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Why We LOVE to Moralise About Corporations Not Paying Enough Tax

23/05/2013 15:28 BST | Updated 22/07/2013 10:12 BST
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We, and our politicians, love to moralise about the rank unfairness of multinational corporations paying so little tax. And it's quite understandable we should. As we suffer austerity measures on one side and higher food and energy bills on the other, why should multinational corporations get off so lightly? Well, they shouldn't.

No one can condone the extreme contortions - albeit legal - that Apple, Google, Starbucks and others engage in to minimise their tax exposure. But moralising only serves to let governments off the hook. For ultimately, as Google's CEO, Eric Schmidt, rightly pointed out, tax rules are made by governments, not be companies. So politicians love all this public moralising because it takes the spotlight away from where it should be - on themselves. We can go on moralising if we want. But if what a society considers "moral" is to actually carry weight, it must ultimately be enshrined in law; in this case, in tax law. But the unfortunate fact the moralisers cannot escape is: the multinationals have not broken any law.

As government coffers run empty, politicians are now finally waking up to the fact that international agreements are needed to ensure multinationals pay their fair share. Efforts are now being made, via the OECD and the G-8, to ensure more nations exchange tax information to close out loopholes, increase transparency and, hopefully, increase the tax take. But it's important to realise that governments have a dilemma. On the one side they want to ensure multinationals pay more tax, yet on the other they have to keep their national economies attractive to inward investors and corporations - to the very people they want more tax from! Here we see, then, the contradiction inherent in the neo-liberal mantra of "international competitiveness". True it may be that governments have to keep their economies competitive, but it's a contradiction nonetheless.

And how is it for the multinationals? We should pressure them as much as possible, of course. But they, too, are in something of a dilemma. For any major multinational that fails to minimise its tax exposure would, ultimately, only lose out to its competitors. As U.S. Senator, Rob Portman, recently pointed out to a Senate Sub-Committee Hearing, Apple is more highly taxed in the U.S. than Samsung is in South Korea. Forcing Apple to pay more tax, in other words, could put it at a competitive disadvantage. This presents a double-dilemma. Because, not only can corporations, whatever their morals, not afford to lose out to their competitors, governments don't want to force multinationals to go elsewhere.

What are we to make of all this? With governments having a serious conflict of interests and the multinationals needing to stay competitive, one starts to see the futility of moralising. We start to realise that what we're dealing with is a genuinely global and systemic problem. We start to see the stark realities of the pathological mismatch between an economy that's gone global, and institutions of governance which remain merely national. You can't hope to manage a global economy with only national governance - derrr!

Throughout history, societies consumed by moral outrage - whether at the excesses of a profligate aristocracy or the inhumanity of a slave trade - eventually gave up on self-righteous moralising and got down to the serious business of first gaining, and then using, their votes to enshrine their moral sentiments in law. And that's precisely what's needed today but at the global level. Given the dilemmas and conflicts governments and corporations face, we citizens need a new, transnational way to use our votes that's capable of driving governments to cooperate at the global level to implement, not just a seamless global corporate tax regime, but a host of other reforms to deal with the global problems confronting us.

Voting in individual countries to solve issues that are global may sound like a contradiction in terms. But one initiative that seems to have solved that conundrum is the Simultaneous Policy (Simpol) campaign. Supported by citizens in over 100 countries, and with MPs and some political parties in the UK and other countries now supporting it too, such initiatives offer new forms of transnational political engagement that allow us to use our right to vote in surprisingly innovative and effective ways. Voting may be considered ineffective or passé by many, but with governments at the mercy of footloose global capital, we may yet find it to be the most powerful tool at our disposal.