The True Face of Corporate America: Tax Evasion

The recent action by the United Kingdom to tax Apple has, at last, opened the Pandora box of the practice of Corporate America whose objective is not to pay tax. The hypocritical comment "tax authorities define the rules, and we comply" from Apple only confirms what we all know. Since taxation is a national sovereign prerogative, the search for tax evasion is made easy.

It reminds me a conversation I had with the chief tax officer of ITT when they sold their telecom business to what is today Alcatel: we were sitting in a sofa of the Bristol Hotel in Paris and he told me proudly: we have not been paying taxes for many years. I asked him how many tax officers he had. He answered 700.

There is absolutely no sense of social or civic responsibility at corporate level. The notion that a company that has a substantial business should actually contribute to the revenues of the country through corporate tax is totally alien to Boards of Directors and Executive Committees.

Profits made abroad are not taxable if they are not repatriated to the United States.

Trillions of dollars of liquid assets are parked abroad by US corporations. It was fascinating to notice than when Apple reluctantly accepted to distribute a dividend, it chose to borrow rather than use its vast amount of cash from abroad that would have been taxed.

Those earnings should be taxed somewhere. The IRS would love nothing more than doing it in the United States. The US Treasury would be delighted to reduce its indebtedness by as much. Corporations argue that earnings made abroad should remain taxable abroad.

Profits made abroad are not taxed abroad either.

Google and Apple fight back against European tax rules, was the FT headline today.

That argument is of course beaten by the fact that foreign earnings are not taxed abroad either. A recent scandal, unduly focused on what was called the Luxgate (in reference to Luxembourg), created huge difficulties for Jean-Claude Juncker, the Chairman of the European Union and former Prime Minister and Minister of Finance of the lovely Grand Duchy of Luxembourg. Yes, Luxembourg, like many other countries gave a favorable tax treatment to Apple, Google, Facebook and Yahoo and other multinational corporations. Apple stated that EU taxes might cost it billions! Who cares? Despite the recue of Ireland by the European Union, the country was not forced to increase its ridiculous 10% corporate tax rate.

Thou shall not pay taxes

For centuries, tax evasion, otherwise know as tax avoidance, has been a major sport around the world. The United States are not better or worse than many other countries. But the game must stop. It is impossible to avoid budget deficits and over-indebtedness unless corporations fulfill their duty to contribute to the financing of the countries they operate in. It is a simple principle of equity.

Most countries have elected to use indirect taxation that has, among other consequences, to reduce the purchasing power of their citizens and to slow down their economies. It is also a taxation that treats the wealthiest the same way as the poor.

Is it moral? Is it equitable? Is it fair? Is it responsible? Of course not. But why should taxation be moral, equitable, fair or responsible? The problem is that unless we recreate those values, our economies are going to their ends. There is a reason why the United States have an infrastructure that is worse than that of China and that new York looks like a third world city. But citizens do not want to pay for the common good. And corporations are not considering themselves as citizens.
We might want to remember these questions before voting for a new President who might be a billionaire who used the advantages of bankruptcy law to avoid taking responsibilities for his serial failures.