On June 3, The Guardian revealed that a company valued at over $1 trillion banked its profits without sacrificing a penny in corporate taxes. If it was not for the fact that the firm, whose headquarters are in Dublin, Ireland, generated a net profit “equal to nearly three-quarters of Ireland’s gross domestic product,” this might not have even been considered news.
It is a well-known principle of the modern liberal economy that the rich are the only ones who can afford to find ways of never paying taxes. A recent study revealed that for decades, at “least 55 of the largest corporations in America paid no federal corporate income taxes in their most recent fiscal year despite enjoying substantial pretax profits in the United States.”
Corruption, an Unnecessary Evil
What makes the story even more newsworthy is the fact that the company that declared $314.7 billion in profit has “no employees other than the directors.” Only the most powerful industrial behemoths have the clout to bully governments into forgoing taxing them. Only the wealthy can afford to hire the lawyers and accountants who fully understand the tricks guaranteed to enrich their clients while impoverishing those who do pay taxes. In today’s global economic system, the wealthier a company becomes, the less it will depend for its prosperity on serving the body politic. Instead, it will expect the body politic not only to serve its interests on all occasions.
The Guardian’s Rupert Neale provides the details of this particular operation, including the tax declaration for the fiscal year ending in June 2020: “An Irish subsidiary of Microsoft made a profit of $315bn (£222bn) last year but paid no corporation tax, as it is ‘resident’ for tax purposes in Bermuda.” Neale quotes the chief executive of the Fair Tax Foundation, Paul Monaghan, whose emotion is evident. “The tax aggression being displayed by Microsoft, and facilitated by Ireland, is beyond belief,” Monaghan says.
Today’s Daily Devil’s Dictionary definition:
An extreme form of non-violent violence done to the bulk of humanity by those who profit not only from their own industrial activity, but especially from the tax burden other people pay to support the entire economic, logistic and political infrastructure required for a functioning economy
Monaghan describes what he calls a “race to the bottom on tax competitiveness” as “truly distasteful.” He compares the practices adopted by wealthy multinational companies to “toxic pollutants of the world’s financial systems.”
Reacting to this scandalous revelation, some will cast the blame on Microsoft; others on the Irish government. But Monaghan correctly identifies the true culprit: a hypercompetitive global financial system that stretches across all borders and leaves little room for any kind of race other than a “race to the bottom.” Governments easily become complicit because they want to attract the activity of multinationals to their territory. After all, it creates jobs. Except in cases like Microsoft, where it only magnifies profit and feeds the bank accounts of a few lawyers.
The same edition of The Guardian features an article by Alex Cobham, the director of research at the Tax Justice Network. Cobham highlights a fact most economists acknowledge: that there exists “decades of evidence that the international tax rules are unfit for purpose.” We might ask, as people increasingly do: “What purpose?” The ideologues of neoliberalism have successfully instilled in most people’s minds the idea that taxes are a form of legalized theft by which governments steal what rightly belongs to others. In such a culture, how is it possible to decide what is fit or unfit?
Even in terms of capitalism’s theoretical principles that turn around the idea of free markets and include the concept of a level playing field, the system as it stands is skewed to the point of deep self-contradiction. Cobham reflects on the history of the past century and the inexorable rise of multinational corporations. “Where once these corporations were a more efficient form for international economic activity, now much of their advantages stem from being able to pay lower tax than domestic competitors,” he writes. The right kind of cross-border engineering of corporate structures allows multinational companies to “shift their profits away from the places where they make their money, and into jurisdictions such as the Netherlands or Cayman, which offer effective tax rates at or near zero.”
Cobham sees some hope in the Biden administration’s proposal of a universal minimum corporate tax of 15%. He calls it “the greatest potential for progress.” At the same time, he warns that because most multinationals are headquartered in wealthy nations, such a universal tax would have the effect of exacerbating the general trend of transfer of wealth from the poor to the rich.
This trend corresponds to the core principle of a system that is designed to reward not just “tax aggression,” but every form of corporate aggression. It can be summarized as the reign of greed. Only a system that elevates greed to the level of an economic virtue can produce the kind of culture that not only expects the body politic to serve the interests of wealthy enterprises, but also understands that the political class can be counted on to defend the wealthy firms’ privileges. After all, who pays for the politicians’ campaigns in our enlightened democracies?
Alex Cobham fears the worst. “It should never again be in the power of a few rich countries to decide whether the rest of the world is able to claw back revenues from the biggest tax abusers,” he writes. But the recent history of international economic practices suggests that he may be dreaming when he suggests that the power to decide can be transferred to the powerless or even equitably shared with them. He focuses on “tax aggression,” as if it were an isolated problem that could be solved by writing a new rulebook. That redrafting of tax codes is within the realm of possibility and the G7 is currently addressing the issue. Applying the new rules universally may also be possible, though achieving it would require some form of universal moral authority that simply isn’t imaginable in today’s hypercompetitive economy in which individual nation-states have acquired the habit of vying with one another for various kinds of privileges or advantages.
The real problem with tax aggression has less to do with taxes than with aggression. We live in the age of aggression that has spawned a culture of aggression in which economic success for individuals, enterprises and nations depends on the agent’s capacity to be aggressive in every domain. It starts with the idea of aggressive innovation (sometimes called “disruptive innovation”), which too often appears in managers’ minds as the key to monopolistic positioning, in contrast with the idealistic vision we are encouraged to believe in that defines inventions as selfless contributions to the welfare of humanity, the delicious fruit of the intellectual generosity of the inventors. Aggressive innovation in production will owe its ultimate success to marketing aggression. Marketing’s role is to concretize the monopolistic status that enables a truly successful company to crush or buy the competition. At the next level, of senior management, the culture of aggression includes all the financial and legal gimmicks and gadgets that contribute to a corporation’s “financial aggression.”
The culture of aggression has imposed all these phenomena to the point of their being considered behavioral norms. Why be cooperative when you know you will be rewarded for being aggressive? These norms even attain the status of science: the sciences of marketing, finance and innovation are built on the laws of creative aggression. US culture has devised a wonderful euphemism for aggression, a term that clearly sounds too aggressive to be hailed as a human virtue. Because of its Puritanical roots, US culture requires that every recommended act be identifiable as a moral virtue. Instead of learning to be aggressive, people are encouraged to be assertive. It sounds so much more polite.
Anyone wishing to make a historical comparison of behavior in public space, which now includes social media, could not fail to notice a rapid evolution toward increasing aggression over the past 50 years. The real question now is what the next 50 years will look like.
*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.
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