One of the most controversial episodes of October 2012 was the revelation that many multinational companies, including Starbucks, Apple and Google, have been evading corporate taxes in the UK through tax management schemes. Most strikingly, all of these schemes have been legal leading to suggestions that such companies have undue influence over politicians in this country. However, commercial interference in the state is nothing new.
Much of the initial imperial expansion of Britain is owed to commercial interest. The desire to dominate the markets for primary goods in Europe led to conflict between companies that often turned violent. It was in the interest of states economically for their own companies to control these markets. This interest led to military (the supply of troops) and economic (in the form of limited liability) intervention.
In no case did this intervention prove more successful than in that of the East India Company. It was Elizabeth I who granted the company the monopoly in trade from the Cape of Good Hope. Through granting licenses for privateering and the limited service of her navies, Britain could successfully manage this trading stream, guaranteeing huge domestic profits.
Although the East India Company did pay its taxes, it benefited politically in many other ways. Most notably, an East India Company lobby was created, designed solely to protect its interests in parliament. Furthermore, by financially supporting unstable foreign leaders, they ensured their continued influence abroad. If any aspect of the company is echoed in the recent headlines, this must surely be it.
However, this history provides a word of warning for today’s multinationals. The ultimate downfall of the East India Company was not market competition; it was rather its increasing involvement in the Bengalese government that meant it simply stopped focusing on trade. As such, politics killed the profits of the East India Company.