Sir Martin Sorrell, chief executive of global advertising group WPP, has said the amount of corporation tax companies pay is largely “a question of judgement”.
Sir Martin argued that companies like Google and Starbucks pay tax more out of a sense of corporate social responsibility, than because the law forces them to. “Doing good is good business,” he said. Sir Martin was speaking to Radio 4’s Today programme.
WPP has now moved its headquarters back to London from Dublin.
Sir Martin moved WPP’s tax domicile to Ireland in 2008 in protest at the potential “double taxation” of corporate profits proposed by the then Labour government.
When the new coalition government dropped the plans Sir Martin agreed to relocate the group to London.
In a globally inter-dependent world, where some companies operate in hundreds of countries, Sir Martin argued that firms interested in building long-term brands would not “do things that will upset consumers”.
“If companies… choose to make a contribution to all their stakeholders... all credit to them.”
Hostile environment
In a wide-ranging interview Sir Martin forecast that WPP would see 2-3% global growth in 2013, with “significant double-digit growth” coming from China.
But he warned that the environment would remain hostile for businesses everywhere.
“It’s been a very gruelling year and next year is going to be more of the same. You’re in the trenches and it’s hand-to-hand combat. Corporates are not happy bunnies at the moment.“
Corporate balance sheets were generally healthy, he said, but bosses were reluctant to invest because of uncertainty over a number of issues, namely:
- the continuing eurozone debt crisis
- tension in the Middle East, including Syria, Egypt, Iran and Israel
- the USA’s “fiscal cliff” spending cuts and tax rises
- slowing growth in powerhouse emerging economies, such as China.
These “known unknowns” he dubbed “grey swans”, in a reference to Nicholas Nassim Taleb’s book “The Black Swan”, about the nature of unpredictability.
WPP’s investment in 2013 would be directed mostly towards high-growth economies, such as Colombia, South Korea, and Vietnam, he said.
“We’ll go where the growth is,” he said.
On the subject of corporate pay, Sir Martin admitted that consultation over his proposed £6.8m pay deal had been badly handled in 2012, but he argued: “If we want world leaders...we have to be competitive. Pay levels within our company have to be competitive with our competition.“
WPP, which operates in 110 countries, has 163,000 employees and is the largest marketing communications group in the world.
Its well-known brands include Young & Rubicam, Hill & Knowlton and Ogilvy.