Category Archives: Business

Arts, Business, Consumer Affairs, Economic, Government, Society, Technology

Internet privacy and the need for firms to profit…

BIG DATA

The next phase of the internet revolution will concern Big Data. Coupled with that will be a ‘Big Debate’ about privacy.

Big Data, a Californian gold rush for the internet age, is all about the potential of the vast quantities of data generated online. It is only now that the brainboxes of Silicon Valley are beginning to harvest, store, transfer and analyse in ways that could prove extremely valuable to companies and governments among others.

Silicon Valley is well known for its liberal sprinkling of fledging firms whose business models are built around Big Data. AdParlour, for instance, set up in 2008 by young entrepreneur Hussain Fazal, is designed to build an advertising network for Facebook.

Whereas traditional advertising is transmitted to those who are not remotely interested as well as to prime potential customers, the new generation and streams of ads can be targeted at people based on personal data gleaned from their online activities.

As Fazal says: ‘Almost everywhere you go on the web, you are being tracked.’

The difficulty for companies such as Facebook, which styles itself as a trendy firm in tune with users, is that increasing numbers of people are uncomfortable with having their every online move observed and used for commercial gain.

Last week, the Wall Street Journal ran a prominent article headlined ‘Give Me Back My Online Privacy’, which highlighted findings by the Pew Research Centre suggesting more than half of Americans are concerned about the amount of personal data online. Potentially there is big money in all that minutiae about our lifestyles and shopping habits.

The anecdotal evidence is important to note. The annual value to Facebook of an American woman who is a light user of the site is just over $12. This doesn’t sound a lot until you multiply this by the millions of users and factor in those online advertising techniques – many of which are still in their infancy – and are likely to become more sophisticated and effective over time.

The public mood among Americans about being watched online is more sensitive than it is in the UK following the revelations about the National Security Agency. Many Britons, though, do feel a sense of unease at the snooping of their personal data, and how the information may be exploited.

From the corporate point of view, probing into customer lifestyles and behaviours is not a novelty. Firms have always, and quite legitimately, wanted to know as much as they can about consumers, so they can target their products and prices to best advantage.

Loyalty cards have been tracking people’s purchases and giving stores information on shopping habits for years. Credit scoring for loans and plastic cards, which monitors behaviour in terms of how, when and whether people repay their debts, has also been a feature of the commercial landscape for some time.

At the moment, the use of Big Data to target ads is relatively crude, which is why those spawned by your previous purchases often miss the mark.

At this point in time, however, it is only scratching the surface. Once the so-called ‘internet of things’, where everyday objects are connected to the internet, takes hold, even your fridge will be tracking your habits, making known all about your clandestine food intake. Privacy is not an absolute, but a concept that changes according to time and place.

The internet is redefining some existing social norms: the generation that grew up with the internet and those that come after may be comfortable sharing information their parents and grandparents would have considered wholly personal.

At the moment, it would seem that many users either do not know or do not care that they might be giving away valuable information about themselves online. The online economy has unarguably brought significant consumer benefits.

Shoppers can easily compare prices and obtain the best deals, and can buy goods from anywhere in the world. Users value their experiences on Facebook and Twitter and may feel the surrender of some personal data is a price worth paying.

Set against that is the reality that the details of our day to day lives, hobbies, friendships, work and interests, is being mined by companies as if it were just another commodity.

Yet, it is an exchange in which the terms of the deal are not clear – we have no way of knowing how valuable our personal information might be to companies, and whether the benefits we receive in return are a fair deal.

The debate about privacy and commercial profit will become more pressing as the online world becomes smarter.

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Britain, Business, Economic, European Union, Government, Politics, Society

UK firms need direction over EU reform…

EU REFORM

Since the start of the year the row over Europe has intensified.

From speeches to signed letters, the Europhiles and Europhobes have played out and made known their disagreements in front of the press and media.

There is no doubt that renegotiation and reform of the EU is necessary. The majority of businesses are determined to see a revamped relationship.

But it has been a year now since the Prime Minister first announced his intentions on Europe, and UK firms are no clearer as to what this means in practice.

Maintaining the status quo and tinkering with some of the existing bureaucracy might seem attractive for some, but it is simply not realistic.

The eurozone, for one, is rapidly moving off in a direction of its own making. Through inter-governmental agreements – fiscal, banking and ever-greater political union – the single currency bloc is set to leave out other EU countries. Specific trading blocs between EU countries within the eurozone are likely to emerge, dismantling the free market as we understand it.

Such an outcome is hardly desirable for British firms. In a survey of over 3,000 businesses last September, only 7 per cent felt this would offer a positive future. Some 57 per cent said that re-calibrating the UK’s relationship would have the most positive impact on Britain’s business and economic interests.

On this basis, the Prime Minister has a clear mandate from business to try and rebalance Britain’s relationship with the European Union.

Even though companies are trading with the wider world, the cold hard truth is that the EU remains a significant trading partner. EU membership grants Britain advantageous access for the sale of goods and the movement of capital and people across national borders.

Firms want to remain in the single market and see it widened and strengthened, to include, for example, the services sector.

So if the Government is to succeed in reform it is vitally important we seek allies within the EU who have a similar desire for change.

It is equally important, too, that the EU knows that the UK is prepared to leave by taking its chances with faster-growing economies. A cacophony of doom regarding the consequences of exist is both irresponsible and misleading, and would undermine the negotiating position of those seeking to enact reform.

Leaving the EU is certainly not the preferred outcome for most businesses and would be very disruptive, but disruption creates opportunities as well as threats. Our ongoing trading relationship with the EU would be influenced positively by the exist negotiations, not least given the massive current deficit the UK has with the EU.

Regulations from Brussels have long been a millstone round the necks of British firms, in spite of the recent reduction in red tape.

Some will want to see action on areas such as employment law, health and safety, and regional development. Others will be hoping for changes in areas like justice and home affairs.

Whilst the Government has indicated that it is serious in its intentions, what remains in doubt, though, is what will constitute a win for the British people. So long as the Government fails to specifically announce what areas it will seek to renegotiate and what the reforms will look like, the government’s rhetoric will be perceived as an act of political opportunism right through to the 2015 general election.

UK business needs as much certainty as possible to provide the landscape on which to build long-term, sustainable growth. This is needed if a revival of our economic fortunes is to be realised.

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Britain, Business, Economic, Finance, Government, Society

The Revenue must call multinationals to account…

TAX AVOIDANCE

The relationship between the Government’ Revenue Service and how big corporations are being advised on how best to avoid paying tax is often uncomfortably close. Suspicions are such, that no sooner have civil servants finished writing a new addition to the corporate tax laws, is then quickly followed by a recruitment drive by top accountancy firms to provide ideas on how to get round it. Tax avoidance measures are costing the Exchequer billions in unpaid taxes.

The belief that HM Revenue and Customs (HMRC) has too cosy a relationship with the big multinationals has gained new credence when, just last week, a Commons select committee suggested in its report that the tax authority seems to ‘lose its nerve’ when it comes to pursuing the biggest names in business.

The chairman of the House of Commons public accounts committee, Margaret Hodge MP, said:

…In pursuing unpaid tax, HMRC has not clearly demonstrated that it is on the side of the majority of taxpayers who pay their taxes in full.

Noticeably, one of the key findings of the committee’s report was that last year the department collected less tax in real terms than it managed to collect in 2011-12, despite its stated aim of cracking down on tax avoidance. For the average man and woman in the street, who are desperately struggling through the age of austerity, this is an extraordinary state of affairs. With public services being cut at a faster rate than ever before, most people will surely find it astonishing that the corporate world is getting an easier ride than before.

There is, however, an indifferent logic behind the tendency of HMRC to strike deals that seem advantageous to the big firms. Multinational corporations hire very expensive lawyers, who invariably find a way round most of the complex tax rules. At some point, the HMRC calculation seems to be that it would rather cut its losses and do a deal than prolong the agony for an uncertain gain at some indeterminate point in the future.

That is the logic, but it is morally indefensible – especially when the tax authorities show no such leniency when it comes to wringing every last penny from the minnows of British business. Little compunction from HMRC often forces small firms to the wall, even if they are struggling to pay their VAT on time.  These small and medium sized firms (SMEs) put up less of a fight, which is why they are pursued so ruthlessly.

Taxation has to be seen to be fair. For that to be the case, the UK system needs to meet two standards. First, it is imperative we introduce new laws that massively reduce the scope for avoidance. There is a strong argument that the tax code is now too complex, and that this complexity has produced a multiplicity of loopholes that are being exploited. And secondly, HMRC needs to have the resources (and the will) to pursue multinationals as relentlessly as it pursues the country’s smaller firms.

Fairness demands that multinationals know their obligations and are obliged in meeting them.

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