05/21/2013 04:17 pm ET Updated Jul 21, 2013

Unilateral Taxation Framework Harms America

Getty Images

Now that senators have finished their public castigation of Apple, a national icon that has done more to advance America than most recent legislative gatherings, a more thorough discussion of the tax issues at hand can occur.

Lost in the U.S. Senate Permanent Subcommittee on Investigations' skewering of CEO Tim Cook is the major point: the United States' decision to stand alone in taxing foreign earnings disadvantages American companies and American workers.

It is unclear why those that excoriate unilateral foreign policy are so anxious to embrace unilateral foreign economic policy. Congress criticizing any company's byzantine tax structure given the byzantine tax code they created is akin to the pot calling the kettle black.

Given this assault on its global competitiveness, is it inappropriate for Apple to adapt and preserve its ability to compete with Samsung, whose country imposes no such comparable international tax penalty? Would Apple have been more patriotic to have simply raised the white flag and sacrificed global markets to more favored competitors? Would America be better off if it did? The answer is no.

How Apple should be taxed on international earnings is an international issue. If America singles out American companies for tax on overseas earnings that international competitors do not bear, domestic firms, their workers, and their suppliers lose out. Worse from the perspective of the United States, home to more prominent global consumer brands than any other country, the grandstanding behavior of U.S. Senate subcommittee gives license and legitimacy to America-bashing across the planet.

This is a topic more appropriately addressed through coordinated action by all countries that host significant multinational corporations. Action by any one country only disadvantages that country.

What should the Apples of the world do? They must recognize that the populist appeal of attacking companies' complex tax strategies has great appeal, particularly in these times when governments across the globe are under extreme fiscal pressures. As more members of society take advantage of increasingly unsustainable social safety nets, politicians are desperate to find scapegoats and diversions. Multi-billion dollar international corporations are a pretty easy mark. It is in the best interest of multinationals to avoid being targeted in this manner.

The enlightened approach for U.S. companies is to push for an international tax compact that applies equally to all, regardless of the location of their headquarters. American companies have the most to gain from this effort and should be most motivated to lead the charge.

On this issue, steering clear of politics and ignoring the issue will be more harmful to your company's long-term competitiveness than would result from active engagement. Getting involved and proposing solutions will be worth it to businesses even if it riles up a few members of Congress in the process.

Whether the G-20 is up to this task remains in doubt, though the countries involved would have the most to gain since they contain the majority of corporate headquarters.

Luckily for businesses interested in starting this dialogue, a framework for action already exists. Edmund Pratt, Chairman and CEO of Pfizer, worked with 13 leading American companies to form the Intellectual Property Committee, which partnered with business organizations in Europe and Japan to add Trade Relations Aspects of Intellectual Property Rights (TRIPS) protections into international trade law, overcoming government resistance to such action across the globe.

Apple and other innovative companies would have far fewer opportunities around the world if Pratt had not successfully advocated for global intellectual property protection in the 1990s. All companies will be in a world of hurt in the future unless they take the lead today to develop a fair and balanced system to tax international earnings.

Hon. Mark R. Kennedy leads George Washington University's Graduate School of Political Management and is Chairman of the Economic Club of Minnesota. He previously served three terms in the U.S. House of Representatives and was Senior Vice President and Treasurer of Federated Department Stores (now Macy's).