My friend Jurg asked me to write something about the EU Commission’s decision that Ireland had given unfair advantage to Apple through the provision of tax loopholes this week. The chat in Ireland is all about what we should do with the €13 billion that the lads in Brussels have told us to take; a tunnel to Wales or a 100-metre-tall golden statue of Michael Flatley seem to be the best ideas at the moment.
Now the bosses in Apple are like you and me. They like to get good value. And if they bring their colossal profits back to California, where arguably they originate, the American tax-man will take 35%. The Apple bosses are concerned with their shareholders’ value. In fact, as the law is currently interpreted, that concern outweighs practically all the other concerns. So they are holding on to about $230 billion in reserves, waiting for the US to revise its tax code and lower that repatriation rate.
They are basically waiting for the sales.
So whatever way you slice this cake, it appears to be a move by the European Commission to call a halt to the waiting game. The scoundrel Irish government will appeal and will surely be successful and will therefore have done the unthinkable: spent money to avoid receiving money.
Apple is run by good people. Or at least, let’s assume it is. Why don’t they want to pay tax? The reason is the same reason you don’t want to pay tax. Why would you want to! That money is better in your pocket than in the taxman’s, right? The only certainties in life are death, taxes, and the irrefutably straightforward decision to avoid tax you don’t have to pay.
A tax haven is a tricky thing to define. One man’s tax haven in another man’s Singapore, miracle of capitalism and shining beacon of entrepreneurship. Sure, the New York Times referred to Dublin as the “wild west of finance” because the size and the scale of its tax loopholes are large enough to fit Steve Jobs’ ego and €200,000,000,000 with space to spare, but someone else might say it’s the cost of doing business in a competitive global economy.
Nicholas Shaxson, in his book Treasure Islands writes:
Nobody agrees exactly what a tax haven is, but I will offer a loose description here: It is a place that seeks to attract money by offering politically stable facilities to help people or entities get around the rules, laws, and regulations of jurisdictions elsewhere.
Let’s stick with that for the moment.
It’s not that the bosses in Apple are bad people. They are just doing what you would want them to do if you owned shares in Apple. They are maximising the return on investment. They are ensuring profitability. They are returning value. They are being good stewards. They are hoarding gold like a dragon in its untouchable lair while children are homeless on the streets of Cork, but you shouldn’t complain because they give jobs to people.
And you can be sure those people pay tax.
Apple, and Amazon, Starbucks, and the rest of them, are walking miracles. Let us call them Schrodinger’s Corporations. When the market opportunity arises, they are alive and well and on hand to do business. But go looking for them when it comes time for tax and suddenly they are gone.
This serves the dividend pay-outs of the shareholders, and for all I know, that’s you and your parents. And it serves the value of your pension fund. So the executives will keep searching for the next loophole and the politicians will keep spouting noise about Ireland being open for business and none of them will pay their taxes because taxes get paid by people who aren’t smart enough to get the absurd joke. The rich are secure and get more secure the more at risk they make the poor.
Only the rich get to use tax havens. That’s actually a pretty good rule of thumb to figure out if you are rich: do you know the difference between tax avoidance and tax evasion? The things we pay for with taxes are the things we need that we can’t guarantee provision for if every man was left for himself. Fire trucks, hospitals, libraries, maternity cover, old-age pensions, street-lights, deaf interpreters in the court service; these are the sorts of things that get de-funded when you ask your accountant to find a way to be more tax efficient. Sure, you spend that extra money on a new flat screen tv and that helps keep a fella in a job in Currys, but that’s not quite the same thing as emergency relief for victims of flooding.
And that’s the great tragedy in the tax evasion conversation. The bosses in Apple are probably morally virtuous in ways you don’t imagine. They probably give a lot to charity and they really care about the progressive causes their firm supports and they may even wake at night in a cold sweat about the conditions in the Foxconn factories. They are doing the best they can when they avoid that tax, for you, the shareholder, whose pension is invested in Apple.
The tragedy, of course, is that they aren’t doing the best thing for you. The best thing for you is for everyone to pay their tax. Because the money you spend on tax is the best value money you spend. Every single year you should tally up your tax spend and celebrate it. It helped 5 year olds to learn to read and it allowed mothers to take a break from working, so their babies could sleep in peace on their shoulders for the first few months of their life. If you were left to fund libraries and ambulance services and prisons from your own devices, you’d end up with crappy services and it would take all your time. Your tax spend is more convenient than Uber and better value than Aldi.
Apple will eventually pay its tax, at a much lower rate than you or me, in America or here or elsewhere. But when they do, they are adding shareholder value, even if the share price doesn’t reflect that. It is in the shareholder’s interest to make society equitable and fair and just. The innovation that they get so aroused by comes about most effectively when people don’t have to scrabble around in precarious jobs to just make ends meet. Taken to its logical conclusion, a culture of tax evasion is an existential threat to a society because the poor will only tolerate being mocked by the rich for so long before they rise up and decide to mock the order that the rich rely on.
Apple has been trading in Ireland longer than I’ve been alive and I’m almost officially middle-aged. They employ 6000 people. They make glossy products that people love. They are not to blame for Ireland’s economic catastrophe and neither are they the solution. But the impossibility of us imagining that straightforward justice would be done – that Apple and their ilk would post profits where they make them and pay tax on them there too, at the same time – reveals the fragility at the heart of our democratic order.
Why do people vote against their interest and back Drumpf or #brexit? Surely that mystery is solved when we consider this absurdist farce. The people who have been entrusted with the collective good can now longer even discern it. People legitimately wonder, “How could Theresa May be worse?” and people coherently ponder, “If the system is genuinely crazy, maybe it would help to put a wig-wearing loon in the driving seat?”
1989 was just the most recent point when history reminded us that even the most extensive societies will collapse if they disconnect from reality. The collective purse being funded by the poorest while the richest get to scarper is unreal. So whatever happens with this particular instance, let me suggest that what we see here is a fracture that is much more serious than Michael Noonan and Tim Cook thinks it is. And between now and the time the fracture gets fixed or grows too big, let me further suggest that you should pay your taxes with glee. All of them. On time. It’s the best money you get to spend.
Your Correspondent, Who needs money when he’s got feathers?