It’s not often I’ll find myself agreeing with the Obama administration on matters of corporate responsibility. This is the same group of politicians currently pushing the Trans-Pacific Partnership and, more pertinently here in the UK, the Transatlantic Trade and Investment Partnership (TTIP). These are two proposed free trade agreements that, if implemented, will essentially see corporations supersede nation states in matters of law. We know this only because similar agreements already exist and, more importantly, because papers outlining super-secretive TTIP proposals have been leaked. It’s been said that TTIP would — among other things — allow corporations to sue governments for perceived loss of profits, in secret courts, presided over by judges who also happen to be corporate lawyers often employed by the companies themselves. (If you want a potential preview of things to come, check out El Salvador and Argentina, which have been sued by corporations for extortionate amounts simply for acting in accordance with their own laws.)
Nonetheless, today I find myself on the side of the people who think that kind of maniac neoliberalism is acceptable. On Wednesday last week, the US treasury threatened retaliation over a European commission tax avoidance investigation that could demand multiple American corporations pay billions in alleged unpaid tax. It’s come at a time of disorder and high public distrust in the establishment in Europe — in other words, a perfect time for the EU to take a symbolic swipe at the corporatocracy. The Obama administration, unsurprisingly, stood firmly behind big business, stating that EU investigations into firms including Starbucks, Amazon and more could set an “unfortunate precedent.” Tim Cook, whose Apple was this week ordered to pay up to $13 billion in additional corporation tax payments to Ireland, also chimed in, arguing “Apple pays every tax dollar we owe.”
What Cook says is true. Apple, Starbucks and others haven’t technically done anything wrong in Europe. As much as we might think it’s morally wrong that some corporations pay virtually nothing in taxes despite using our countries’ resources (and therefore our tax dollars) to run their businesses, it is also foremost in every corporation’s interest to make and retain as much money as possible. It will never be in a competitive company’s best interest to pay more tax than they’re legally obliged to by the countries they operate in.
It is, however, in every government’s best interest to make sure corporations pay fair. (What is ‘fair’ is debatable. MEP Molly Scott Cato, a tax affairs spokeswoman for the EU, insists tax be paid “where economic value be added” – but loopholes be damned, multinational conglomerates should be paying for the privilege to do business in a country, as well as for the use of its roads, land, workforce and so on.) Lately, our governments haven’t been doing too much of that. That includes the US, which has been lax on combating tax avoidance and money laundering, as well as governments in Europe. Now the European commission is looking to punish corporations, when the incompetence and complicity of EU nations has often been the underlying issue.
For years, the EU has overlooked sweetheart tax deals and ignored the fact that a number of its member states operate as glorified tax havens. Now Brussels investigates whether billions of dollars in corporation tax has been denied its citizens, some of whom are looking at more than 20% unemployment in their home countries. Well, of course more money would be in European citizens’ pockets if loopholes and anemic tax deals hadn’t been deemed perfectly acceptable in Europe, and of course major corporations such as Apple can afford to pay. The problem is these governments should have been looking out for their people by taxing corporations a reasonable amount in the first place. If corporations in this case got away with not paying a decent amount of tax, it was the fault of law — law which was created by, and which should be upheld by, governments. When corporations negotiate a sweetheart deal to pay less tax in a country than they should, it is ultimately the decision of that country’s ruling powers. And the governments of Europe have for years chosen to deal that way.
If and when the TTIP comes into play, European governments are going to have a much harder time telling corporations what to do. Right now, though, they still have ultimate power to decide what constitutes right and wrong. Retroactively deciding which corporations owe additional tax and how much after the fact is a messy business — already the US treasury is talking of American taxpayers potentially having to foot the bill if EU investigations into Amazon, Starbucks and more declare wrongdoing. The EU should face up to the fact that it has long allowed for a culture of lax corporate taxation, learn from its mistakes, and make sure there doesn’t have to be another investigation like this again. That will require behaving like governments should, by taking responsibility and putting its people first always, not just when they feel public opinion is turning.