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Businesses Need to Act Responsibly by Paying Their Taxes, Just Like the Rest of Us

23/05/2013 13:04 BST | Updated 21/07/2013 10:12 BST
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You've got to hand it to Apple chief executive Tim Cook, it takes some balls to stand up to Congress. It takes even more to make demands of them when you're meant to be in the dock yourself.

In front of a Senate sub-committee, Cook yesterday unabashedly confirmed that Apple's tax contribution to the federal balance sheet was somewhere between peanuts and zilch. In Cook's bizarre distortion, this gave him sufficient leverage to insist the US government slash corporate tax rates if they want a slice of Apple's $100bn offshore stash. He was subsequently backed up by some members the committee who managed to see the bullying of Apple on the part of the government, but were blind to the converse.

Just to be clear, in the most non-libelous way possible, Apple's is a chronic case of tax avoidance, not of tax evasion. The first is legal, the second isn't. Yet in the end they produce the same net effect: depriving governments of much needed finance to support public services. In Apple's case, the true villainy is not that the tax revenue fails to accrue to the citizens of America, where the company is headquartered. It is that some of Apple's 'stateless income' doesn't incur tax liabilities anywhere, period.

We seem to have adopted tax avoidance as a fact of corporate life; it's just so ubiquitous that we barely bat an eye anymore. We occasionally even praise the ethically dubious machinations of wealthy multinationals by saying things like 'fair play to them if they're clever enough' or 'I'd do it if I could.'

But just because companies are able to dodge tax doesn't mean they should. And just because certain techniques are legal, doesn't mean they should be. It's an egregious waste of resources that global companies fork out millions on costly tax consultants each year with the sole purpose of minimizing their bills by finding loopholes. These are fine minds that I'm sure could be put to much more productive and socially useful purposes elsewhere.

Should we allow the practice of tax avoidance to continue on such a grand scale, there is no way we can enforce desirable levels of accountability and responsibility on businesses. 'Ethical business' certainly seems to be in vogue, but without reforming the tax code we risk miss out on a huge opportunity to make this a reality. The law in the area is somewhat archaic as it stands, easily circumvented by companies like Amazon, Google, Starbucks and Microsoft, some of whom have a market cap equivalent to the GDP of a small country.

This isn't me wanting to beat up on rich people or successful businesses. To even imply that being rich and being moral are mutually exclusive categories is somewhat distasteful. But that cannot be allowed to take from the idea that social responsibility doesn't end at the individual. Profitable businesses are not socially optimal simply by fiat; they must show an active willingness to act responsibly, promote the greater good of society and not take from it, else most of us would actually be better off without them.

Sitting on ginormous cash piles, multinational corporations should certainly be willing to contribute their fair share during times of austerity. According to recent estimates, tax avoidance in Britain could be costing the taxpayer as much as £5.5 billion each year. That's £183 per taxpayer, or 21 days funding for the entire NHS.

If the US bends to the will of Cook and Apple then it would set an alarming precedent. The message would be clear: one business has the power to drastically alter the course of government policy. The leviathan influence of an over bloated state so feared by those on the rights is probably no better or worse than the overriding monopoly of a corporation like Apple should it come to sway politics and politicians even more than it does already.

Fortunately, that's unlikely to happen. But nonetheless Cook's mischaracterization of the relationship between corporations and governments is an alarming one. He, and certain other prominent members of the business community, would do well to remember that they do not operate on a one way street; governments depend on their tax revenues yes, but businesses also depend on government authorities to secure a healthy environment in which to trade. The best way for them to continue doing so is if businesses act responsibly and pay their taxes just like individuals.