I am a little taken aback by all the righteous indignation that has been leveled at multinational companies like Starbucks which have been shown to be rather good at corporate tax avoidance. I'm also rankled by the anger shown to rich individuals like the French Actor Gerard Depardieu who choose to move in order to pay less tax. Do people get the difference between tax avoidance and tax evasion? Depardieu first. He's decided to move to Belgium, to Nechin, a small town a mere stone's throw from the French border. He is not alone in doing this; Nechin is home to 2,800 French people and many of them are wealthy and live there only because it allows them to pay less tax while being able to drive into an office in France in minutes. The anger that has met Depardieu's decision is quite entertaining. One politician went as far as to suggest he should be stripped of his nationality. The prime minister called the move “pathetic”.
Others have called the actor a traitor or even a thief. We're told he's not contributing his fair share of tax and that he is stealing from the people. Why should he get away with not paying tax when ordinary people are being burdened with increasingly high taxes, when moreover the country is facing an economic crisis? As Line Renaud, a doyenne of French actors, put it in a television interview: “Your country is in crisis. You don't leave the ship.” It would be entertaining if it weren't missing the point. The reason so many wealthy people are leaving or thinking of leaving France is because France taxes the wealthy like nowhere else in Europe. By moving to Belgium, Depardieu will not have to pay France's new 75 percent income tax on income over €1 million, nor will he be subject to France's wealth tax on assets worth more than €1.3 million, nor will he pay capital gains tax.
Those are hefty savings, not just because he makes €2 million a film but because he is also a businessman who owns properties, restaurants, vineyards and other businesses in France and elsewhere. He will continue to pay taxes to the French state, just less of them, and he will also start paying taxes to his new home country of Belgium. His overall tax bill will be greatly reduced, but it will still be way more than any of those in the angry mob calling him a traitor pay every year. That's the thing, how would you feel about having such a huge chunk of your income confiscated by the state? The 75 percent tax rests on the idea that a million euros is plenty and allows anyone to live in more than luxury, so it is only fair that income over that threshold should be heavily taxed. The idea is not without merit, but can you really blame those who earn that kind of money for wanting to move elsewhere? Besides, when a country is in economic crisis, surely what it needs is to encourage people to generate wealth, not the opposite. Corporate tax avoidance is another matter. It is unfair that Starbucks pays so little corporate tax compared to coffee shops who only operate locally and so cannot choose how and where they pay their taxes. Ditto for Google, it seems unfair that its accountants can use the world as a playground and move money around so that $2 billion annually is stashed away in the tax haven of Bermuda. Unfair yes, but illegal or immoral, no. International business is unfair. Multinationals have advantages of scale and scope over their smaller national competitors. It is also a sign of just how pathetic human beings are that they flock to the familiar and will choose to drink their coffees in Starbucks, eat their burgers in McDonald's and buy their clothes in Zara, whether they are in Riyadh, London, Dubai or Moscow. We like brands; it's stupid, but there it is, and once a company has built a brand, it reaps the benefits worldwide. The brand is worth more than the design, or the raw materials, or any other element in the supply chain. People don't go to Starbucks because the coffee is good, they go there because they know what to expect. When Eric Schmidt, the Chairman of Google, says he is proud of his company's structure and that it's just “capitalism”, I can only agree with him. Companies are in the business of making money for their shareholders, and if they operate globally, they have the opportunity to adapt their business accounting to minimize their tax burden. Suddenly this surprises people. How dare companies try to pay less corporate tax! Well that's capitalism.
When you couple it with globalization that's what you get. The onus is not on companies to willingly pay more tax as Starbucks has now decided to do in Britain, but on lawmakers to adapt their thinking to the new realities of multinational business. Companies have a duty to their shareholders not to the nations where they do business; blaming them for finding ways to legally pay less tax seems absurd. Tax avoidance is not only legal but logical; most of us would flinch at having to give away in taxes more than three-quarters of what we earn even if we would happily give to the poor or to charities. It doesn't make people selfish or unpatriotic, just human. — Imane Kurdi is a Saudi writer on European affairs. She can be reached at [email protected]
