the last 10 years. (Last week it announced £2.1 billion in pre-tax profit for 2008-2009 to the end of June.)
Against these profits, an investigation cited by Hopper today revealed that the company paid an average of just £43m a year tax to the UK during that period. This is an annual return to the UK Exchequer of 4.3%. Let’s put it another way, this may be legal but it cheats every UK citizen.
The £100 million investment the company may make in Fife and which it is monotonously playing as a counter-card to the sort of unfamiliar scrutiny it currently faces, is a tiny fraction of what it ought to be paying to the UK Treasury. So pause for thought before buying into the bighearted corporate citizen line. It’s light on substance.
As Hooper points out: ‘It is not as if the company was in trouble and obliged to undertake major surgery in order to survive. It is in fact highly profitable’.
Hooper wrote The Puritan Gift (full title above) with his elder brother Kenneth and in it calls for a return to the form of capitalism prevalent in the United States in the 1950s and 1960s. This saw shareholders’ interests set alongside and balanced with the interests of staff, customers, suppliers and society at large – socially responsible capitalism.
As we ourselves argue, the rampant self-interest of many major companies operating in Scotland – like Diageo and Peel Holdings (whose subsudiary is Clydeport) to name two of our current interests, lack corporate social responsibility to a degree that will, when the time is right, necessarily bring legislative change.
Recent For Argyll stories on Diageo (earliest first)
- Diageo: the real issue is the Scotch Whisky Industry
- Diageo feeling the pressure
- Diageo the continuing saga and salute to courageous journalism
- Diageo story plant in Daily Mail backfires: was the Kimarnock closure a failed blackmail attempt to protect vodka profits?
- Diageo whines and bullies over Kilmarnock jobs and Port Ellen grain silo
- Bruichladdich releases the ultimate single malt as Diageo faces imported barley row
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erm…..Marcus commented on another topic that there had been little input from myself and other on this subject….I actually see next to none at all, from me or anyone else ??????
Well, the main point of this brilliant, amazing, astounding peice of journalism seems to be that bid bad diageo should not be paying taxes in the netherlands and should be paying them to the UK. All very well, but if I needed a building to use for a business and had the option of one that was going to cost me 40% of my profits against another that was going to cost me 10% of my profits, I dont think i would have to think long about which one to choose! The “british” government is just as greedy as it and others call diageo with the level of taxation on whisky, the difference is however that nobody is forced to pay anything to diageo! if you want to buy one of its products you buy it by choice, taxes of any kind that we all have to pay to the government are compulsary and we have to do it regardless of how unfair it is or how little some people get in return for their “payments” in comparison to others.
Now this is a very simple way for me to look at this obviously, but thats the way it is, people in Scotland are very quick to slag of the company that employs so many people, and is a huge part of Scotlands whisky industry, yet they pay very little notice to the fact that the “british” government keeps hammering the industry with wild taxes, massively higher than other products, and will one day have a very serious impact on the industry!
The bottom line is that any company has the right to do whatever it wants with its money, its up to the governments to make their country as appealing as possible to companies, in the case of the UK it is not atractive at all for any company….the netherlands obviously is better! Its not just diageo that are doing this, but they are this seasons big bad wolf !
I look forward to the next installment……………………..
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Of course a corporation has every right to maximise, legally, shareholder value.
What sticks in the craw is when a company rabidly exploits, in this case Scotland and all things Scottish, without putting much back in to the pot. If it is not corporation tax, duty (only 10% of whisky) or jobs (0.175% of Scotland’s working population) – what does Scotland get from Diageo, her Dutch owned-distilleries, and its £2bn profit?
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Thanks Marcus for giving my surname prominence in your ‘goading’ sentence “Dosen’t seem to be much comment from the likes of Campbell, Inkwell, Gavin etc.” over on the article “Diageo: the real issue is the Scotch whisky industry”.
“… the likes of Campbell, Inkwell, Gavin, etc.” What are we the ‘shit’ on your shoe Marcus? The title is Mr Campbell too you! To elaborate I am Colin M Campbell, resident of Port Charlotte, Isle of Islay, Scotland if you are “brave” enough Marcus (and others) may be you would like too elaborate a little more information as too whom you are and where you are talking from?
So Marcus you didn’t see much comment from aforesaid in your goading sentence. Ironically, nor any comment from you either until Gavin started the ball-rolling for you then you jumped in with your “I hate Diageo views”, do you employ 20,000 people world-wide and have share-holders to pay, Marcus?
Forgive me – if I don’t ask ‘how high’ when you shout JUMP!… but having been a crab fisherman around Islay around a decade ago, a job I loved doing, which I then struggled to do as unbeknown to me at the time the ‘alcohol’ (free from health warnings – and still) I was drinking was damaging my liver too the point it triggered an auto-immune condition destroying my life, where one of the nightmare symptoms is ‘chronic fatigue’ where death will be a release from my living hell! Quality of my life now is, well, I wish I had the option of a compassionate government to help end my life (when I wish) with some dignity rather than having suicide constantly on my mind. Also a drug, a lot less harmful to alcohol and an aid to elevate the pain and stress of my condition the ‘ignorant government’ has banned while alcohol is proven to kill 40,000+ people in the UK every-year and is a blight on hundreds of thousands of peoples lives… AND a majority of crimes like murder, rape and ‘child abuse’!!… I wouldn’t like to see alcohol banned as the government has ‘no right’ in judging what we put into our body’s as that’s a dictatorship! Education is the responsibility of the government.
Diageo going Dutch to avoid Tax. Like the so-called Ileach community newspaper going Dutch by Mr Reavey leaking his editorials (to gain off Islay support) onto the Dutch owned ForArgyll awarded “Best Community Website 2008″ i.e. the “Islay Weblog” which is subsidised by the Ileach’s 85p cover price and advertisers ‘ironically’ where I believe the majority of my community have never heard of the “Islay Weblog” or “ForArgyll” as they have never been reported in the Ileach!
“Story of the last 300 years on Islay” one of Mr Reavey’s editorials gone Dutch on the Islay Weblog where I left the first, and only comment – (which the Dutchman removed!)… read: “Mr Reavey who edits our only newspaper in moving to Islay increased Islay’s population. He writes our history, edits our news and campaigns via that paper for population controls. Spot his paradox?”
Mr Reavey in his history of Islay’s 300 years claimed under the ‘Great’ Daniel Campbell who bought Islay in 1726 increased Islay’s 4,000 population to 14,992 in just 100 years… Mr Reavey ‘an Englishman’ who edits our community newspaper compared that population increase in his article to “modern Ethiopia” as basically Scots population breading out-of-control lowering quality of life – which is now down to a depressing 3,400 odd on Islay. Mr Reavey fails to factor in the 300 year (forced) union with England’s “British Empire” into the equation (being an Englishman) which was to close down Scot-land as competition to England and open our country up to the free-market decimating Scotland population – the oldest nation state in the world! Diageo is just exploiting the free-market just like the “Scottish Government” when ordering the worlds oldest flag of nation-state, my flag, flag of the Scots i.e. the ‘saltire’ from out-with Scotland recently. Lets not forget how much money has just been paid to the free-market banks and the recent MPs scandal, noses in troughs! Diageo is not the big-bad-wolf the British government is! The sooner Scotland is free again to lead the world – the better!!
On another note, e-mail (Re: ileach) 02/07/2008 Gordon Fyfe, Chairperson who awarded the Ileach “Community Newspaper of The Year 2006″ concluded his short e-mail to me “I can see no useful purpose in me continuing this correspondence.” as he would not acknowledge my complaint and evidence against his Ileach ‘newspaper’ award, ironically!
And another note. The Dutchman owner of the Islay Weblog and ForArgyll awarded “Best Community Website 2008″ in his e-mail (RE: Comments on the blog) 05/04/2009 reads in full, who is re-printing the Ileach editor’s propaganda out-with the Ileach for free and majority of Islay’s community knowledge (I believe)… “Hi Colin, I am not starting a discussion with you, after all you seem to have something against Carl. When I replied to your comment I was in Germany and shocked about it. My reply was merely to ease the tone of your comment to which I’m not used to on my blog and to remove the sharp edges and strange feelings it would cause by my readers. I read it again properly when I came home and decided to remove it all together. It’s my blog and my right to do so. I’m not accountable to you or anyone else. If you want to make a point start your own blog and publish your ideas there instead of using my blog as a vehicle for your grudge against the Ileach. And furthermore, please feel free to inform any media you like. In the worst case I get some extra visitors and the island get’s a wee bit more publicity. I will not respond to any further emails so you can spare your time and effort. All the best, Kind Regards, Ron” (Nice guy that ron!)
Can ForArgyll’s news-desk inform me how a Dutch owned (blog) out-with Islay using my community as a vehicle for propaganda that is ‘not accountable to me or anyone else’ can win a For-Argyll “Best Community Website” award and why do you think it never made the “news” in the Ileach just like as to what, or who ForArgyll is for has never made the “news” in the Ileach either, Islay’s so-called community newspaper?
Who wants to read the second comment the the Dutchman removed from his mimicking my community newspaper on-line in responce to Mr Reavey, Ileach editor’s “A wild conspiracy theory” re-printed on the Ileach-2, sorry Islay Weblog and the Dutchman’s breaching his disclamer to protect his Englishman’s and Neatherland’s propaganda and the lie he fed his readership about me before blocking my access to his mimicking site and other relevant misleading on-line information he has been voicing?
The Ileach, Islay Weblog and ForArgyll, the Prime Minister made a commendable comment today I seen on Channel 4′s news at noon you may wish to heed as collaborators – in responce to The Sun newspaper’s opportunistic switch from supporting Labour to the Conservative Party!… Gordon Brown: “I’ve got an old fashioned view of looking to newspapers for news, rather than ‘propaganda’.
Finally… ish, Mr Reavey, Ileach editor who is not Ileach/from Islay in his article “What about Malthus?” 33/25 14 October 2006, page 15 concludes his article paragraph which reads: “The human population of the earth has doubled since 1964 and continues to rise at a stupendous rate but our politically correct concepts of civil liberty and freedom of the individual make it religiously, culturally and politically impossible to address this. It is much easier for politicians to pay lip service to a vague concept of “global warming” but unless something is done to address the Malthusian principle then something really horrid will happen much more quickly than climate change. If human beings fail to regulate their global population voluntarily and really soon, then turning all all our TV’s off standby and building windmills between now and Doonsday will make very little difference. By Carl Reavey.
I believe, Islay, Argyll and Scotland who’s population has only doubled since act of (forced) union with England who’s own population has increased six times since (forced) act of union… Englishman Mr Reavey and supporters who advocate the control of the of the ‘individual’ as self suicide is legal, there is nothing stopping you regulating your own self for the greater good of the planet if you are “brave” enough but I will not hold my breath! More self serving being the dictator – than the dictated too?
I believe in the present and next generation inventing their way out of trouble it’s called evolution. After people have raised their children to the point of their being self-sufficient then they them themselves are as good as obsolete… I believe I (may) know the key to perpetual motion i.e. free, safe, simplistic – planet saving electric generation. Anyone out their that could help me develop my perpetual motion (concept) i.e. conventional power generators, electrical engineers, investors, etc, can drop me an e-mail at colin.campbell90@btinternet.com or would you rather join Mr Reavey and co. and order people to have one child or less?
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“What sticks in the craw is when a company rabidly exploits, in this case Scotland and all things Scottish, without putting much back in to the pot. If it is not corporation tax, duty (only 10% of whisky) or jobs (0.175% of Scotland’s working population) – what does Scotland get from Diageo, her Dutch owned-distilleries, and its £2bn profit?”
here we go again….THINK !….exploiting Scotland and all things Scottish ??? they actually run a business that pays every worker a wage, they pay a small fortune into communities and local charities, and the main point of this arguement , they DO still pay the “british” government a hell of a lot of money in taxes !!!!
To refer to Diageos 2bn profit and ask what Scotland gets from it is purely stupid and totally out of context….The £2bn profit is not made in Scotland is it !!
I do not know where you are from Marcus but it is obviously not Islay, as you seem to know so much (in your opinion) work out how much whisky goes off Islay every year, then work out how much of the money from that whisky goes to the government…..with me so far ?…… then tell me how much of that money goes back into Islay ? with your attitude to how Diageo should be giving all its taxes back to britain I imagine that you think the “british” government should then re-invest all its taking back into Islay, yes ? and do they ? no, of course they dont so where does that money go ?? So wherever you are sitting writing your ill informed bile, you too may be benefiting from Diageos efforts and the taxes that it pays from its Islay whisky, because I can tell you for a fact that Islay certainly does not get its fair share !!
Is that then the problem that people have ? are they angered that money being “produced” by companies like Diageo does not then go into their pockets or communities ? let me ask you this , why should it ? why shuldnt it go back into the communities that it comes from in the first place ? All these issues are government strategies, maybe if you put so much effort into campaigning against the government and how it makes this country more attractive to companies to put their money into then we wouldnt be having this conversation! but then again, maybe where you live is doing just fine from other peoples efforts, like so many others !
Do you work in the whisky industry Marcus ? Do you live in an area steeped in whisky history ? Have generations of your family worked in the industry ? I doubt any of those questions to be answered with an affirmative for the simple reason that your point on other articles have been so misguided it was embarrasing!
The next time you visit Islay, if you do, have a good look around, look at the prices we pay for things here!, look at the public services we have! but be careful not to start crying about why you think that you and all those mainland residents are being short changed by Diageo!….it is not you that is being short changed and neither is it Diageo that is short changing the communities that it has responsibilities to!
THINK Marcus, then speak!
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p.s. just one intersting thing
The Government build a new parliamnent building that had an original budget of £40m…….that cost rose to a final figure of around £490m , 12 x the cost ?? it also ran massively overtime. Diageo recently built a brand new distillery ON budget and ON time………………….now, can you guess which one of these 2 organisations is telling the other how to go about its business ??? go on , have a guess surely you couldnt get it wrong eh ??
To make matters worse, one job was done during a boom period and the other was done during one of the worste recessions in decades, can you guess which one that applies to each job ??? go on have a wild guess? you couldnt make it up !
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