The US Senate’s investigation into the tax avoidance strategies of Apple has helped to cast a light on the very practices that international tax justice activists have highlighted for years (see, e.g., the work of the Tax Justice Network and these videos). Apple’s strategies, which resulted in tax avoidance on the order of several billions of dollars, exemplify the kind of the transfer pricing and other strategies so long perfected by other multinational and large national firms.
The Apple case also highlights the self-defeating nature of the strategies used by states (in this case Ireland) that compete with one another to attract foreign firms by giving them the keys to the Treasury. These corporate giveaways hollow out the state revenue base precisely at a time when tax revenues are falling because of the global recession. While these lost tax revenues are always costly to states, they are especially costly now that governments in the grips of austerity fervor are slashing social spending when it is most needed. Of course, it is far easier politically to enforce “discipline” by retracting social spending and raising taxes that fall on struggling households and small businesses than on large, footloose and politically powerful corporations. And then there is the matter that many of these firms are simply taking advantage of the tax rules that governments have created for them, and so it becomes difficult to imagine states going after these same firms. Nevertheless it bears noting that austerity-induced expenditure cuts might be avoided altogether were states to cooperate on closing tax loopholes and ending race to the bottom forms of international and domestic tax competition.
Tax giveaways to foreign and large domestic firms also grant them an unfair competitive advantage over smaller domestic firms as they simply can’t negotiate the deals or navigate complex tax laws in the same way as foreign prestige firms like Apple, Fiat, Google etc. The logic that these tax giveaways attract firms that increase local employment and capacity (and hence boost the economy) is simply untrue, not least because many of these deals involve firms maintaining a legal rather than a physical footprint in the countries that given away the store to attract them
It is heartening that the European Union (EU) last week unveiled a law that would require large public and private firms to reveal corporate profits and taxes on a country-by-country basis. This is an important step toward increased transparency in the EU, and hence can provide useful information for European tax justice activists. In and of itself, of course, the EU law does not resolve tax avoidance or enhance tax justice. The OECD is planning to take up the matter of global tax rules prior to the G20’s September meeting. It is doubtful that the OECD or the G20 will do anything more than underscore the blaringly obvious—i.e., that the problem is serious and something should be done about it.
We can hope that civil society groups that have so long been involved in issues of tax justice use the spotlight that the Apple case has shined on this issue to press the EU, the OECD, the G20 and national authorities to take meaningful action. We can also hope that the global “Occupy” movement sees corporate tax law and evasion as an appropriate and logical target for its next campaign. At the same time, global consumers groups and university students might take up the matter of tax justice with the same dedication with which they have pressed large firms on sweatshop conditions and environmental justice. It may be that the technologies and platforms that have become such a part of the DNA of youth culture—and which are associated with companies like Apple and Google that have been so much in the news around issues of tax justice lately—can be put to good use to facilitate campaigns on the matter.
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