Corporate Tax justice to tackle inequality
In the last ten years the Tax Justice Network has grown and its journalists from ICIJ (International Consortium of Investigative Journalists) have come up with the infamous Panama papers and more recently Luxleaks, the Paradise papers and the Swiss leaks. All of these public exposures have assisted in bringing transparency into HNWIs' worldwide, celebrities included, who store their excess funds in Tax Havens, where they avoid paying any tax to their country's tax authorities. Although the current spiderweb of laws globally allow this, because expensive tax lawyers are able to find every loophole, tax avoidance by the extra wealthy is still a lack of contribution to society. But money is a powerful drug and they'd seemingly rather buy another yacht or property than contribute to their governments' federal reserves which lend a hand towards greater equality and for the good of all. Everyone knows that equal societies are peaceful societies with less crime and physically, mentally and emotionally healthier populations. How does tax avoidance actually work and how do HNWIs do it?
There’s a fine line between aggressive tax avoidance and outright evasion, the latter of which is illegal. Of course it is not only HNWIs but also Multi-nationals who have been avoiding tax aggressively for years. Companies, too many to mention but those who've received negative press because of the amount they avoid paying are the giants such as Apple, Starbucks, Amazon, Google and Nike to name a few. Their tax constructions enable them to see their profits being taxed at only 1%. They do this through inter-company loans where they deduct the interest deductibles and through fancy structuring, with subsidiaries all over the globe, they erode any corporate base rate, (on average 25% in many jurisdictions) by profit shifting. The latter is known as BEPS (base erosion profit shifiting). Shifting profits around the globe through postbox companies and deposits into banks on different tax havens, they manage to claim losses from one subsidiary, after they’ve shifted its profit to another subsidiary, sister company or affiliate in their spiderweb structures of companies.
The European Parliament and Commission have been trying to push through reformed policies with the help of professional ICIJ input and research. The aim is to implement a country-by-country reporting standard, which would mean profits could be taxed where they are earned. But imagine implementation on a global scale with all the online transactions every second. It's a mammoth operation. Before Cameron left his duties as Prime Minister, this idea was also on the G8 agenda. Here this report from the Financial Times of that meeting.
The European Parliament and Commission have been trying to push through reformed policies with the help of professional ICIJ input and research. The aim is to implement a country-by-country reporting standard, which would mean profits could be taxed where they are earned. But imagine implementation on a global scale with all the online transactions every second. It's a mammoth operation. Before Cameron left his duties as Prime Minister, this idea was also on the G8 agenda. Here this report from the Financial Times of that meeting.
The European Commission, OECD and some governments have been undertaking new measures over the last years to ensure that at least in their own countries, 'owners, shareholders, or directors' of registered companies, do actually reside in the countries they state, and/or hold their board meetings there. This at least returns to the economy locally if office space is required and a company employs employees. However, trying to streamline a system totally out of control in a global, lightning flash capital transfer market, success is booked tediously because each and every country needs to follow the same system. Within the EU, that's at least 27 states who need to agree when voting for new laws and democracy can be slow, so they are always behind. Additionally, countries compete against each other in a race to the bottom, offering either to abolish dividend tax, or a continual lowering of the base corporate rate. In the end paying taxes benefits everyone as it has been researched and reported frequently. In its current system, while some companies and countries get richer from the avoidance, it steals billions from poorer countries who don't have the knowledge or expertise to combat tax avoidance yet. An example is below and includes the act of transfer pricing, which is a complicated area for the ordinary lay but involves inter-company business and loans to each other.
On the positive side, progress is being made every day and ICIJ reports updates weekly. For example, last week, ongoing investigations in the Panama papers reveals the chaotic scramble by Mossack Fonseca to survive and sheds light on unknown criminal investigations with new findings about the world's global elite. Much is kept out of the media because otherwise evading tax individuals would flee their countries, but there is much going on behind the scenes.
Those interested in tax justice, namely Tax activists, write to the Queen of England, sit in at important public enquiries, and gain the public's attention through various documentaries. These politically active activists who fight the good fight for a better world and more honest distribution of equality are movements with a long breath and are in it for the long haul, fortunately for us. Take for example, Margaret Hodge, a European Parlimentary who together with others in 2012, grilled Amazon, Google and Starbucks publically which has resulted in Apple paying a few billion in retrospective tax, and Starbucks, who even voluntarily paid a few million as the bad publicity was not good for business.If there is one video to watch it's this one. Watch the top "executives" act clueless and deny while they snake around the issue! Yet still months later they paid up...
Those interested in tax justice, namely Tax activists, write to the Queen of England, sit in at important public enquiries, and gain the public's attention through various documentaries. These politically active activists who fight the good fight for a better world and more honest distribution of equality are movements with a long breath and are in it for the long haul, fortunately for us. Take for example, Margaret Hodge, a European Parlimentary who together with others in 2012, grilled Amazon, Google and Starbucks publically which has resulted in Apple paying a few billion in retrospective tax, and Starbucks, who even voluntarily paid a few million as the bad publicity was not good for business.If there is one video to watch it's this one. Watch the top "executives" act clueless and deny while they snake around the issue! Yet still months later they paid up...
Sheffield University published an interesting article in 2013 about the new concept of Civic Capitalism and it addressees the current system's key elements and flaws outlining how these could be changed. CIVIC CAPITALISM a new model of capitalism Thomas Piketty also, in his Capital in the 21st century best seller, also pleaded for a small 0.01 % tax on HNWIs' capital and corporate profits. Excellent ideas but right wing political policies oppose as much as possible, claiming it would be state intervention, preferring deregulation. A short-sighted view on economics because long term, everyone benefits when Africa, poorer nations and poorer populations live in more equal societies. Less immigrants, less violence and overall more peaceful societies. However, just as the end of slavery, child labour and winning women the vote took decades politically to achieve, tax justice too will take time before morality is served to all of society. In the meantime, the Scrooge's of society will continue to fill up their pockets at the expense of societies and government budgets, for useful things such as healthcare and infrastructure.
Recently in The Netherlands, political turmoil has seen the ruling party face much opposition for their hope and plans to abolish dividend tax. They argue that companies provide employment. Again a short sighted view because even the Dutch reputable press publishes articles on how in 7 years, 52% of jobs will be done by Artificial Intelligence. Companies will naturally go for AI if it saves them labour costs. As long as the right wing liberals continue to serve the wants of the elite, the rise of right wing populism will not go away. Tax avoidance is still an injustice to society and legality doesn't make it moral. Slavery, apartheid, child labour and no vote for women weres also, once upon a time 'legal.'
Another ugliness that results from tax avoidance and profit shifting of HNWIs and multi-nationals is that it launders dirty money. A Dutch Bank Finance executive recently stepped down because unbeknown to them in past years, they had had clients who had been doing exactly this. Even after all banks officers had taken the ethical oath after the crisis. But this problem is widespread. This article outlines the trouble the UK is having in their investigation, where the Cayman Islands, a well known tax haven, are failing to help. As Will Fitzgibbons, from the ICIJ reports on Twitter.
We are taking steps forward though with databases now online after whistle-blowers have aided investigative journalists and soon the non-transparent secrecy in banking, and company ownership will dissipitate, the more secretive information is bought to light. Some companies and HNWIs are already beginning to change their tune in their aggressive tax avoidance. But only with pressure will it continue to happen. So make sure you know what tax avoidance is, how it's done, and get involved in politics to ensure your government puts policies in place to put a brake on this immoral practice.
