At first glance, you would think the CEOs of taxophobic US corporations and our less-than-stellar leaders in Washington have nothing in common. But you’d be wrong. What they share is a lack of shame and an excess of narrow thinking.
The similarity between C-suite tax avoiders and Washington reality avoiders struck me as I watched the debt ceiling and government shutdown debacle unfold recently. Listening to politicians say “This is what voters in my district want” reminded me of watching Apple chief executive Tim Cook invoke “shareholder value” during his May testimony at a Senate hearing that focused on the extraordinary games that Apple plays to avoid paying US taxes on what anyone other than a tax lawyer would consider to be US income. Not only was Cook not visibly embarrassed, but he actually seemed proud of what the company was doing.
Politicians and CEOs both justify their actions by citing obligations to their narrow constituencies. The fact that all Americans, conservative and liberal alike, would realize long-term benefits from having a functional government with predictable finances; the fact that shareholders would ultimately realize serious value from an increase in our nation’s well-being if bigtime corporate tax avoiders decided they had an obligation to help pay for public education and infrastructure — somehow these most basic of benefits have been completely overlooked.
It’s easy to understand why companies legally avoid taxes. Lower taxes mean higher profits, which presumably translate into higher stock prices. But going to extraordinary lengths to avoid taxes helps undermine companies’ long-term interests by hurting society and by giving average people yet another reason to detest Big Business.
It’s also easy to understand why politicians would rather pander to their constituents than act in the national interest. It’s safer. If you’re a Tea Party type who compromises or a liberal who tells Social Security recipients that the program in its current form is unsustainable, you risk losing your job.
I have a belief — possibly naive — that when you’re entrusted with corporate or political leadership, you are supposed to lead rather than stick your finger in the air, divine the prevailing wind, and follow it.
But there may now be a few glimmers of hope.
Some of the fanatics who caused the government shutdown and fomented the debt ceiling crisis are catching heat for having damaged conservatives’ long-term interests. Which, in fact, they did.
And we now see a company that has been embarrassed into doing the right thing. Not in the US yet, but in England…where an uproar erupted last year after a superb series by Reuters about the tax avoidance games played by Starbucks. Reuters reported that Starbucks told its shareholders it was making big profits in England but filed UK tax returns showing losses. (My favorite part was Starbucks UK buying coffee beans from a Swiss affiliate company that benefited from an agricultural tax break.)
As a result of the blowback, Starbucks paid 10 million pounds (about $16 million) in UK taxes voluntarily. (NORM ‘n’ AL Note: “Voluntarily” might be a rather loose usage of the term in this context, since the primary goal of the tax payment was not healing of the conscience but a desire to overcome extreme negative publicity.) When Starbucks was asked why it was paying its taxes “voluntarily,” its answer was “We believe that acting responsibly makes good business sense.” (NORM ‘n’ AL again: What was not added, but didn’t have to be, was “…when you are between a rock and a hard place due to your not acting responsibly initially.”)
Two other US companies skewered by Reuters, Google and Amazon, felt no obligation to anything. (NORM ‘n’ AL one more time: Possibly because they have a much thicker armor on their consciences, or — dare we say it — no shred of conscience left?)
So we can be encouraged by the Starbucks reversal, as by the intra-conservative debate between pragmatists and fanatics. Maybe the liberals will even join in.
When shame leads to doing the right thing, we could even hope for a trend to emerge. That’s not too much to hope for, is it?
[from a column by Allan Sloan in FORTUNE magazine]
As always, posted for your edification and enlightenment by
NORM ‘n’ AL, Minneapolis