Distrust, caution and security

The Paradise papers show that Apple moved US$250 billion dollars to an offshore account so that in 2014 it faced a tax rate of 0.005 percent. Had the money remained in Ireland the rate would have been 12.5 percent (2,500 times greater); the 35 percent US rate would have been 7000 times greater.

A year before the money was moved, Apple’s CEO told a US Senate subcommittee that: “We pay all the taxes we owe, every single dollar.” At the time, concerned by the harm that questions about his company’s tax strategy might do to the brand, Tim Cook repudiated the use of “tax gimmicks” adding that: “We do not stash money on some Caribbean island.” However once US pressure eliminated the “double Irish” loophole Apple had been using – reportedly because it caused “great reputational damage” to Ireland, according to then-minister of finance Michael Noonan – company lawyers soon found a new loophole in Jersey.

The size and breadth of certain multinationals makes the intricacies of tax liability a complex and lucrative legal question. An Apple statement earlier this week notes that it is “the largest taxpayer in the world” and pays “every dollar it owes in every country around the world.” Within the US the company has paid “over $35 billion in corporate income taxes over the past three years, plus billions of dollars more in property tax, payroll tax, sales tax and VAT.” The statement acknowledges that “some would like to change the tax system so multinationals’ taxes are spread differently across the countries where they operate” and it expresses Apple’s support for “comprehensive international tax reform and a far simpler system.” Emphatically, the statement points out that Apple follows the law “and if the system changes we will comply.”

Apple is hardly alone in its arbitrage of tax regimes. Within Europe there has long been considerable scepticism about the intentions of the large US tech companies which are often referred to as GAFA (Google, Apple, Facebook, Amazon). European governments and citizens increasingly assume that such companies will do what  they can to maximize their profits while avoiding regulation and taxes. Some of this mistrust may be due to nationalist resentments but there are larger reasons – including the loss of privacy and vulnerability to surveillance – for not taking these companies, or indeed any other large multinationals, entirely at their word.

In “World Without Mind: The Existential Threat of Big Tech”  Franklin Foer writes that although “Transparency is one of the great promises of new technology … knowledge monopolies take us in the other direction. They contain the trappings of openness… but if you stare hard enough at Google, Facebook, and Amazon they become a bit like Italy, a country where it’s never entirely clear how power really operates.” As their hold over us increases, such companies have learned not only how to manipulate our behaviour with great efficiency – a third of Amazon’s purchases are driven by its recommendation engine – but also how to further entrench themselves in our lives. And, as their influence and revenues increase, it is entirely appropriate that they, and all other corporations of comparable size and scope, should face greater oversight and be held to higher standards of accountability.

The Paradise Papers confirm what is already well-known: that wealthy corporations and individuals make full use of the expertise available to them to outmanoeuvre institutions that seek to regulate them. Such financial sleights-of-hand should underscore our larger doubts about the lack of transparency and accountability. Every day there seems to be more evidence of impunity: Russia interferes in the US election, powerful Hollywood figures get away with abusive behaviour, senior political operatives have ties to shady interests – and there are no apparent consequences. The resulting loss of confidence is inevitable, and regrettable, but it can also be turned to our advantage.

“Distrust and caution are the parents of security,” wrote Benjamin Franklin in Poor Richard’s Almanac, words that feel truer today than Franklin could ever have imagined. Nevertheless, the embarrassed response to the release of the Paradise Papers, and the abrupt cancellation of a Netflix show in the wake of abuse allegations against the leading actor, have shown that public distrust is still a potent means of increasing of transparency and accountability. To some extent, democratic transparency is the elevation of scepticism to a governing principle. A wary public, one that treats all powerful interests with appropriate scepticism, is also one that will eventually force rival factions to settle on basic standards of transparency and accountability.

Around the Web