By Chaahat Khattar
This article is the second part of a series of two articles by Chaahat Khattar. Find the first part here.
Problem with the European Commission
The GDP of the EU stands at a staggering 13 trillion pounds, making it the largest economy in the world. On the other hand, the annual budget of the EU is around 141 billion pounds. The imports are not too high when compared to exports in the EU, but the economy is still struggling to tackle the soaring public debt. On paper, the economy looks balanced with positive growth and increasing revenue, but in real terms the sovereign debt is as high as 82% of the GDP, eating almost all the revenue.
Newspapers published stories on how European entrepreneurs bought million dollar businesses outside the continent, but none of them mentioned that those entrepreneurs took billion dollar loans from their local banks for the same, and spent most of the money on buying depreciating assets such as 200 ft yachts or a penthouse in Monte Carlo. Even after the meltdown, no CEO or high flying boss was affected. The companies laid off thousands of workers across the globe and showed off the fact that even CEOs were forced to resign. Now, the question is, did any company demand the million dollars those CEOs made as bonuses during their tenure? Did any company disclose the actual amount of severance packages offered to laid back CEOs?
Even after the economic meltdown, no CEO or high flying boss was affected. | Photo Courtesy: Google ImagesAll such executives are enjoying their holiday homes, leaving the common men flooding job search sites.
[su_pullquote align=”right”]The heads of parliamentary committees are illegal lobbyists who just swap positions from the top floor of a skyscraper to the top position in the government. [/su_pullquote]
No one is demanding a cap on salaries, but at the very least, some regulation and accountability must be enforced over such people. Since there is no harsh punishment or million dollar fines on stealing from your own home, a simple testament in parliament paves way to a new and more relaxed life for advanced corporate criminals. To make things sweeter, the parliamentary committees or the regulatory/advisory bodies of the government, particularly in the EU and US, are headed by ex-CEOs of investment banks who are not satisfied with meagre government salaries and get paid millions in the name of advisor or consultant from banks and financial institutions. They are illegal lobbyists who just swap positions from the top floor of a skyscraper to the top position in the government.
European Commission has critically eyed foreign mergers as well, amongst alien firms which have had a spaceship landing in the EU. The EU wants to charge parking fees for the spaceship. No single merger among foreign nations having businesses in the EU have gone through the transition swiftly and smoothly. Whether its Intel and McAfee or Shell and Cosan, the Commission has taken over a year to clear the mergers making such firms bleed millions in legal fees to the EU. When Google bought Motorola Mobility, the European Commission blamed Google on grounds of anti?trust and demanded a 10% penalty of Googles global revenue of over 37 Billion USD. Novell filed a case against Microsoft in 1993 for predatory licensing practices. In 2012 no one knew where Novell was and what exactly it did, but what everyone did come to know was that Microsoft had to pay 2.1 Billion USD to the European Commission as a fine. Intel Corp also shelled out 1.4 Billion USD on antitrust ruling.
The Other Side of the Coin
European Commission has failed to understand the economic importance MNCs have garnered for the European Union.
Tim Cook has appealed to Apples customers in Europe [1], As responsible corporate citizens, we are also proud of our contributions to local economies across Europe, and to communities everywhere. 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. European Commissions ruling may harm not the US, but the European Union only, especially in the wake of Brexit, which is evident from an instant statement from the United Kingdom Treasury saying that it would “welcome any company wishing to invest in Britain.
The techniques adopted by Apple are termed as tax evasion and not tax avoidance. | Photo Courtesy: Google Images[su_pullquote]The techniques adopted by companies like Apple might be legal in nature, but not ethical.[/su_pullquote]
From a legal perspective, the techniques adopted by companies like Apple are termed as tax evasion and not tax avoidance. Hence they might be legal in nature, but not ethical. Such arrangements are not easy to hide and GlaxoSmithKline can well relate to the same, as it paid over USD 3.4 billion to settle the governments transfer pricing case against it. While the European Commission has found that certain tax regulations are anti-competitive, it has never before ruled whether countries have applied tax regulations fairly in the way it has with Apple, Starbucks and others. Therefore, European Commission itself faces a tough battle to convince courts to back up its stand.
Chaahat Khattar is an ardent economist and is working with an international consultancy firm. He is an MBA and pursuing Masters in Business Laws. He is also a Harvard University alumnus and a certified financial modeller.
The article is only for information and learning purposes. The information and business models depicted in this article are sourced from secondary reliable sources. The analysis and comments presented above are solely of the author of this article and it does not have any relation or bearing with any other party.
References
[1] http://www.apple.com/ie/customer-letter/
Featured Image Credits: Pexels