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The Ethics of a Global Corporate Tax

photograph of unequal columns of stacked coins

The Biden administration has recently proposed a global minimum corporate tax, but what is at stake in such a policy? When debating public financial matters, it can be easy to get so focused on economics and politics that basic ethical considerations fade into the background. David Scheffer, for example, notes that when it comes to corporate tax avoidance “much of the ensuing debate has centered on how to tax corporate profits fairly and more efficiently…but there has been little effort to associate tax avoidance schemes with corporate abdication of responsibility for advancing critical societal goals.”

Scheffer was writing in 2013, when Starbucks paid only £8.6 million in British taxes over a 14-year period, and paid no UK corporate taxes in 2011 despite over $400 million in sales. U.S. corporations had $1.7 trillion in overseas accounts to avoid taxes. Apple, for example, held about $100 billion in tax haven accounts to avoid taxation in the U.S. In 2020, despite record-breaking profits, Amazon only paid an effective tax rate of 9.4% rather than the actual 21% rate, avoiding over 2 billion dollars in taxes. (Prior to that, Amazon had avoided paying taxes altogether for several years.) As a result of these trends, Scheffer points out that the percentage of tax revenue collected from wage-earners and consumers has increased dramatically, while the percentage of corporate taxation has dropped precipitously.

Unfortunately, figuring out what to do about the situation is no small task. While a nation can try to close loopholes and raise taxes, a corporation can simply move their corporate headquarters to a different nation with a lower corporate tax rate. These tax havens allow companies to minimize their tax liabilities through profit-shifting; companies register their headquarters in an alternative jurisdiction rather than the country where its sales took place.

To crack down on corporate tax avoidance, the Biden administration is now calling for a global minimum corporate tax rate of at least 15%. As Treasury Secretary Janet Yellen recently stated, a global minimum would “stop what’s been essentially a race to the bottom, so that it’s competitive attractions of different countries that influence location decisions, not tax competition.” The idea is that a country could require a corporation to pay the difference between its minimum tax rate and the rate it pays on earnings in foreign countries.

So far, several nations have signaled their agreement with the proposal. Canada, Germany, France, and many others have indicated their interest, while nations like Ireland and Hungary have registered vocal opposition. (Ireland has only a 12.5% corporate tax rate and has encouraged numerous businesses to create subsidiaries there for years to take advantage of this.) Many developing nations have also expressed misgivings about the proposal due to fears a crackdown will discourage foreign investments.

While a global minimum rate may be important for issues of trade and economic development, the issue of tax competition has received comparatively little attention when it comes to issues of ethics and justice. But Peter Dietsch and Thomas Rixen have argued that tax competition undermines the de facto sovereignty of states. Without the ability to effectively set the size of the state budget and the extent of redistribution, states have no fiscal self-determination.

Likewise, Scheffer argues that taxes are a moral issue because the future of human rights depends on a state which is capable of protecting and securing them (and has the funds to do so). Further, while Milton Friedman and others have argued that corporations are primarily only responsible to their shareholders, Scheffer notes that given climate change, rising income disparity, and the backsliding to authoritarianism, there is no such neat division between capitalist pursuits and societal imperatives. He argues:

“The fact that major multinational corporations are paying such comparatively miserly taxes in their home or operating jurisdictions, and doing so legally, means they are minimizing their contributions to social priorities in education, infrastructure, public health care, law enforcement, and even the military defense of countries that provide them with the security and stability that allows them to earn their profit. Societies where these government services are properly financed stand a much better chance of protecting the human rights of the populace.”

Overall, tax avoidance by corporations contributes to the overall decline of government services, which “degrades the operating environment and the very markets within which corporations seek to thrive.” These considerations suggest important moral issues at stake in addressing corporate tax avoidance.

On the other hand, critics of the global minimum corporate rate argue that the move is unfair. While the move would equalize tax rates across the globe, it would also benefit richer nations at the expense of smaller and developing economies who would no longer be able to set lower, more competitive rates to attract foreign investment. Foreign investment represents an integral part of the development plans for lower-income countries, and so the move threatens to reduce the overall welfare of lower-income countries. Even Ireland has managed to dramatically increase living standards after once having one of the worst living standards in Europe, largely thanks to foreign investment. Nations like Mauritius, Paraguay, Uzbekistan, and Kosovo would likely suffer from a decline in tax revenue as well, while a global standard would help nations like the U.S. and France.

But of course, that doesn’t mean that steps couldn’t be taken to mitigate some of these concerns such as direct redistribution of financial means into education and public infrastructure of developing nations. Besides, perhaps taxes should be applied more where economic activity and value creation occurs rather than the location of corporate headquarters. But beyond these practical considerations, Scheffer argues that “the higher ethical perspective” demands that corporations look past minimal standards of compliance and embrace a stronger sense of social corporate responsibility. In order to address the larger problem of which tax competition is merely symptomatic, it’s important to stress the ethical role that corporations have to play in advancing our shared societal goals.

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Moral Authority in America

photograph of President Trump leaving podium at border wall event

Leaving office on January 20, a disgraced Donald Trump, enraged over the failure of his attempts to overturn the election result, chastised by his latest impeachment for incitement of insurrection, sulking at being denied a farewell military parade, will be able to gloat about one thing – Joe Biden’s inauguration crowd will be smaller than his.

Trump’s presidency began in January 2016 with the petulant and much-repeated lie that his was the biggest inaugural crowd ever, despite the evidence of photographs showing the size of the crowd attending Barack Obama’s inauguration clearly refuting the claim. This gave rise to Kellyanne Conway’s absurd remark that there are ‘alternative facts’ a phrase which encapsulates the Trump presidency.

This ridiculous lie, and many others like it that issued from the president and his administration over the last four years, seems petty and, compared to other false claims, laughable.

Things have taken a much darker turn since the November election with Trump’s campaign to convince his supporters that the election was rigged culminating in the horrific events of January 6, when what should have been a routine process of certifying the electoral college vote turned, at Trump’s urging, into a violent and deadly assault on Congress by an angry mob of his supporters.

Following this failed insurrection, as the FBI continued to arrest (suspected) participants and the president faced swift rebuke with the House impeaching him, disturbing reports have continued to surface about possible collusion from inside Congress, questions have been raised about the lack of preparedness of security forces, the disparity has been noted between the anaemic response on Capitol Hill the day of the riot and the heavy-handed response to BLM protests earlier in the year; as security services remain concerned about possible sympathizers within the US armed forces and the Pentagon attempts to vet all armed personnel ahead of Biden’s Inauguration, America looks like a different place.

In the hours leading up to the inauguration of Joe Biden as America’s 46th President the world watches on anxiously, shocked by footage of Washington DC, that beacon of democracy, where streets are lined with soldiers in fatigues, and government buildings are fenced off, heavily guarded by military vehicles.

This moment, in which America and the world holds their breath, is the culmination and intersection of many factors – Trump’s election fraud lies, his persistent years-long stoking and appropriation of people’s grievances, and the permissive normalization of white supremacy which has characterized his presidency together with the inexplicable presence in the US of citizen militias legally armed to the teeth.

This period of American political and social history will no doubt keep analysts, historians, and pundits of all kinds busy for a long time.

Something we have heard a lot over the past weeks, from US lawmakers, political observers and members of the public is that these events have somehow changed America. Whether it is being called an insurrection, a domestic terror attack, a riot or the storming of the Capitol, one thing is clear – something has happened to America that has deeply and indelibly affected the country’s claim to being a beacon of democracy. Counting the cost of these last four years (and especially the last two weeks of the Trump presidency), America’s moral authority has to be reassessed.

To talk about America’s moral authority as a free, liberal democracy, jingoistically, without acknowledging factors that complicate that claim – such as the deep vein of racism which runs through American history to the present as its legacy of slavery, and America’s interference in other country’s political processes with its involvement of coups d’état in Latin America during the Cold War era – would be naïve.

But eschewing the simplistic patriotism which leads to sloganizing of America as ‘the greatest country on Earth’ – a cliché that has long irked many non-Americans – still leaves room for America to be justifiably proud of the central role held by liberal democratic values like freedom, equality, civil rights, justice, and the rule of law.

As the era of the Trump presidency (if not of Trumpism) closes, those values have taken a hit. Whether the wounds are fatal is yet to be seen, and depends on what happens next.

However, as the Trump presidency has marched and stumbled inexorably towards the events of January 6, some of the country’s moral authority has been lost.

Moral authority is a difficult, somewhat fuzzy concept. It is not the authority of power, but of example. A person, institution, idea, or indeed a society possesses moral authority when it has over time exemplified some important moral stance. Moral authority exemplifies ‘the good’ not in the shallows of moralism but in the deeper waters of virtue.

Donald Trump has never had any personal moral authority. He has power, and authoritative sway in the form of might, but he does not possess the kind of authority that comes in principle and by example. He has in fact always mistaken power for authority. Of the many instances that demonstrate this confusion is the tone of his attempt to persuade Georgia’s secretary of state to change the election results in early January. Trump has used his power to demand loyalty at all costs, and the costs have been high.

As he has tried more and more to wield his power with sound and fury, real authority has become more and more remote from him.

Trump has of course not single-handedly caused the current crisis in American social and political life that has seen white supremacist extremism move from the fringes to entering the mainstream, but he has used the resentments boiling away in American life ruthlessly to his own ends – to gain power and feed his insatiable ego. As we try to unpack this whole mess, the question of America’s moral authority will have to be wrested back from that of Trump’s – and we have yet to see what is left.

In her book Too Much and Never Enough, Trump’s niece Mary Trump writes:

“The fact is, Donald’s pathologies are so complex and his behaviours so often inexplicable that coming up with an accurate and comprehensive diagnosis would  require a full battery of psychological and neuropsychological tests that he’ll never  sit for.”

Diagnosing Trump is one thing, diagnosing the state of the American democracy is another. I believe American democracy is resilient, and that it will win out against the dark forces not just at its door but well and truly inside the gates – but only if America is prepared to learn the lessons here.

Moral authority will not be preserved fully intact after these events, which may not yet be over; but neither will it be lost if we keep hold of the idea that authority is not about being faultless, and it is not about power, or strength in the form of power. Moral authority comes from the way a person, an institution, a country copes with its challenges, and how it responds to its own failings. For such authority to return, power and moralism, will have to step back.

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The Capitol Coup and the Rhetoric of Essentialist Exceptionalism

photograph of a burning tire with the feet of a crowd of protestors in the background

On January 6, 2021, a mob of Trump supporters stormed the U.S. Capitol, disrupting Congress’s certification of President-elect Joe Biden’s electoral college win for a few hours. Law enforcmenet deployed tear gas in the Capitol Rotunda, and at least four people died; one woman was shot and killed. It was a deeply depressing spectacle that underscored two facts: that millions of Americans live in an alternative reality in which President Trump, the nemesis of shadowy, rootless “globalists” and other vaguely Semitic “swamp-dwellers,” won a second term in a landslide; and that Trump himself, pathologically fixated on his electoral loss, will gladly incite violence against his own government in order to cling to power.

Even as it was happening, media commentators registered their bewilderment that something like this was happening here, and not some other place — Iraq, maybe, or perhaps (as CNN’s Jake Tapper imagined) Bogotá. The by now well-worn cliché that it was something that might happen in a “banana republic” was trotted out. Echoing these sentiments, in his remarks on that day, President-elect Biden said that “the scenes of chaos at the Capitol do not reflect the true America.”

There is, I think, a deep connection between the commentators’ surprise and Biden’s rhetoric. Many people in this country seem to subscribe to a metaphysics of America, or of American political culture, that is essentialist in that it says that there is something that the culture essentially or truly is — that there are qualities which define America and without which America as we know it would not exist. Usually, the outlines of this conception of America’s essence are drawn by exclusion: by saying what America is not. Thus, Biden tells us that the “true” America is not whatever-it-is that the Capitol insurrection represents — probably that it is not violent or lawless. Other invocations of America’s essence have claimed that America is essentially liberal or conservative, or essentially tolerant. In general, we can say that American essentialism defines what America is in terms of what the one doing the defining thinks it ought to be. Frequently combined with this claim about America’s essence is the idea that this essence is exceptional; that America has a unique essence that distinguishes it from other countries. Thus, those who hold to American essentialism often define America not only by what it is not, but they suggest that what it is not is what other countries are. 

Put these two beliefs together — that America has an essence, and that this essence is unique — and you can readily explain why it should seem shocking or unbelievable that something like the Capitol coup occurred. If America is essentially not what, say, Iraq is — violent, lawless, prone to coup attempts — then what happened at the Capitol is almost unthinkable.

But American essentialist exceptionalism is doubly untrue. First, even if America’s political culture had an essence, it would be implausible to claim that this essence is peaceful or law-abiding. Since its founding, America has been the site of extreme political violence. Periods of relative peace have, if anything, been the exception, not the rule. Second, it is simply implausible to think that political cultures have essences. What makes this particular political culture American is simply that it is comprised of the political beliefs and practices of citizens of the United States, a particular political entity. Those beliefs and practices can (and have) changed dramatically over time and yet remain American. 

Defenders of the rhetoric of essentialist exceptionalism might call on Plato or Government-House utilitarians for support, arguing that even if untrue it is a “noble lie” that helps bind the political community together. On this view, saying that America is essentially good motivates its citizens to love it, thus making it more likely that they will help preserve it across time.

However, we must balance this benefit against the costs, which in my view are considerable. First, the exceptionalist aspect of American essentialist exceptionalism encourages Americans to view the political cultures and systems of other countries with unthinking disdain. That disdain was on full display in commentators’ casual invocation of Iraq, Ukraine, and other countries as examples of places where a Capitol coup would somehow be more appropriate. In fact, Americans likely have much to learn from the struggles of other democracies.

Second, the essentialist aspect of American essentialist exceptionalism may encourage complacency about America’s prospects: if America is essentially democratic, non-violent, tolerant, law-abiding, and so on, then the acts of individual political actors seem to matter less in the scheme of things — it just can’t happen here. Put another way: if in some sense we already are what we ought to be, then what’s the point in struggling to achieve our ideals? It is perhaps just this sort of complacency that was at play in the acts of the Republican congressmen and -women who chose to contest Biden’s electoral win, or the failure of the Capitol police to anticipate the possibility that Trump supporters might assault the building. Now the costs of that complacency are available for all to witness.

Third, the idea that there is a true America can easily be hijacked to serve nefarious political ends. Instead of arguing that American political culture is essentially tolerant, liberal, and democratic, some on the far right believe that it is essentially white, Christian, and patriarchal. Thus, the belief in American essentialism can motivate the exclusion of many members of actual American society as fundamentally “alien” to the culture.

The best course, then, is to jettison both our essentialism and our exceptionalism. There simply is no “true” America, and there are no qualities, good or bad, which define our political culture for all time. There are only the beliefs and practices of Americans in their roles as citizens, jurors, office-holders, and the like; and whether these beliefs and practices are, on the whole, good or bad depends upon the choices of each and all of us.

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The Price of Being a Refugee

reating Refugees as the problem is the problem - Refugee Rights Protest at Broadmeadows, Melbourne by Takver via CC 2.0 (via flickr)

A recent tragedy in Austria, where 71 decomposing bodies of refugees, including 3 children, were found in the back of an abandoned truck, is yet another in the ongoing saga of Europe’s refugee crisis. Due to severe instability in much of the world today, the number of refugees seeking asylum has drastically increased.  Most come from the countries of Kosovo, Syria and Afghanistan, and some from  Iraq, Pakistan and Ukraine. In addition to the influx of refugees, the practice of  the human trafficking of refugees is on the rise as well.

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