Why the travails of Apple are symptomatic of a much wider problem

By Daniel Margrain

In the wake of the democratic decision of the British people to exit from the EU, it would paradoxically appear to be highly probable that the UK government will give away the kind of sovereignty the ‘Brexiteers’ claim to covet by signing an unadulterated TTIP deal with the United States government. At a point in time in which the UK government appears set to extricate itself from the ‘bureaucratic and unaccountable’ EU, the multinational conglomerate Apple is availing itself of Ireland’s tax system, the most favourable national tax regime in Europe.

However, the European Commission ordered Apple to pay the Irish government £11bn of back-dated tax that it has avoided. The Irish Cabinet agreed to appeal the European Commission diktat. Irish PM, Enda Kenny, ordered his ministers back from their summer holidays after the European Commission accused Ireland of breaching state aid rules.

But Independent minister John Halligan initially said that the Irish government should take the cash owed by Apple in order to fund hospital services in his constituency before eventually agreeing to the decision to appeal the ruling. The European Commission alleges that Apple’s effective tax rate in 2014 was a mere 0.005 per cent which means that someone earning £30,000 a year at an equivalent rate would pay just £1 a year in tax.

Meanwhile, the reaction of the British government to the impasse, was not to support the EU in its noble endeavor, but rather to remain on the sidelines in the hope that the situation would play out to their advantage, thus providing them with a potential opportunity to entice Apple with a ‘sweetheart’ ‘investment’ deal. Meanwhile, as Alex Callinicos  pointed out “Apple is playing the EU and the US off against each other over which gets the taxes it hasn’t been paying.”

It’s precisely the logic that overrides these kinds of shenanigans that explains one of the reasons why wealth inequality continues to rise to stratospheric levels, and why governments are witnessing a backlash against globalization. Over the past 40 years, the productive capacity that capitalism has engendered, allied to the ability of successive governments to transfer assets and capital from the public to the private sphere, has created an enormous concentration of wealth at the very top of society.

Britain is a country where armies of lawyers and accountants sift through mountains of legal paper work in order to justify on a legal basis those at the very top paying as little tax as possible. This has happened as a result of the restructuring of rules and regulations which provide corporations with legal loopholes with which to jump through.

In the case of Apple, profits are funneled into a ‘stateless company’ with a head office which, according to EU Commissioner, Margrethe Vestager, “has no employees, premises or real activities.” In other words, Apple’s resident European office for tax purposes doesn’t exist. It has no staff and no location so it doesn’t pay any tax on most of the money it earns outside the United States.

Ireland has been told that it must claw back the £11 bn of back taxes from Apple even though Ireland’s ruling politicians say they don’t want it. This is money which could be spent for the benefit of an electorate who these politicians supposedly represent. Irish finance minister Michael Noonan intimated that individual states, not the EU, are responsible for individual taxation policies. “It’s an approach through the back door to try to influence tax policy through competition law.”, he said.

But what use is a tax policy if it is not intended to benefit human kind? If tax havens like Ireland behave in a way that negatively affects the well being of humans by reducing the resources available to fund services and infrastructure of which the functioning of civil society depends, then such a tax policy is not worth the paper it is written on. Does Ireland look like a country that doesn’t need £11 bn?

Apple’s billions worth of profits generated in Europe and the Middle East are transferred to Ireland where the company pays tax on just 50m euros worth. The rest is sent to their non-existent ‘virtual’ head office. As of 2015, the company’s lightly-taxed foreign cash off-shore mountain of $187bn is the biggest of any U.S multinational.

 

How can Apple defend this state of affairs whilst simultaneously maintaining the moral high ground by claiming that any attempt to prevent such an immoral situation will be bad for the societies in which they operate?

The activities of a virtually non-existent tax-paying company like Apple is already bad for these societies. The reason the masses, as opposed to companies like Apple, are subject to tax at a fixed rate, is because the former, unlike the latter, are not in the financial position to be able to avoid it. Those who are least able to pay taxes are the ones who have it deducted from their wages in full at source.

It’s not the overreaching arm of the EU ‘interfering’ with the tax laws of individual member states that’s the problem, but the fact that multinationals pit one country against another to avoid paying as much tax as possible while availing themselves of everything the rest of us pay for. The ‘race to the bottom’ is one in which corporations are constantly on the look-out to ‘up-sticks’ in the search for ever cheaper tax havens.

The end goal is a scenario in which the corporations pay no tax at all, while the masses pay for civil society because corporations like Apple, Google and Starbucks don’t have to. The upward spiral of money from the many to the few is increasing at a rate of knots due to a form of state-managed capitalism that perpetuates it. Moreover, it is happening to the detriment of the whole of the human race.

Widespread public anger towards this kind of systemic corruption is stymied daily as a result of the distractions associated with TV light entertainment and sports programmes. All this is aided by a largely uncritical corporate-based journalism. The ability of the rich and powerful to lobby governments in support of their own economic narrow interests, often to the detriment of the environment and society at large, exacerbates the problem.

Shortly before becoming the UKs unelected PM, Theresa May, intimated that the Tory government she would go on to lead would instigate greater transparency between government and big business and that she would no longer tolerate the undue influence of corporate power on domestic UK politics and the corruption through the power of lobbying that this implies. However, less than two months later, the Guardian revealed that a £3,150 payment to the government will buy business executives strategic marketplace influence.

The privileging of a tiny minority of the wealthy and corporations in this way, can be regarded as nothing less than the usurping of democracy. The mass of the working poor whose exploited labour creates the wealth from which the rich benefit and who often vote for corporate-funded politicians diametrically opposed to their own interests, is indicative of the propaganda power of a corporate and media-dominated political and economic system.

With a corporate tax rate levied at just 12.5 per cent, Ireland is effectively prostituting itself to Apple who can legally say that legally they are doing nothing legally wrong. The conventional argument goes that if Ireland failed to attract corporations like Apple, then it would be places like Belize, Bahamas or any of the British tax avoidance dependencies who would. But this zero-sum game means that while this situation is great for the CEOs of the corporations and their shareholders, it’s terrible for everybody else.

Because of the unfair competitive advantage the multinationals are able to lever, shops close, factories shut down and local businesses go under. Companies like Apple not only have governments on their side and can buy and manufacture on a vast scale, but they are not subject to the relatively higher rates of tax small businesses are forced to pay.

This situation is compounded by the fact that the typical consumer will tend to look for the cheapest goods and services available which, as a result of economies of scale, the big corporations will be most likely to provide. In such an eventuality, the role that corporations play in society becomes more prevalent at the expense of the small business.

The logical corollary to this is that eventually everything will be sold by a few giant multinational corporations who will come to dominate the marketplace resulting in less choice for the consumer, as well as its monopolization by private capital. This process was predicted by Marx who understood that capitalism was an inherently contradictory system.

In order to gain a competitive advantage over their rivals, capitalists either need to introduce mechanization to speed up the production process, reduce wages or replace their existing workforce with a cheaper one. Here’s where the contradiction comes in: If all capitalists are engaged in this process, their workers will have less and less money so they won’t be able to buy what the capitalists are producing to sell.

The capitalists, therefore, are effectively ‘creating their own gravediggers’ as a consequence of there being less demand in the economy. How has the system managed to have kept going when people don’t have money to buy things? The answer is the emergence and widespread availability of credit. However, the problems of capitalism are now so severe, so systemic, so global, that many people are wondering whether the system is coming to an end.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s