Tech meets politics: the battle continues

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EU Commissioner Margrethe Vestager

“Without exception we are responsible for the results of our actions and the influence we have on society,” so taught the Italian humanist Vittorino da Feltre (1373-1446) in the fourteenth century. Today, this lesson is often forgotten, especially by the technology and data companies that, more and more, dominate the Internet and our society.

Tech giants are under scrutiny, both in the US and in the EU. In November of last year, the US Congress held several hearings during which executives received fierce criticism and warnings from American lawmakers regarding their data collecting activities, the way they handle the phenomenon of fake news and their (alleged) role in the election-manipulation operations of foreign actors. The European Parliament has not gone this far yet, partly because of the lack of knowledge necessary amongst politicians to battle the tech industry effectively. As Laurens Cerulus wrote sharply in a recent article on Politico, “For policymakers, the tech industry can seem like a black box, an unwieldy and unregulated global behemoth that favors a handful of large tech giants and remains mostly off limits to governmental control.”

The EU Commission however is putting more and more pressure on tech giants in a broad and continuous effort to make them take the responsibility that their position obliges them to. Several commissioners have dedicated themselves to reform the tech and data industry, to increase transparency and to make them work for society instead of against it.

An important point of focus of the Commission's battle with the Googles of sorts is to counter what fiscal experts call base erosion and profit shifting (BEPS), a term that refers to tax avoidance strategies that exploit gaps and mismatches in national tax rules. Although this has been common practice in many corporate industries, several tech companies have taken this practice to new heights. The publication of the Lux Papers, the Panama Papers and, recently, the Paradise Papers, has made it abundantly clear that the moral appeals made by governments and societies over the years were not enough to alter companies' behavior. Therefore the Commission decided to take legal action, and not without success. In the autumn of 2017, EU Competition Commissioner Margrethe Vestager summoned Amazon to pay 250 million euros of unpaid taxes. The online retailer was only the latest on a list of companies that gets longer and longer - varying from Starbucks to beer brewer AB Inbev. The money that Amazon was ordered to pay was small change compared to the 13 billion euros that tech-giant Apple was ordered to pay in a settlement in 2016. Between 1991 and 2007, Apple had made tax deals with the Irish government, which, according to the Commission, were not compliant with EU competition law. As a result, Apple's fiscal obligations where reduced to a bare minimum: in 2004 the company only paid 0,005% in taxes on its revenue.

Interesting in this case was the reaction of Apple CEO Tim Cook, who, in an interview with 60 Minutes, claimed that “Apple pays every tax dollar we owe.” To the Irish Independent he even called the Commission's decision “total political crap”. Shortly after, in a “message to the Apple community”, Cook reacted a little more elaborately, “As our business has grown over the years, we have become the largest taxpayer in Ireland, the largest taxpayer in the United States, and the largest taxpayer in the world,” a claim he presented without any proof by the way.

Cook's outcry did not stand alone; it was supported by various captains of industry, especially in the world of tech and data. Claiming that they always complied with national law, many have publically criticized the Commission's actions against their companies. Some even called it a witch hunt and a crusade.

Something interesting happens here: while they seek shelter behind legal arguments - which are not moral or immoral, but amoral -, they completely evade the question of whether it is morally sound that their companies were able to pay a tax percentage for which no citizen will ever be able to negotiate. The implicit message they want to communicate seems to be "As leaders of large corporate entities, it is not our responsibility to make sure our actions are morally sound. They only thing we have to make sure of is that we stay within the bandwidth of the various jurisdictions we operate in."

Here they make a mistake. It would be wise for Cook and his colleagues to not forget two important things. The first is that every freedom brings with it the implicit responsibility to use that freedom with care. As Nobel-laureate Bob Dylan once wisely said, “a [true] hero is someone who knows the responsibility that comes with his freedom.” The second is that the freedoms that corporate entities, in general (and tech companies such as Apple and Google in particular), have to trade, to make profit and to freely move their capital, data and activities out and about, are granted to them by society. The executives and the shareholders of these companies, therefore, should not forget their responsibilities towards society, something they cannot do without.

Legally Cook and his colleagues may have had the freedom to negotiate on their fiscal obligations, and every deal they made with local fiscal authorities may indeed have been compliant with the rules and regulations of the respective jurisdictions; but the real question is whether they comply with the moral responsibilities that come with their privileged position and role in our global society.

According to Klaus Schwab, the initiator of the World Economic Forum (WEF), the capitalistic economic model that focused on individual freedom and financial profit is a broken model that is in its aftermath. We are developing towards a new economic paradigm, one that focuses on human wellbeing and the development of society as such. In such a system every actor - especially those with great influence on society - has to take ownership of the moral responsibility he bears. If he does not, sooner or later he will lose his license to operate: the implicit fiat that society gives a company to exist and to work. Apple, Google and others should start functioning in the spirit of Vittorino da Feltre, if they want to earn their place in tomorrow's society.




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