I agree that in the case of Google, it would do no good for the head of Google Australia to try and change the company’s attitude towards paying tax where profits are made. For such a large multinational corporation the change has to begin at the top with the CEO and board, it has to take shareholders with it along the way, and it has to be gradual. However there’s no question in my mind that it can be done.
The market is fine with Bill Gates and Mark Zuckerberg pledging most of their personal wealth to charitable causes. We all understand that this wealth didn’t come from nowhere, it comes from the sale of shares in the company. Shareholders are OK with 90% of a CEO’s equity going towards a cure for malaria or saving the white rhino, so why can’t they become OK over time with the idea of a fair percentage of the company’s revenue going to pay for teachers, doctors and police in the countries in which the corporation makes its profits?
I think there’s two core reasons, one small and stupid, one large and as-yet unrealised.
The small reason is shareholders fear a rush from shares in the first company in a sector to start paying taxes towards shares in that company’s competitors not yet paying their fair share. But I think the first-mover advantage for the first company to make this decision is huge – you can learn how to do it best and win significant brand value from positioning yourself as a leading moral brand.
The larger (and I think largely unrecognised) reason underlying all this is that capitalism considers itself in competition with government; constant, low-level, Cold War-level conflict.
A lot of free market proponents will happily tell you that smaller government is better and no government is best of all, but deep down that’s not really about what’s best for the community as a whole – it can’t be. What they really mean is that government is the one big competitor their corporation is afraid of.
For every dollar a corporation earns, most of the executive team are there to find ways of maximising the amount that gets booked as profit, as return for shareholders. That means constantly driving down costs, and in the past century we’ve seen massive progress in driving costs down on all fronts – trade treaties, tariff barriers coming down, automated manufacturing, energy savings! offshoring, information technology and significant falls in the real wages (adjusted for inflation) for all employees except the top 5–10%.
When you look at what remains in that dollar of corporate revenue which isn’t yet booked as profit, it’s mostly taxes and the cost of complying with laws. City and state property taxes, the proportion of wages paid to government as income and retirement savings taxes, and of course, sales taxes. Legal compliance in everything from food safety to data privacy and vehicle emissions.
The world’s largest companies don’t want to exist within countries, at least not if they’re run by governments that can’t be kept under the thumb. These governments are their biggest competitor.
What would the world look like if corporations started doing what governments wanted? Well, they’ll tell you, you only have to look at China to see what that would be like.
What’s the real difference between Mark Zuckerberg handing a billion dollars to a charitable organisation and Facebook paying a billion dollars more in tax? Just this: corporate America doesn’t consider World Wildlife Fund to be a competitor… yet…