Similar Design, New Features

Guest blog by Esmé Berkhout, written for International Tax Justice Blogging Day 2016

tax justice blogging day 2016

On the 7th of September Apple’s CEO Tim Cook is expected to hold his famous keynote. People around the globe will be curious to hear about the new iPhone7. With similar design as iPhone 6, but of course with some new features. My wish for this week is that Tim will use his keynote to make a statement, not just about making a better phone, but about tax justice.

We’ve all taken note of the Commission’s ruling on Apple’s deal with the Irish tax authorities. And perhaps you’ve also taken note of Tim’s judgement on this: “it’s total political crap”. I’m not convinced it’s a great defence, as he argues, that Apple paid $400 million in taxes in a given year, while the Commission judges Apple has over a good number of years paid approximately 13 billion Euro’s too little in taxes. But he may have a point where he argues that using state aid rules is not the right approach to (what he suggests the EC really wants) harmonize tax rates across the EU. “There should be a public discussion about it”.

And that’s an interesting statement to make as CEO of such a huge global corporation, because these CEOs have the power to influence political discussions. In May this year, Apple and a group of other Silicon Valley high-tech firms sent a letter to Dutch ministers¹ urging them to fiercely cut the corporate tax rate and limit public reporting requirements. Talking about political crap,,,

Corporate tax havens are a bit like the different models of iPhones, similar design with changing features, trying to outdo the others. But instead of a race to the top (yet a better phone), it’s a race to the bottom (less fair tax system). Putting an end to loopholes in corporate tax sytems, together with setting a minimum for corporate tax rates is crucial if we are to ensure sufficient finance for development in richer and poorer countries.

Governments do need to have more serious discussions about this and about additional measures to stop corporations from shifting their profits to tax havens. Ireland and Apple were not the first and will not be the last country and company held to account. A major overhaul of the international tax system is needed.

A much more simple tax system, with sound tax base and a fair minimum effective tax rate to be paid by corporations. In a way that is transparent to the wider public. What I would love Tim to announce on September 7th is not just a new iPhone, but that they want to see an end to the era of tax havens. That they are not afraid of fair competition, with all companies paying a fair share. And full transparency about where they pay their taxes.

¹Link to letter addressed to Dutch Ministry of General Affairs: PDF