A them-or-us battle seems unavoidable - Taxing international corporations

It may be difficult this morning, as you finally choose between Delia’s or Darina’s turkey stuffing, to wonder how liberal democracies might stop the backwards slide into something like neo-feudalism built on supine international tax codes. 

Though the turkey crisis may take priority today, it is impossible to ignore another set of figures, published just this week, which show how corporations drive a sleigh-and-four through the powerful, sustaining idea of social obligation.

Google saved €3.45bn in taxes last year by moving €14.9bn to a Bermudan shell company. €12bn of that came from Google Ireland Limited, which processes most of Google’s international advertising revenues. Alphabet — Google’s owners — also moves the bulk of its non-US profits through a Dutch subsidiary that has no employees. This is another episode in the narrative that has come to represent the ugly face of capitalism, Ireland’s questionable role in that three-card-trickery, and the capacity — or real desire — of national parliaments to confront the issue.

Apple is a lead actor and its story is well-rehearsed. Its 0.005% tax on billions in profit has become symbolic. Despite that, Apple CEO Tim Cook has described the EU €13bn tax bill as “total political crap ... that’s completely unfair”.

Irrespective of Mr Cook’s hurt and indignity, there remains a hugely important case to answer. Mr Cook argued that the EC ruling was an attempt to harmonise EU tax rates and — alert, schoolboy argument here — that Apple might have been targeted because of anti-US sentiment.

The chasm between trans-national business and societies that rely on a version of Thomas Hobbes’s social contract was made startlingly clear by one of Apple’s chief legal advisors, Bruce Sewell. Speaking to Reuters earlier this week, he suggested that Apple were, in fact, the victims in this conflict between tax philosophies. In sweeping terms, America taxes companies on worldwide income, but the rest of us — if we tax anything — focus on income earned in our own country. This conflict, argued Mr Sewell, means firms such as Apple are open to exploitation, that they are the meat in the sandwich.

“The difference between those two creates exactly the kind of loophole that the commission has now been able to exploit,” he argued.

Any thanks Mr Sewell might anticipate for clarifying the situation will be, at best, muted, as it will be seen through the 0.005% prism. After all, it was assumed that international corporations played a version of pass-the-parcel to legally minimise tax bills. How illuminating it is to hear that these corporations are, in fact, victims of rapacious governments with the gall to levy taxes on activities under their jurisdiction.

But what can be done? The EU’s take-it-or-leave-it regulatory response is not convincing. The prospect of an unfettered city of London undermining European efforts, if any, looms. It may be pretty close to believing in Santa to imagine that US president-elect Donald Trump’s billionaires’ cabinet will fall on the side of active social equity.

Once again, and tragically, we are approaching another us-or-them crossroads.