Multinational Corporate Tax Evasion
https://www.humantruth.info/corporate_tax_evasion.html
By Vexen Crabtree 2024
#civilisation #crime #governance #indonesia #multinationals #tax #tax_havens
Large multinationals excel at tax evasion1. They do it by exploiting holes between tax jurisdictions1, by making their accounting artificially complicated2, and by hiding profits in low-tax countries (at a rate of $1 trillion per year)3, causing true damage to democracies and developing countries alike. They stubbornly resist even the most determined international pressure groups, and only change their ways if forced to when multiple governments co-operate to fix tax holes - their ordinary response is to find new tax havens. The USA's multinationals are the most selfish, hiding about half of their profits, whereas the average for the rest of the world is 30%3.
There are many companies well-known for tax evasion; including tech giants from Silicon Valley - Amazon, Apple, Facebook, Google, Microsoft and Netflix2,4. Nike too5, and, the fashion and textile industry as a whole has produced a long and terrible legacy of using low-tax special zones in places like Indonesia where produce is made in factories using modern-day slave-labour6,7. Consumers face an almost impossible task of trying to narrow down choices to an elusive list of small and hard-to-find ethical companies.
- The Staggering Scale of Tax Evasion
- Evading Tax and Shifting Profits to Low-Tax Countries
- Examples
- Links
1. The Staggering Scale of Tax Evasion
#bahamas #bermuda #british_virgin_islands #cayman_islands #civilisation #crime #democracy #economics #globalism #governance #inequality #internationalism #ireland #malta #mauritius #multinationals #netherlands #panama #tax #tax_evasion #tax_havens #USA
Civilisation relies upon taxation. Workforces are educated, nations are defended. The rule of law, which makes business possible, is secured through state apparatus. The roads on which logistics rely, the national infrastructure that supports electricity and food suppliers, the judicial system: it is all funded through tax. But not all people pay fair. Billionaires manage to pay just 0% and 0.5% of their wealth in tax, significantly less than all others8. The United Nations say that 46% of the world's wealth is owned by the richest 1% of the population9, and economists think somewhere between 10% and 50% of it all is held in tax havens5,1, forcing the poor to pay a much higher proportion and causing true damage to democracies and developing countries alike.10
Tax havens can be found in Panama5,11, the Netherlands5,12, Malta5, the Cayman Islands5,11, Guernsey11,13, Jersey11,13, the British Virgin Islands5,13, the USA's states of Delaware, Wyoming, Nevada and South Dakota plus Puerto Rico11; the Isle of Man11, Mauritius5, Bermuda5,11, the Bahamas11, Ireland14, Luxembourg11, Macao11, Singapore11 and Switzerland11. They support the same financial schemes that also allow organized criminals, drug lords, violent gangs and terrorist groups to launder money.
The complexity of taxes, and the international flows of money, mean that it has moved beyond the ability of any government to fix the problem of tax evasion on its own15,16,17,1. Co-operation is the only possible way to collect tax from the reluctant wealthy, selfish corporations, and antisocial criminal gangs. Since the late 2010s, a multinational scheme saw banks in over 140 places begin to share banking information to catch tax cheats and "offshore tax evasion has declined by a factor of about three in less than 10 years"18 but still, the rich and powerful manage to pay less than struggling citizens18
For more, see:
- " Tax Evasion" by Vexen Crabtree (2021).
The International Consortium of Investigative Journalists (ICIJ) were responsible for reporting on some of the largest leaks obtained from tax havens, shedding some light on the true scale of the problem, and since then, a number of global institutions have taken up the cause with renewed vigour; the first report of the EU Tax Observatory confirms much of what was suspected about corporate tax evasion:
“A persistently large amount of profits is shifted to tax havens: $1 trillion in 2022. This is the equivalent of 35% of all the profits booked by multinational companies outside of their headquarter country. The corporate tax revenue losses caused by this shifting are significant, the equivalent of nearly 10% of corporate tax revenues collected globally. U.S. multinationals are responsible for about 40% of global profit shifting.”
"Global Tax Evasion Report" by EU Tax Observatory (2024)3
“Multinational companies use the extra cash to reward shareholders and edge out smaller competitors.”
International Consortium of Investigative Journalists (2020)5
Not all regions are equally subversive: USA's multinationals hide about half of their overseas profits, whereas the average for the rest of the world is 30%3.
The countries that suffer are mostly European (losing 20% of its corporate tax to evasion by multinationals); the USA loses 14%3.
“This does not mean that profit shifting is not an issue for developing countries - the revenue loss faced by these countries is particularly costly in terms of welfare given the high governments revenue needs of low- and middle-income economies for spending on education, health, and infrastructure.”
"Global Tax Evasion Report" by EU Tax Observatory (2024)3
“Anger at multinationals fiddling their tax returns has been rampant across Europe ever since austerity policies were introduced by their governments in 2009. [...] As governments turn the screw on citizens in order to balance their own books, why should the biggest and most profitable companies not pay their share? To make this happen, the European Commission has stepped up to the plate.”
"The European Union: A Citizen's Guide" by Chris Bickerton (2016)19
For further text on international countermeasures, see the final sections of Tax Evasion.
2. Evading Tax and Shifting Profits to Low-Tax Countries
#bermuda #ireland #netherlands #USA
Large companies can easily move production, employee numbers, management, assets and finance from one place to another (especially on paper). For example, in the USA, multinationals have to declare where profits come from. They lie, and, say that a full 35% of their profits come from just three places: Bermuda, the Netherlands and Ireland5. This outrageous financial distortion sheds some light on the scale of tax evasion being practiced as a matter of routine, and its international nature.
The Service Model: By breaking company services across multiple countries, each corporate body can be made to 'pay' for the services of other parts. So, for example, you move a financial department to a very low-tax country, and then, you can charge massively inflated rates for internal financial services. This removes profit from high-tax HQ country to the low-tax country. The same with other elements, such as patents. You patent a corporate logo in a low-tax country, and then charge the other parts of the company to use it, hiding overall profits in the low-tax country.3. Once these low-taxed incomes are declared, they're free to be moved around internationally without further taxation.
3. Examples
3.1. Nike, Amazon, Facebook, Google, Netflix, Microsoft
Nike became infamous for its tax avoidance strategies5. The big six Silicon Valley companies of Amazon, Facebook, Google, Netflix, Apple and Microsoft have avoided paying anything like fair rates of tax, according to transparency campaigners Fair Tax Mark2. For example, over a decade Amazon achieved a revenue of $960.5 billion but paid just $3.4 billion in tax. They say, of course, that they pay what they owe. But fancy accounting and the hiding of profits means that they owe very little2.
3.2. Apple
Apple organizes itself so that most of its huge profits are not being registered anywhere in the world for taxation. Under its chief, Tim Cook, it was caught out in 2013 for using loopholes in Ireland. He declared that "we pay all the taxes we owe, every single dollar". The lie was in the detail: Because they used loopholes, they didn't technically owe much tax at all. It was easier to get Ireland to change its laws than it was to get Apple to pay tax. As a result, Apple had to change its ways. And I don't mean that they started paying tax - they moved their money elsewhere, and continued to evade.
“Now leaked documents, called the Paradise Papers [show that] despite its CEO's public rejection of island havens, [Panama is] where Apple [first] turned as it began shopping for a new tax refuge. [...] In the end, Apple settled on Jersey, a tiny island in the English Channel. [... From 2014] under this arrangement, the MacBook-maker has continued to enjoy ultra-low tax rates on most of its profits and now holds much of its non-U.S. earnings in a $252 billion mountain of cash offshore.”
International Consortium of Investigative Journalists (2020)4
3.3. The Fashion Industry and Slave Labour in Low-Tax 'Export Processing Zones'
#multinationals #philippines #slavery #tax_evasion
Export Processing Zones is the name given to the commercial land where governments concede tax breaks to multinationals. The factories within EPZs are synonymous with what are popularly known as "sweatshops" and employ labour forces in conditions of modern slavery, often in areas that governments allow to be free from human rights or employment law. These are often only indirectly owned by corporations, so, they can pretend to be surprised when journalists discover that top-level fashion brands are produced there.
“The phrase "tax holiday" is oddly fitting. For the investors, free-trade zones are a sort of corporate Club Med, where the hotel pays for everything and the guests live free, and where integration with the local culture and economy is kept to a bare minimum. [...] Zero-risk globalization. Companies just ship in the pieces of cloth or computer parts - free of import tax - and the cheap, non-union workforce assembles it for them. Then the finished garments or electronics are shipped back out, with no export tax. [...] The Cavite Zone, for example, is under the sole jurisdiction of the Philippines' federal Department of Trade and Industry: the local people and municipal government have no right even to cross the threshold.”
For more, see: