Think Bigger, Bill Gates

The Economist reports that if Microsoft ends up actually paying the fines which have been assessed by the EU Anti-Competition bureaucracy, it will make a bigger contribution to the EU budget than many member countries.  The article points out what happens to the money:

Fines in competition cases are quietly pocketed by the Union, and poured into the general budget.

Government agencies will gladly lie, cheat, and steal to get money without having to ask their friendly local politicians because the politicians have to justify the tax bill to the voters.  The more money the EU bureaucracy can raise through fines, the closer they can get to living in the style to which they'd like to become accustomed.

The article points out that the recent €899m fine is more than Sweden, one of the richer EU contributors, paid into the EU budget in 2006.  The writer suggests that Bill Gates should just buy one of the smaller countries - it wouldn't cost him any more, and that way he'd at least get a vote.

The Cost of Empire

This sounds attractive until it's subjected to analysis.  Owning a country tends to be a losing proposition - the main reason England gave up the British Empire was that running the Empire didn't pay.  There were so many conflicts with various "lesser breeds without the law," as Rudyard Kipling put it, that keeping the Empire cost more than it returned in taxes.  How much oil would we have to pump out of Iraq to get our money back?  Building an empire loses money given today's limitations on using effective methods of nation-building.

Nation Building for Dummies

The Romans had a well-tested and highly effective solution to minimizing the cost and maximizing the tax revenue of running an empire, but the British were too squeamish to follow state-of-the-art methods of empire / nation building.

Given that the British couldn't keep the natives in line, there's no reason to think that Mr. Gates could manage it either.  Owning a country won't net him any benefit and it would only give him one vote, which might not be enough.

Payment for Services Rendered

We've explained how the Taiwanese government got the benefits of many United Nations General Assembly votes without having to assume the costs of actually running the countries which voted their way - they encouraged their people to found export businesses which earned enough foreign exchange to bribe government officials.

There's a slight problem in that the US government forbids US companies to pay overseas bribes, but that's a trivial matter for a man of Mr. Gates' means and connections.  The Chinese government has shown that it has no problems with Chinese companies paying all the bribes they find to be commercially worthwhile.  Microsoft has subsidiaries in China, India, and in other countries which have a more relaxed attitude towards bribery than the United States has.

The solution to Mr. Gates' EU problem is not to buy one of the EU countries no matter how much being a wholly-owned subsidiary of Microsoft would benefit the citizens thereof.  The cost-effective solution is to use some of Microsoft's overseas millions to persuade compliant officials to see things Microsoft's way.

Best of all, the actual manufacturing cost of Microsoft's products is close to zero so he can recognize the profits in pretty much any country he likes.  If the matter is handled properly through appropriate adjustment of transfer prices and allocating development, support, and maintenance expenses, the profits and the bribe money can be realized in the country of choice.  That way, the entire sum will be tax-deductible.