Multinational Companies Power

In what ways do multinational companies exercise significant power over the US government

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School of Politics and International Relations






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‘In what ways do multinational companies exercise significant power over the US government?


In today’s era of globalisation, multinational companies exercise a substantial amount of power influencing the political sphere through campaign funding and lobbying to say the least. For some, this has led to the government representing corporations more than it represents people. Throughout this essay the extent of corporate political influence will be explored assessing in what ways multinational corporations engage in the political process and whether this involvement truly has an effect.
As aforementioned the power of multinational corporations over the US government is significant, a key way this can be reflected is through their ability to reduce their tax and in some cases even avoiding tax. There are a number of ways some of the world’s most well-known companies do so, with an end goal of achieving tax-levels which serve their best interest. Some corporations carry out a process of corporate inversion, which involves the relocation of a company’s base to a country with low-tax jurisdictions. As a result of this corporations such as Apple have ‘reduced their corporate income tax by an average of $10 billion-a-year for the past four years.’ This strategy allowed them ‘to pay an effective tax rate of 12.6% -- one of the lowest among U.S. corporations.’ Currently corporation tax in the U.S stands at 35% ‘the highest overall rate of any of the worlds developed economies.’ This contrast in corporation tax undoubtedly indicates the power of MNC’s translated through the first dimensions of power in its simplest form by multinational corporations (A) exercising power over the government (B). This is reflected in that although there are laws in place multinational corporations bypass and circumvent these laws. Their economic power provides them with the means to establish more favourable conditions for their company to prosper, ultimately maximising their profits. In this context the power of MNC’s over the US government is prominent in that their superior economic resources puts them in a position to exploit the existing tax loopholes for corporate benefit.
Nonetheless this can be undermined in that multinational corporations do not possess full exception from tax and that although they may carry out measures to avoid tax; this doesn’t go unnoticed by the government. Corporations such as Apple have come under fire from the Senate Subcommittee; with the investigations chairman Carl Levin coming to a conclusion that Apple used ‘a complex web of offshore entities to avoid paying billions of dollars in US income taxes.’ Additionally the Obama administration has also undertaken measures to curtail tax inversion. Treasury Secretary Jack Lew passed a bill which would ‘significantly diminish the ability of inverted companies to escape U.S. taxation.’ As a result this clearly indicates that the government retains power as they continue to exercise authority over such corporations ensuring that legal jurisdictions are followed. It ultimately challenges the view that multinationals have vast amount of power which allows the government to disregard their tax avoidance.
However this doesn’t weaken the fact that multinational corporations still possess a significant amount of power over the government in regards to taxation. Due to corporate inversions and other forms of tax avoidance by multinationals, they have forced the US government to form a debate about the current levels of corporation tax and what type of action should be taken to subvert corporate inversions. ‘President Barack Obama\'s 2015 budget proposed making inversions harder to do by raising the foreign ownership required. Congressional Democrats have made similar proposals.’ This influence over the US government can be expressed through the second dimension of power. Bachrach and Baratz discuss this dimensional-view of power in regards to shaping