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08 August 20130 Comments by Jon M

Sainsbury’s and ethical business

justin king

Justin King, the outspoken boss of British supermarket chain Sainsbury’s has come under fire after launching his new mobile network in partnership with Vodafone.

Only a few days ago, we reported on the new mobile network being launched under the brand Mobile By Sainsbury’s. Justin King, who is the chief executive of the supermarket, has consistently challenged business leaders regarding their aggressive tax arrangements and has even gone as far to say that the issue is simply one of morality.

At the British Retail Consortium symposium just a few weeks previously, he made a speech asserting that businesses should stand behind their tax arrangements and that they have an ethical obligation to pay a fair amount back to the state. Mr King he even warned other businesses that they might face consumer boycotts if they can continue to use tax avoidance schemes.

Some quotations from Justin King include the following:

By the last count we were the 12th biggest taxpayer in the UK and we are proud of our taxpaying record.

If companies believe what they do is moral, they should be very happy to lay bare what they are doing, and open it to consumer scrutiny, and we are quite happy to do that, not just on the issue of tax.

However, recently his words have been called into question and accusations of hypocrisy have been flying in from left, right and centre. The principal reason for this is that Vodafone have long been lambasted for their aggressive tax avoidance measures.

Tax campaigners have pointed out the contradiction between his claims about tax being a moral issue and his business relationship with Vodafone which is a company well known to be a prolific tax avoider. Despite taking in over £40 billion in revenue, Vodafone haven’t paid any tax at all in the last financial year. Nor did they pay any the year before that.

Meanwhile, the Vodafone CEO has a paycheque of over £10 million and shareholders received almost £5 billion in dividends over the last 12 months. Vodafone were publicly accused in Parliament of paying just over a sixth of the tax bill owed to HMRC.

The whole time Vodafone have been vigorously defending their tax records and in fact published a lengthy document making it clear that they would only go as far as necessary to just meet their legal requirements and certainly would not consider issue of morality regarding their tax avoidance schemes.

It’s hard to see how Sainsbury’s can justify this business relationship even if the other mobile networks may be just as bad as Vodafone. Tax avoidance campaigners have called on Sainsbury’s to reconsider this partnership in light of what is known about Vodafone’s tax arrangements. And it will certainly be a significant blemish to Sainsbury’s reputation as a company that pays more tax than other organisations with a similar amount of profit.

This news comes only a few weeks after the revelation that Sainsbury’s has several overseas subsidiaries including ones based well-known tax havens such as Jersey, Guernsey, the Isle of Man and the Cayman Islands. The Fair Tax Mark – a civil society campaign concerned with promoting transparency and fairness in the tax affairs of companies – also showed that they had a shortfall in the amount of tax actually paid.

In response, Justin King has defended the Vodafone deal by describing Vodafone as a “first-class” operator and the “perfect” choice for his supermarket. However he’s refused to be drawn into a direct comment on Vodafone’s tax affairs or whether the moral obligation to businesses and their tax liabilities extend to other organisations they have business partnerships with.

What is your take on Mobile By Sainsbury’s working with Vodafone? Are they being hypocritical with this business relationship? Or has Justin King got a lot to answer for by dealing with these tax avoiders?

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