“In today’s Daily Telegraph, Boris Johnson writes about the red hot topic of the day – how much tax should big companies pay? He begins:“It’s King Kong meets Godzilla. It’s Lex Luthor versus Dr Doom. Yes, folks, it’s a showdown between two of the biggest supervillains of the modern epoch, and I want to know which side you are on.
Here in the blue corner, representing the rampaging forces of gizmotastic hi-tech 21st century capitalism – the steely-eyed figure of Tim Cook. He is the CEO of Apple Corporation of Cupertino, California, and therefore the wielder of the biggest cash mountain in the history of mankind. He runs a company that is at the centre of the consumerist conspiracy, inspiring fresh millions across the planet every day with a lust to possess his lustrous machines.
And in the red corner we have the most dangerous foe that Apple has ever encountered. She’s crop-haired, she’s Left-wing, she’s Danish, and she’s straight out of that Scandi-noir serial Borgen. She’s called Margrethe Vestager, and she runs the competition directorate in the European Commission in Brussels – the world’s largest and most powerful producer of shiny new rules, regulations and all manner of paralysing pettifogging piffle.
Omigosh – what a contest; and what a dilemma for us all! Your eyes flit desperately between them, and for many people it will be an eerie feeling: the first time they have ever been tempted to side with Brussels over anything. Margrethe has made an extraordinary demand. She wants Apple to pay the Irish state an infarct-inducing sum in back taxes – between $8 and $16 billion, and I know that many of you will egg her on. Yee-hah, Margrethe, you will be saying. Go on, darling. You fine them. You tax them. You show those overmighty Yankee tech giants that someone, somewhere, will finally stand up to them.
Are you in that camp? If you are, I can understand why. About a month ago the bankers Goldman Sachs published a list of the biggest and richest firms in the world. The top three, in order, were Apple, Google and Microsoft – and Facebook and Amazon were also in the top 10. All these tech companies make staggering sums from an avid British population. We love this stuff. We can’t get enough of it. We buy tens of billions of pounds’ worth of American hardware, software and services – and yet these companies pay quite derisory sums in tax to the UK Exchequer: derisory, that is, when you consider how much dosh they are earning from us all.
Google has just agreed to stump up an extra £130 million, to compensate for underpayments over the past nine years; and if its executives were expecting applause from the public, they must be disappointed today. They got a raspberry, and everyone is complaining that it isn’t enough, that it still amounts to a tax rate of only about 2 per cent on earnings.
There is a widespread feeling that the loopholes and dodges should be axed, and that they should be paying more. To a large extent I agree. It has never seemed fair that some of these companies – no matter how wonderful the service they provide – should be paying so much less in tax than the high-street tea rooms and bookshops they have pulverised. It would be a good thing, both for the UK finances and for the image of these great companies, if they paid more.
And yet I must confess there is a part of me that sides strongly with Tim Cook and Apple – or at least can see his point of view. It is absurd to blame the company for “not paying their taxes”. You might as well blame a shark for eating seals. It is the nature of the beast; and not only is it the nature of the beast – it is the law. It is the fiduciary duty of their finance directors to minimise tax exposure. They have a legal obligation to their shareholders. Tax is not paid on the basis of what “feels right” either to public opinion or to politicians. It is not some eleemosynary contribution. It is not as if we are all in church, and watching beadily to make sure that Tim Cook puts his £50 note into the collection basket. Tax is paid, and must be paid, in accordance with the strict requirements of the system. And the second reason for sympathising with Apple, and not Margreth the crusading Danish commissioner, is that in my view this dispute should have nothing to do with Brussels.
The Commission is plainly using the EU treaty articles on state aid to intervene in the tax jurisdiction of a member state when strictly speaking, it seems to me, they should butt right out. The paradox of this whole case is that the Irish and Apple are on the same side. If Margrethe the Commissioner makes Apple give Dublin $16 billion in back taxes, that will actually be against the wishes of the Irish government.
The Irish decided they wanted to go for an ultra-low corporation tax, at 12.5 per cent. It was their sovereign ambition to attract the HQ of Apple and others. They wanted Irish taxi drivers to have the honour of ferrying Apple executives around, and they wanted Irish waitresses to snaffle their huge tips. The EU Commission is partly excited by the chance to bash a corporate American giant; but mainly it is a chance to attack tax arbitrage between member states – to move ever closer towards uniformity and away from a spirit of healthy competition between jurisdictions.
We need that competition. We need the Irish to be able to do their own thing. Otherwise business tax rates would simply rise in lockstep across Europe. We should be resisting the Commission’s approach, and we should recognise that the fault in the whole affair lies with our national arrangements – our own system for not getting a fair whack from the tech giants. After years of Labour inertia, George Osborne has made progress. The Google payback is a start. We now need to go further. We want, need and deserve these companies somehow to pay more tax in the UK. But the problem does not lie with the firms, or the Irish government, and it certainly should not need Brussels to sort it out.”