Opinion piece by George Rozvany
In 1964, when Bob Dylan wrote his immortal protest song, ”The times they are a-changin”, the Peoples’ Tax Revolution of today was 52 years away. While many issues have altered little over the years such as whether “a-changin’’ is an actual word or not, attitudes towards multinationals and their advisers are clearly in transition towards greater transparency, accountability and indeed a corporate ethical tax framework.
It is not surprising that the strongest “protest” statement came from Apple’s own CEO Tim Cook who described the European Union’s imposition of a $US19.2 billion tax bill on Apple as “total political crap”. It would get really interesting if the EU had the capacity to impose jail time for foreign CEOs of companies who committed major tax fraud. This should be the case; this is a crime with vast implications for society, deserving of a jail sentence, and Cook readily admits moral culpability through his words.
More importantly, the comment is so distant from the current values in society and yet so telling of the true attitudes of the top levels of major corporations and indeed the super-rich. In a true democracy, the leaders of major corporations and indeed the super-rich have no greater entitlement under the law than a homeless person.
If the leaders of corporations and the super-rich have a greater entitlement over a nation’s law than a homeless person then there is no longer a true democracy. We simply have a government for hire, a government to provide law services to the rich and powerful. In Australia’s case, the question must be asked, do we have a democracy? I have worked with all the major advisory firms and all the major investment banks for the last 32 years so I know these folk extremely well; they desire power and wealth not equality under the law. If they can get an advantage over society they will.
The duty of government is to ensure that this does not occur. Let us face reality, we have a Prime Minister who was a brilliant investment banker but two major decisions belie his commitment to democracy.
Firstly, the sale of the corporate registry of the Australian Securities & Investments Commission (ASIC). Transparency is a basic tenet of a democracy, particularly when it comes to the activities of the major corporations. Increasing charges by selling this database to private owners will only deliver true access to information for the elite. For example, access to the “public information” about a group of companies with say a hundred entities over five years already costs $19,000 for the annual company reports. How much will this cost in private hands?
The second decision is the proposed drop in the corporate tax rate. In reality, tax competitiveness does not translate into commercial competitiveness. As confirmed by the World Economic Forum over many years, tax does not even appear in the top 12 factors for commercial competitiveness. In fact, the majority of the most competitive economies in the world are high-taxing. The drop in the corporate tax rate will generate cuts to welfare programs while the benefits will be passed on to shareholders of companies, many offshore, who are typically from the wealthier classes.
Following worldwide outrage at the Luxleaks and PanamaPapers tax scandals, there is no doubt the People’s Tax Revolution has begun, and it is gaining momentum, putting pressure on governments daily. What is important about the EU Apple case is that it is a timely and robustly targeted decision against one of its own member states.
There are a number of important implications:
- The EU is sending very clear message to all its member states to tidy up their act on international tax avoidance.
- It is very likely to put a complete end to favourable tax rulings to individual companies within the EU block. In turn, this will put considerable pressure on the US and the UK to do likewise with their respective tax havens such as Delaware and the British Virgin Islands.
- The position taken is what responsible government should be; to reign in what is irresponsible decision-making. The action of Ireland to appeal the decision against the interests of its own constituents is proof of a government who has lost its direction.
- The use of competition law opens up a new armoury of powerful legal weapons against tax avoidance by ensuring a level playing field on tax decision-making; and the law is likely to be strengthened based on experience.
- It is possible that Ireland may leave the EU as a result of the decision. This is a matter for the Irish but they certainly must contemplate future international action on taxation which may render such a decision as facile.
The EU action is a reminder for all Governments to think creatively about addressing the scourge of international tax avoidance. The EU approach is impressive. Merely allowing company tax revenues to fall through weak action on international tax avoidance and, even worse, cutting corporate tax rates on unproven assumptions is a clear sign of incompetent government.
The Peoples’ Tax Revolution is upon us. And as Victor Hugo said:“There is nothing more powerful than an idea whose time has come”.
Editor: George Rozvany has worked with three of the “Big Five” accounting firms (which included Arthur Andersen) and was more recently head of tax in Australia for insurance multinational Allianz.