As regards Donald Trump, I have to admit to feeling great relief when he was elected. This is because I was sure, from everything she said and did before and during the election, that Hilary Clinton had every intention of provoking a nuclear crisis with Russia once elected President.
Trump appeared to be saying that he could do business with Putin, hence my mild support for the man. But I have looked on with dismay ever since his election, particularly at his regular mentions of Ireland and our corporation tax rates. He was at it again yesterday in a speech where he specifically mentioned Apple and Ireland as tax avoiders. He mentions funds held offshore and states his determination to see those funds brought back to the good old USA.
For an international businessman of some repute he displays an amazing ignorance of how international business works. For those of you who may not know it, Apple and all of the other American multi-nationals pay their full corporate taxes in the US on all of their business transactions in that country. Given their insularity and their, ahem, passing interest in world affairs, the average American probably believes that Apple etc, pay no tax at all. Trump makes it sound that way when he prattles on about it. In fact in 2016, Apple paid $7.682 billion in taxes to Uncle Sam.
When we enter the grey area of overseas trading however, things are, well, grey. Take for example the financial services sector located in Canary Wharf in London. The amounts traded through there each year run to trillions of pounds sterling with only token taxes applied to any of it. Apple’s latest accounts show that it paid just £12.9M ($17M) in UK corporation tax despite making an estimated £2B ($2.6B) profit in the country. With a corporate tax rate of 20%, the actual amount due on profits of £2B should have been £400M to her Majesty’s Treasury. But like the financial wizards in Canary Wharf, Apple headquartered itself elsewhere, hence the difference between real and actual. This is the world of international business laws and corporate planners ‘legally’ maximizing profits.
What the Donald forgets however, is just who these various multi-nationals are maximizing their profits for. All of the big boys are publicly quoted companies and the CEO in each one runs the business for the sole purpose of shareholder’s profits. In the case of the American multi-nationals overseas, the vast majority of their shareholders are either American Pension Plans or citizens of the US. So billions of dollars in shareholders profits are already funneled back to America, some of which must have come out of the £380M Apple didn’t pay the UK Treasury last year. The same is true of every other EU country where Apple sells its products and services, (meaning all of them). The scenario is the same for the other corporate giants currently headquartered in Ireland.
In this context, all that Ireland did was to spot an opportunity for itself in amongst the international business rules and laws. Technically speaking, we are guilty of nothing but cleverness. The UK has a Corporate tax rate of 20%, America charges 37% and Ireland chose a long time ago to lower theirs to 12%. But think of that for a moment. It is intuitive that the guy who charges the higher rate will rake in more loot. The Yanks charge over three times more than the Paddies therefore they should be making three times more in real money. Indeed, when the plan was first mooted in this country to lower our rate to 12%, there was uproar. But the authors of the idea correctly predicted that it would attract many times more investment here and they were proven correct.
Under EU and World laws a sovereign state is entitled to charge what it wants and it is up to the Multi-National to decide how it wishes to respond. But a low corporate tax rate is only one attraction. For example let’s say North Korea decided to undercut Ireland and charge a rate of 10%, do you think there would be a dirty corporate rush to transfer all of the irish investments to North Korea? So what Trump fails to address is why his country has forced their own large companies to trade overseas. Why is it not attractive for the lot of them to repatriate their profits back to the Mothership? Is Ireland at fault or is the American Government just incompetent?
You see, the Yanks are great at calling for free enterprise and stimulating competition when they are on top. But they are bad losers when a plucky little competitor comes along and beats them at their own game. The very protagonists of the free market get quite protective in their instincts when they are outsmarted. Currently the EU is pissing in the breeze as regards Ireland’s corporate rate because the very name callers themselves are doing the same thing in their own countries when the opportunity arises for them and the stakes are high enough to justify it. And as for Donald, he wants it ALL for the States. He wants a carte blanche for American companies to trade and make profits in every country in the world so that 37% of all of it comes right back to him in America. It’s nice work if you can get it but it is not about to happen either.
And sadly even under Donald, the American Plan-B is still to politically agitate and then invade other countries and just blatantly steal their assets. Is this democracy 21st century American-style?