THE BLOG

Businesses Like Apple Need Politicians Who Can Stand Up To Them

09/09/2016 11:43

Have you heard the one about the government that teamed up with a major corporation to prevent itself from being paid billions in lost taxes, equal in value to its annual health care budget?

Well this is precisely what happened last week, following the findings of a three-year investigation by the European Commission, which stated that Ireland should recover up to €13bn (£11bn) from technology giant Apple in back taxes.

While Apple sounded the predictable knell of the Commission's meddling being a blow to jobs and investment across the European Union, Ireland's finance minister Michael Noonan said he had no choice but to seek approval to appeal the decision and defend the integrity of the country's tax system.

Now, you may well ask what integrity there is in defending a tax system that the Commission claims saw Apple effectively paying 1% tax on its European profits in 2003 and about 0.005% in 2014?

The Commissioner for Competition Margrethe Vestager took a contrasting view. She said the tax agreement brokered between Ireland and Apple meant that the firm's taxable profits "did not correspond to economic reality".

Make no mistake, the appalling picture of Ireland trying to do itself out of £11 billion in lost taxes is indicative of a lopsided arms race between big business and their tax advisers on the one hand, and the state on the other. The former can afford to shuffle the cards of tax planning so fast and often, it can leave governments in a daze with few viable options beyond under-resourced tax authorities thrashing out another sweetheart deal.

For over a decade, the stellar work of campaign groups such as The Tax Justice Network, Publish What You Pay and UK Uncut, have shown that when it comes to taxation, multinational corporations play a darkly comic and inverse game of ITV's Take Me Out.

In fact, so desperate are competing countries to boost inward investment and jobs, that the payment of corporation tax has been denigrated to a tool of reputation management to be wielded when - as was the case with Starbucks - the sight of fat profits sat next to an empty tax bill risks denting sales of skinny lattes. It is still staggering - to me at least - that the coffee retailer paid almost as much corporation tax in 2015 as it did in its first 14 years in the UK, after caving into pressure to end its complex tax structures. Let us not forget that the tax that these giants don't pay is effectively money that you and I have to pay for them.

While competition between governments on tax rates may benefit a few firms in the short term, over time it undermines the ability of states and markets to function well. In my book, Healing Capitalism, I showed how there are strong arguments for business leaders themselves to back international collaboration to improve regulation, so that they don't compete in ways that back fire on themselves. Unfortunately, this enlightened self-interest has dwindled in comparison to the temptation of short-term hikes in profits from creative accounting.

And so the scandals continue. Last week's claim against Apple triggered a wave of headlines and comment pieces about corporate tax. It reminded us that political leadership is required. Which made it difficult for the UK government to vote against a successful amendment brought this week by Labour MP Caroline Flint, that will require greater transparency on profit and tax from international firms.

Transparency helps, but going forward, the UK needs to close the loopholes so beloved of some global corporations. This is why the Shadow Chancellor John McDonnell has challenged this government's foot dragging on tax avoidance and condemned the deals that some global corporations have secured from the Tories. This week, the Shadow Chief Secretary to the Treasury, Rebecca Long-Bailey MP, went further in describing the more comprehensive approach to tackling tax avoidance that is now being pursued under Jeremy Corbyn's leadership of the party.

Given the uncertainty we face after the EU referendum, the Labour Party, Liberal Democrats and SNP must continue to hold the British government to account during a perilous period of trade negotiations. And while we may not have the Commission to look out for British interests in the future, we can and must work together with progressives across Europe and beyond, to realign corporate and multilateral power with the interests of taxpaying citizens.

I know some CEOs would support that. But they won't lead. Instead, those politicians who are steadfast in seeking to make global corporations accountable to the British public offer the required leadership. Theirs is the truly pro-business stance, as by maintaining a fair playing field upon which to compete, entrepreneurship can benefit us all.

Comments

CONVERSATIONS