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25 January 2016

Google’s deal with the government shows where power really lies

Corporations should be taxed fairly and tax revenue invested according to democratically determined priorities not the whims and preferences of internet oligarchs. 

By Molly Scott Cato

All politicians need an occasional diversion from responsibility and my own chosen form of escapism is costume dramas. So the undeniably sumptuous new BBC production of War and Peace provides pleasurable indulgence. Amongst the many philosophical themes woven through the novel is the question of how to do good. Pierre Bezukhov, who unexpectedly inherits great wealth, attempts to improve the lives of the serfs on his many vast landed estates by improving their housing and building schools. He is disappointed by their reaction, by their resistance to self-improvement, and perhaps also by their failure to show sufficient gratitude.

I hope it isn’t too much of a stretch to see a link between the philanthropy of the more enlightened Russian aristocrats and the tsars of the contemporary corporate world. Google’s announcement that they will pay more tax than they are legally required to has been treated with the contempt it deserves. We are not seeking charitable donations but a fair tax system. Similarly, Mark Zuckerburg’s pledge to give away the majority of his vast fortune simply draws attention to the outrageous way that he has been able to enclose value created by Facebook users.

And while I would not seek to deny the good that the Gates Foundation has done, the vast Microsoft profits that made this philanthropy possible are further evidence that the corporate tax system is failing. Company profits should be taxed and the money invested according to democratically determined priorities not the whims and preferences of internet oligarchs.

As a result of active lobbying, Greens in the European Parliament achieved the establishment of a special tax committee. Shortly before Christmas I was involved in a report that made clear the view of the European Parliament in this area and puts pressure on the European Commission to bring forward strong legislation. Proposals include preventing companies that have subsidiaries in tax havens from receiving any EU funding, including CAP payments, and a system of country-by-country reporting that will allow us to know exactly what profits each corporation makes in each country. Only when we know where profits are made will we be able to end the unacceptable profit-shifting scams that facilitate tax avoidance on a grand scale. Likewise, a common approach to tax bases and tax rates in the EU will help stop tax competition between States and a race to the bottom.

One Green amendment did fall, and that was a proposal for the creation of a special fund to support whistleblowers, to be created from money clawed back from illegal sweetheart tax deals. The aim of this was to protect those who courageously put themselves on the frontline of tackling tax avoidance and who make a stand for tax justice. Whistleblower Antoine Deltour disclosed large scale corporate tax avoidance, which became known as Lux Leaks and provoked indignant reactions around the world. But rather than be rewarded for uncovered the tax deals that have robbed Europe of billions, Deltour faces trial and could spend up to five years in jail. Like a modern day serf, tied to working for his corporation – in this case an international accountancy firm – he faces punishment for daring to break ranks.  

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The vote in the European Parliament on the special fund for whistleblowers was very close – 328 in support to 338 against. If Tory MEPs had voted in favour, the measure would have been adopted. Tory cries for action on tax avoidance ring hollow while they fail to support those who expose such practices.

Of course we are not serfs: we have votes! But the unashamed power play that happens annually at the World Economic Forum in Davos at this time of year, just like the ability of Google et al to negotiate their tax rates, makes clear where real power lies in the global economy. Like the Russian serfs of Tolstoy’s novel we will not be satisfied with the crumbs that fall from the table of the elites. What we demand is economic power to be used democratically and for the benefit of all. Hardly a revolutionary sentiment but one whose justice is hard to deny.

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