Google and the G20
The furore over Syria at the G20 meeting has distracted attention from the potentially highly significant agreement by the leaders of the world’s largest economies to support an ‘ambitious and comprehensive’ plan to address the massive global problem of multinational corporations’ failure to pay tax where they earn it, using transfer pricing and other methods to pay lower tax elsewhere or none at all.
The issue has been in the news in the UK since last year, when Google was accused by a parlimentary select committee of ‘immoral tax avoidance’. And earlier this year the amount of corporation tax paid by Apple in the UK during 2012 was announced: zero.
The companies are in effect taking advantage of outdated tax legislation, designed almost a century ago to avoid trade across borders leading to double taxation. Often, then, they are acting legally, and this was the basis of the now notorious response by Eric Schmidt, the executive chairman of Google to criticism of his company’s tax affairs.
According to Schmidt, all that any company ought to do is keep within the law, and fulfil its fiduciary duties to its shareholders, and Google was doing both. But the idea that moral obligations overlap with legal ones is hardly worth a response. If Mr Schmidt were drowning in the river Cherwell, he’d be unimpressed by my defending my failure to throw him a lifebelt on the ground that I’m within my legal rights to walk on. And corporation law doesn’t support, let alone require, aggressive tax avoidance. All that’s needed is reasonable managerial judgement.
I suspect that many boards of multinationals feel that their aggressive tax avoidance is justified because they believe that their companies have ‘earned’ their profits and are therefore entitled to keep them, as long as they keep within legal limits.
This idea requires a theory of property. And as far as I can see, no half-decent theory will justify what they are doing. According to most utilitarian or consequentialist theories, property rights are useful fictions, so the test of any alleged right is whether assuming and respecting it will do more good than not. It’s pretty clear that the money that could have been paid by Google and Apple would have been put to better use by governments around the world than through its being used to pay dividends to shareholders and bonuses to employees.
But what about a non-consequentialist view of ethics? Can’t people become entitled to property through, say, owning their talents, or hard work? For the sake of argument, let’s assume they can. But a theory of property needs an account not only of justice in acquisition, but also of justice in transfer. Now consider just one asset: land. It is of course absurd actually to believe that all land owned in the world today was originally justly acquired, but again let’s assume that it was. It’s no less absurd, however, to believe that it has been justly transferred. And because of the significance of this single asset, any other contemporary claim to property rights – because it is bound to depend at some point on some alleged right to land – drops away.
What should non-consequentialists do? They can’t just ignore the problem and assume, like Eric Schmidt, that contemporary legal rights rest on moral rights to ownership. Rather, they have to look elsewhere in their theories for a principle of rectification. It seems to me that the most obvious principle is that of benevolence (and if they don’t have such a principle then it seems to me we’re hardly dealing with what most nowadays would call a ‘morality’ at all – Google’s ‘do no evil’ on its own isn’t enough). And that brings us back to producing the greatest good.
In other words, it’s not only consequentialists who should welcome the G20’s decision on tax, but anyone with a morality worth the name – and I hope that includes Eric Schmidt.