Six points about the EU’s Apple tax ruling.
1. US up in arms
For Apple and (and prospectively the other GAFA companies) now to claim they want more “reliability”regarding EU tax rulings begs disbelief.
With their armies of legal and tax consultants, they have been looking to exploit every imaginable (and unimaginable) tax loophole for years. In the process, they have turned the European tax system into Swiss cheese.
That the European Commission is now striking back has corporate America up in arms. This is a bit like former U.S. Presidential candidate Steve Forbes constantly clamoring for “tax simplification” and the flat tax, ideally by filing annual tax returns on a postcard.
What made this suggestion so “rich” is that it came from the head of a family that has made a lifelong sport of finding every tax loophole it can find.
Punching loopholes into the tax code via armies of lobbyists and then complaining about the complexity of the tax system is, at best, disingenuous.
What really annoys corporate Washington and its lobbyists is that the European Commission in Brussels evidently has too much backbone. It doesn’t just fold in front of a powerful lobby.
That makes the European capital very different from the U.S. one. Via the cancer of campaign finance, U.S. corporations and their lobbyists own Washington. They expect Brussels to fit into the same pattern.
2. Reining in MNCs
If globalization is to have any popular support in the future, the big multinationals (for this isn’t just a United States problem) simply cannot go on turning the global tax system into Swiss cheese. Reining them in is a key condition for the future legitimacy of globalization.
This may displease the hordes of lawyers, accountants and others who make a spectacular living out of what is euphemistically called “tax optimization.”
In that effort, the GAFA firms systematically pick on the weak – typically governments without meaningful industrial activity that were nevertheless desperate to attract significant levels of corporate taxes.
The European Commission is now making a deliberate effort to push back on such shenanigans. It basically says that major corporations colluding with all too pliable governments isn’t acceptable European practice.
The Commission is correct. It doesn’t suffice any longer to have more OECD studies and standards calling for more tax fairness. The rubber finally has to meet the road.
True, countries like Ireland, Luxembourg, the UK and the United States — all tax shelter havens (remember Delaware?) — may have to find new ways to make a living.
So what? Consider the case of Switzerland. Its previous precious business license for tax evasion – via its “exclusive” private banks – was also effectively shut down (notably by U.S. enforcement measures).
Keeping the multinationals from endlessly gaming the system is the next step in reining in crass inequities.
3. What’s wrong with Jack Lew?
It is amazing to see how Jacob (Jack) Lew, an otherwise sober and very honorable public servant, has turned himself into a veritable cry baby, advocating on behalf of GAFA. His crying foul just because major U.S. business interests are legitimately affected smacks of a bazaar mentality. It is out of character for him – and generally unbecoming for a sitting U.S. Treasury Secretary.
On many items, he and his predecessors tend to feel responsibility for the global system. This is often a useful exercise, such as on combatting terrorism finance and other abuses of the global financial system.
What is unclear – and left completely unexplained by Mr. Lew – is why this principle of managing to enhance global responsibility apparently only applies if, by and large, the culprits are firms based in other countries.
4. Imperialist U.S.
The U.S. government simply cannot always assume to be the arbiter of the behavior of other nations and their firms (see: foreign banks, VW, terrorism finance) – and at the same time consider itself Scot-free and/or above the law. That ultimately smacks of an imperialist mindset.
The problem is that the U.S. will encounter more resistance on its future initiatives if it factually acts in a manner where U.S. firms are effectively held to lower standards than foreign ones.
5. Is criticizing U.S. firms Anti-Americanism?
The related effort – to try casting people like myself who point out these massive inconsistencies – as advocates of anti-Americanism isn’t just a cheap shot.
It’s actually a sign of despair (and an implicit admission of a lack of good arguments). Intended as a killer argument, it actually achieves the opposite purpose.
It is water on the mills of the categorical opponents of TTIP since such “arguments” underscore why big corporations cannot be trusted.
Ironically, by raising this point, CEOs like Apple’s Tim Cook unintentionally create a self-fulfilling prophecy. These companies will do everything to run away from their responsibility toward the democratic societies out of which they extract the vast plethora of their gargantuan profits.
6. The new Wall Street
Europeans are also painfully aware how many former senior Obama officials (not to mention those from the Clinton machine complex who made the move before them) have already moved over to be employed by the GAFA complex.
Silicon Valley firms have become the “new” Wall Street. After the global financial crisis, moving to the employ of investment banks just isn’t as prestigious and remunerative as it used to be.
But this revolving door stinks from the head if Secretary Lew now effectively turns himself into a one-sided corporate tax advocate. True, he used to be in the employ of Citigroup and learned there how the greasing game works.
But he should hold himself to a higher standard.
Editor’s Note: Partially updated and rounded out on September 1, 2016.
**Stephan Richter is the publisher and editor-in-chief of The Globalist, the daily online magazine on the global economy, politics and culture, which he founded and launched in January 2000. He also is the President of The Globalist Research Center.
In addition, he is the presenter of the Marketplace Globalist Quiz, which is aired on public radio stations all across the United States as part of NPR’s Morning Report. Mr. Richter has also frequently appeared on leading television and radio programs such as CNN International and PBS’s Newshour.
He has moderated more than 150 policy events in Washington, D.C., featuring prime ministers, CEOs, Nobel laureates and heads of international organizations.
His articles and views have appeared in such publications as the New York Times, Wall Street Journal, International Herald Tribune, Le Monde, Singapore’s Straits Times, South China Morning Post, Bangkok Post, Al Ahram, Washington Post, Time, Newsweek, Die Welt, Die Zeit and Foreign Affairs.
From 2002-08, Mr. Richter was a monthly columnist for Les Echos, the leading financial daily in France. He was also the U.S. correspondent for Rheinischer Merkur from 1990-98, as well as a monthly columnist for CEO Magazine.
In addition, he has been a keynote speaker on geopolitical and geoeconomic issues and trends at major international conferences organized by asset managers, investment banks and public policy institutions in Europe, the United States and Asia.
Prior to starting The Globalist, Mr. Richter led a global strategic communications firm based in Washington, D.C., advising governments, leading global banks and corporations, international organizations and foundations around the world.
In that capacity, he served as North American advisor to the German Economics Ministry and Vice Chancellor in the early 1990s, when he successfully shaped the “New Federal States” campaign, designed to create a dynamic brand image for the former Communist East Germany.
In the fall of 1990, at the request of the U.S. Senator Bill Bradley, he drafted the Sense of the U.S. Senate resolution calling for forgiveness of Poland’s Communist-era public debt. It proved a crucial step in the successful conclusion of the April 1991 Debt Agreement in the Paris Club.
For those activities, he was awarded the Cross of the Order of Merit by the President of Poland in June 2014, as part of the country’s celebrations for the 25th anniversary of the arrival of freedom.
Mr. Richter received his J.D. from the University of Bonn, Germany in 1984, was a Rotary Foundation Award recipient in 1980-81 and a Congressional Fellow of the American Political Science Association in 1986-87.
His 1992 book, “Clinton: What Europe and the United States Can Expect,” correctly forecast the Clinton Administration’s emphasis on fiscal consolidation in U.S. public accounts.
In 2013, he was the co-editor of the book, “In Search of a Sustainable Future: Reflections on Economic Growth, Social Equity and Global Governance.”