Death and taxes

Enrique Dans

As the saying goes — one often attributed to Benjamin Franklin, but that had already been used by Daniel Defoe — death and taxes are the only certainties in life. But the world has changed since the 18th century: and while it might be true for many, it’s very much not the case for everybody. It’s clear that we’re not all equal, and that some of us really are more equal than others.

Speaking to the BBC, Apple co-founder Steve Wozniak recently said that Apple should pay more taxes, and that he didn’t like the idea that the company didn’t pay the same levies he is subjected to. The company finds itself in a difficult situation in light of the Panama Papers leaks, not because its name has come up, but because of what it does with its money in foreign countries, revealed a number of years ago in the media. CEO Tim Cook insists that the company has broken no laws and that the idea of repatriating profits belongs to the industrial age and make no sense in the digital era, and that politicians need to catch up with the new reality.

Tax evasion has, in many people’s minds, become associated with the tech sector. In reality, practices such as transfer pricing between subsidiaries in different countries, the use of tax havens, Dutch sandwiches, or Double Irish are within the reach of any company working internationally. But it is the fast-growing tech companies that have attracted the most criticism.

I’ve always taken a pragmatic approach to these kinds of issues: if it’s legal, it’s legal, and there is no point in demonizing companies who take advantage of the law. A company’s job is to maximize shareholder value within the law, so why be surprised when that’s what happens? I’m not saying I approve, but the law is the law.

Countries are free to choose their own strategies to attract investment: Ireland has fought to retain its own tax rates, and this has helped it overcome the financial crisis to a large degree.

But other countries, tired of seeing companies get away with putting nothing back into society, have decided to tackle the problem at root: France has sent Amazon a $252 million bill for unpaid taxes, the United Kingdom has settled with Google for $185 million, while Russia says that Google, Apple, and Microsoft will now have to start paying real taxes there. The signs are that governments are beginning to crack down, imposing not just higher taxes, but clawing back unpaid dues dating back years.

Have we now reached the point where paying taxes is linked to corporate social responsibility? Are we prepared to boycott companies who don’t pay their taxes? Tim Cook insists Apple pays every sent of taxes it is obliged to pay, more than any other company in the United States, he claims (which makes sense considering that Apple is the company that turns in more profit in the whole country), but the truth is that I don’t know of anybody who would boycott a company over its tax policy, and I don’t think it’s going to be a factor for many other people, at least not in the short term.

Will we start to see a situation where, as the tax playing field levels, big companies start to list their tax details for each country, as a way of showing how socially responsible they are? Will companies start boasting of how they don’t exploit tax loopholes? It doesn’t seem likely that appealing to companies on moral grounds is going to result in more tax revenue.

I pay my taxes religiously, but it isn’t for moral reasons. Will we see companies save on taxes only when they decide they can make deducible priority investments to support social causes? And what happens if the taxes a company doesn’t pay in one country are not to do with tax avoidance but to support education and technological inclusion? It would be no bad thing if we could return to a situation in which a company could say it pays its taxes in every country where it operates without having to suppress a grin.


(En español, aquí)

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

Enrique Dans

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Professor of Innovation at IE Business School and blogger at enriquedans.com

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)