Corporate tax rates are at historic lows. While many politicians like to grab headlines with claims that corporations are not paying their fair share and should “do the right thing”, they happily ignore the reality that government tax reform and regulation is the only way to make sure this happens.
Take the example of Apple: In 2013, the multi-national giant was grilled by a US Senate committee for evading billions of dollars in US taxes. This is because most of their international revenue is channeled through an Irish subsidiary. Members of the Senate committee were outraged and made headlines across the country.
Apple’s response should not have been surprising. They maintained that they did nothing wrong and had paid every penny they owed. Within capitalism, no for-profit company is going to knowingly pay a tax they do not need to. An army of accountants does for Apple what pretty much every other multi-national corporation does, navigate the complex web of tax law to avoid taxes where and whenever possible.
The only way to ensure Apple and other companies pay their fair share of taxes is to (drumroll) close the loopholes that allow these companies to hide their revenues oversees. Instead of politicians paying lip-service to voters, these politicians themselves should “do the right thing” and reform broken corporate tax laws.
Why don’t they? The fact is that these politicians are actually very happy with the laws just the way they are.
Currently, the European Union is conducting their own investigation into Apple and the company’s tax avoidance schemes. And, ironically, the US government is now attempting to run interference and defend Apple. The US Treasury has written a white paper stating that the EU is overstepping its authority and should cease and desist from trying to claim more taxes from American companies.
The nuances are more revealing (and ridiculous). The US government’s real concern is that any additional taxes Apple pays to the EU would allow the company to pay even less tax in the United States.
Corporate tax laws are broken – both in the United States and in Canada. And, although they were broken by law-makers, they can be fixed by law-makers too. If only these politicians would stop talking the talk and start walking the walk.