Tax Perversion

ISIS is not the only entity under bombardment these days. Consumers of almost any media outlet are, too: endless articles and broadcasts about "tax inversion" are being showered on to the consumer's stratosphere, with no end in sight. For those unfamiliar, tax inversion is the process wherein U.S. companies devise a series of maneuvers to move or buy companies overseas with the goal of lowering their corporate taxes. It can also take the form of fiscal and asset shape-shifting, which involves a company moving patents, intellectual property and other corporate goodies into tax havens. Tax minimization and outright avoidance is always the goal.

You know something fishy is afoot when the normally arcane world of tax law begins sprouting terms like "double Irish with a Dutch sandwich" to describe certain techniques. Terms like this are better suited for a billiards parlor or sex club than an annual tax report.

European governmental agencies have launched investigations, and the U.S. Senate has too. Worldwide bodies like the Organization for Economic Cooperation and Development (OECD) as well as NGOs like Citizens for Tax Justice have piled on. The business, accounting and legal communities are all abuzz.

The headline companies here are not small potatoes, and the sums involved are in the trillions. The tax-shifting players are well known: Apple, Starbucks, Walgreens, Pfizer, Google, Burger King and a dozen other blue-chippers have buckets of cash free-floating abroad or are looking for ways to do so--all in an effort to circumvent U.S. tax laws.

The Obama Administration has acted, with Secretary of the Treasury Jack Lew issuing a series of edits that may or may not be legal but are bound to throw a wrench into the axel of the fleeing taxpayers' wheelbarrows by raising the uncertainty to a Board of Directors level. The Tea Partiers and their conservative fellow travelers, by contrast, seem uninterested or have remained silent. Basically, the right views these tax shenanigans as a way to "starve the beast" and reduce the government's ability to expand or pay its bills. They believe that this is actually a good thing.

But in the wider context of Western civilization--of democracy, of America's role in the world and in its oversight of multinational corporations based within its borders--what does it all mean?

One answer is this: corporations in the U.S. do not view themselves as having a skin in the American game. They are not citizens of America; they are supra-citizens of the world who owe allegiance not to the stars and stripes but to whatever color flag their shareholders and executives wish to fly.

The famous 1983 quote by real estate magnate Leona Helmsley that "only the little people pay taxes" could have been said by Apple CEO Tim Cook. Or Starbucks head Howard Schultz. Hiding behind the Byzantine fig leaves of incoherent tax codes is business as usual these days.

These international giants are treating the world's countries the way Italy's denizens treat its tax authorities: ignore, deny and evade. Hence the tax collection rate of the Italian state is the second lowest in the E.U., while its citizens have trillions stashed abroad. If you look at the Italy's debt to GDP ratio you can see the disastrous results.

What really rankles, nevertheless, is how demoralizing this is to those who dutifully pay their taxes. What fools we are to think we owe our country a chunk of our hard-earned incomes. How silly to think the wars we authorized need funding, that wounded veterans should receive affordable healthcare. How naïve to think the social security checks grandma gets should be funded. As "little people" we surely have got stuck paying, in essence, twice. Once for ourselves, and once for those that domicile their intellectual property in Ireland or Luxemburg. Like a friend that leaves the restaurant before the check arrives, these global giants make us all reach deeper than we should.

Many of us can remember when those who evaded their obligations and fled an unpopular war were castigated and shamed by their fellow Americans. Where is the outrage now? Could it be that these giants that dominate the media and have access to the flow of information don't want to look in the mirror and see their own shallow reflection?

However, the bandwagon for reform now seems to have taken hold. Countries that played the evasion game are under intense scrutiny (Ireland, Luxemburg, the British Virgin Islands), and the companies themselves are being placed in the media stocks where all can throw stones at them (including me).

No one likes to be played for a patsy. Sovereign countries especially.

How to tackle this problem of monumental proportions? One recommendation is for an amnesty. Let's get these corporate giants to show us what's speciously sheltered and agree on a remediation. No one wants to stifle the creativity of a company or its ability to generate profits. The goal is only to have the financial success created in the warm bath of American civilization--with the proper taxes paid.