Human Events Blog

The global non-crime wave of “tax avoidance”

The hot new crime wave obsessing our global elite is “tax avoidance.”  That’s what happens when scurvy low-down thieving criminals… er, well, actually, they’re not criminals.  That’s what vexes the ruling class.  They’re not breaking any laws, but they’re doing something that deprives the ruling class of money it believes itself entitled to.  The aggrieved politicians lack either the courage or constitutional means to pass laws that would make this behavior illegal, so a great deal of snarling and table-pounding ensues.

Tax evasion is the illegal sheltering of income from lawful taxation.  Tax avoidance is the perfectly legal use of deductions, or the movement of assets – sometimes across national boundaries – to minimize tax exposure.  You may have noticed a growing tendency, both in America and abroad, for the political class to conflate these two concepts.  That’s because they derive great power from using tax deductions to influence behavior and reward favored constituencies… but eventually their hunger for revenue grows so acute, and the public becomes so leery of further deficit spending, that the complex tax code turns against its creators.  This is when “deductions” magically become “loopholes,” and politicians who should be working to make their nations attractive for global investors start putting up razor-wire fences to imprison domestic investors instead.  It’s also when the new alternative minimum taxes that tomorrow’s small businesses will pay are proposed for today’s Evil Rich.

Today’s non-criminal tax-avoiding Public Enemy Number One is Google chairman Eric Schmidt – who, amusingly enough, was tapped by President Barack Obama to serve as either Treasury or Commerce Secretary in his new Administration, but said no.  (Maybe we should save a few bucks by consolidating the Treasury and Commerce Departments, because monetary policy is increasingly supplanting commerce as the spark plug for America’s debt-fueled engine.)  The United Kingdom is very angry at Schmidt for daring to avoid its confiscatory tax rates, as the UK Telegraph reports:

Google chairman Eric Schmidt has insisted that he is “very proud” of the company’s tax structure, and said that measures to lower its payments were just “capitalism”.

Mr Schmidt’s comments risk inflaming the row over the amount of tax multinationals pay, after it emerged that Google funnelled $9.8bn (£6.07bn) of revenues from international subsidiaries into Bermuda last year in order to halve its tax bill.

However, Mr Schmidt defended the company’s legitimate tax arrangements. “We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.”

“It’s called capitalism,” he said. “We are proudly capitalistic. I’m not confused about this.”

In Britain Vince Cable was unimpressed by Mr Schmidt’s views. The Business Secretary told The Daily Telegraph: “It may well be [capitalism] but it’s certainly not the job of governments to accommodate it.”

(Emphases in the original.)  The job of governments doesn’t involve “accommodating” the legal movement of capital?  Well, that’s not the job of totalitarian governments, granted.  It appears there is less and less room for any other kind.

It’s a pity Schmidt didn’t take Obama up on his offer to run the Commerce Department, because there’s plenty of anger over Google’s tax strategies in the United States as well, and the resulting blue-on-blue warfare would have been hilarious:

A Californian pressure group called Consumer Watchdog wrote to the Senate’s Finance Committee demanding a hearing on Google’s “global tax avoidance strategies”.

Consumer Watchdog’s director John Simpson called for the Committee to schedule a time for Mr Schmidt and Google’s chief executive could “testify under oath and explain their company’s apparent abuse of the tax code to the detriment of all who play fairly.”

Mr Simpson urged the Senate to work with “other countries’ tax authorities” to “put an end to egregious loopholes that allow cynical exploitation by this generation’s Robber Barons.”

“Governments in Europe, many of which have been targets of Google’s morally bankrupt tax policies, are actively seeking redress,” he wrote. “But this is not a problem that only impacts other countries’ revenues. Google’s tactics strike at the US Treasury as well, forcing the rest of us to make up for the Internet giant’s unwillingness to pay its fair share.”

He added: “What makes Google’s activities so reprehensible is its hypocritical assertion of its corporate motto, ‘Don’t Be Evil’.”

Here’s another corporate motto to consider: “Don’t Be Stupid.”  Any CEO who voluntarily subjects his company to the deranged-lunatic tax rates of California or Britain should be immediately sacked by his shareholders.  A good rule of thumb is to flee any local, state, or national theater whose bankrupt, irresponsible politicians begin muttering about how people should pay some sort of nebulous “fair share” that is not clearly defined, to the pound or dollar, through reasonable and clear tax law.

Instead of carping and whining about companies that take advantage of “complex tax schemes called the Double Irish and Dutch Sandwich,” as the Telegraph calls them, why not take the advice of another Google executive and direct your ire at the politicians who made them possible?

The tax arrangements add fuel to accusations made by British MPs that Google and other firms including Starbucks and Amazon, have been “immorally” minimising its tax bills.

Matt Brittin, Google’s UK boss, said MPs were blaming companies for a system that they had designed. “Google plays by the rules set by politicians,” he said. “The only people who really have choices are politicians who set the tax rates.”

Last week, Starbucks caved into public pressure and promised to pay £20m to the Treasury over the next two years. However the trigger [sic] more criticism of “optional” tax payments.

Oh, is that how everybody wants to roll?  We’ll let governments whip up “public pressure” to force companies to fork over money beyond their legal obligations… to cover the massive debt those politicians created in defiance of their civic (and in some cases, legal) obligations?  Try projecting that strategy a few years, and a few trillion more dollars of socialist debt, into the future and tell me what kind of violent, dystopian hell you see.  Imagine little armies of “demonstrators,” egged on by liberal politicians, forming up in front of any corporation they “feel” should be paying more of its “fair share.”  Given the scale of the American government, Greece will look like a picnic by comparison.  I wouldn’t fancy a stroll through the streets of London, either.

That’s the road we travel when we indulge the complaints of morally bankrupt socialist politicians, and the special interests who love them, about the “moral bankruptcy” of a shrinking private sector that refuses to bleed enough to feed them.  It’s all heading towards trans-national, global taxation, which would finally relieve these no-growth, non-competitive aristocrats of the need to compete with each other.  Good luck trying to vote against those tax rates, no matter how much you dislike them.  But the only way to defuse the situation is to vote for the kind of low taxes and simple rules that would effectively, and honorably, remove both the means and motive for “tax avoidance,” and such tax codes don’t appear to have much of a popular constituency anywhere in the developed world at the moment.

 

 

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