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The decision by Margrethe Vestager, the EU competition commissioner, and her department to impose a €13 billion penalty on Apple in lieu of unpaid taxes to the Irish government has understandably led to a tsunami of editorial and political commentary.
The rich seam not only includes the iconic status of the target and the sheer scale of the penalty, but also the weird scenario of a government actively lobbying to decline a windfall that would represent a tidy sum to even the largest economies. All of these factors and more contribute to a fascinating case study alongside Google, Starbucks and the many other corporate tax cause célèbre we have witnessed during the last few years.
For me Rafael Behr’s piece in today’s Guardian highlights a bigger issue than Apple’s esoteric tax planning:
Our phones are material extensions of ourselves, repositories for memories and secrets…Facebook has 1.71 billion active monthly users, many of whom treat it as their main source of news and their principle portal for communication with friends and family. That isn’t a company: it’s a territory more populous than any nation state. We barely even have a language to describe this realm, let alone a way of conducting politics within and around it. (‘Tech giants know where the power lies. It’s not with us’, The Guardian, Tuesday 30 August, 2016)
Whilst the optics of this story are indeed fascinating, particularly for those of us who work in areas like business ethics and corporate responsibility, in reality they are a proxy for a wider debate about what constitutes corporate nationality, associated accountability and legal authority in a world where business borders are porous (even as we paradoxically seek to block geographical ones). In short, we’re gonna need a much, much bigger wall, if we want to stop what might be called a form of legal or moral arbitrage.
Taxation is a tactical issue in a more strategic debate about where citizens and governments pursue their grievance for alleged corporate wrongdoing. We have come to accept — by ignorance or default opt-in — that we must license a hefty chunk of personal data and privacy to access ostensibly free or cheap products and services. But in doing so have we also licensed an equivalent degree of citizen (and by definition state) power that inhibits our ability to challenge those same companies on issues like tax, human rights abuses or pollution where we have concerns about their actions?
What power do citizens really have when, in the UK at least, such power that we exercise is achieved primarily through the brief wielding of a stubby pencil in a windy church hall every five years? Doesn’t seem very now or ‘millennial’ does it? Nor indeed quite pertinent to the task given the fast and fluid nature of globalised business practice (particularly in the technology industry).
Grievance can pursue its course through supra-national bodies like the EU, or in the case of alleged corporate human rights violations, for example, non-judicial grievance mechanisms like the OECD National Contact Points. However, achieving an audience at these forums typically requires a level of legal sophistication, resources or awareness beyond the scope of the general public.
More importantly it also requires an acceptance that in our globalised and highly amorphous world we need institutions that are commensurate to the task of holding companies to account. This is not a value judgment on the EU in this case, but by definition these institutions will not necessary be domestic governments who may either lack the scale, technical competence or political will when economic expediency takes precedent.
As citizens and consumers we have clicked the metaphorical ‘Accept’ button on our relationship with the market that is meant to serve us without challenging or even reading the fine print. Typically we defer to some technocratic or legal institution over which we may exercise limited immediate democratic control, but which nevertheless represents the most effective (often the only) mechanism to investigate and prosecute claims where we lack the necessary leverage. But these very same institutions are currently facing a crisis of legitimacy as powerful voices beat a cynical retreat from international obligations and standards and where the word ‘expert’ has become a term of ritual abuse.
This week the big conversation is about tax, next week it might be about labour standards or environmental protection, but deep down, as Behr points out in his article, it’s almost always about power. I come from a discipline where companies, particularly big brands with high profile reputations to protect, aim to do the right thing, to comply with both the spirit and the letter of the law, not least because they are increasingly realising an ‘ethical premium’ on good business practice. But mistakes and bad choices will always be made, and when that happens we either need strong domestic or international institutions to correct them or we are going to need to start reading those terms and conditions a little more closely.
Richard Brophy is a consultant specialising in corporate responsibility and sustainability. @richardbrophy