A panel on economic inequality went off script this weekend, as the participants told the gathered billionaires that their philanthropy and pet projects for the poor were not the answer to economic world justice.
This wasn't what Davos had in mind....
In a seminar room in Oxford, one of the reporters who worked on the Panama Papers is describing the main conclusion he drew from his months of delving into millions of leaked documents about tax evasion. “Basically, we’re the dupes in this story,” he says. “Previously, we thought that the offshore world was a shadowy, but minor, part of our economic system. What we learned from the Panama Papers is that it is the economic system.”
Luke Harding, a former Moscow correspondent for The Guardian, was in Oxford to talk about his work as one of four hundred–odd journalists around the world who had access to the 2.6 terabytes of information about tax havens—the so-called Panama Papers—that were revealed to the world in simultaneous publication in eighty countries this spring. “The economic system is, basically, that the rich and the powerful exited long ago from the messy business of paying tax,” Harding told an audience of academics and research students. “They don’t pay tax anymore, and they haven’t paid tax for quite a long time. We pay tax, but they don’t pay tax. The burden of taxation has moved inexorably away from multinational companies and rich people to ordinary people.”One of the chief objectives of neoliberalism is to remove taxes from capital and put them on labor, while simultaneously increasing capital share over labor share through other institutional arrangements in collusion with politicians on the make and take. The result is populist revolt that the establishment has pulled out all stops to confront.
“Closing Panama Tax Haven Will Require Fighting the Most Powerful Lobby In the World,” The Real News Network, April 14, 2016.
Economist Michael Hudson says oil and mining industries and the State Department created Panama and Liberia for the express purpose of tax evasion.Video and transcript.
The British government’s claim to be tackling tax evasion is about as credible as Al Capone claiming to be leading the fight against organized crime. In fact, Britain is at the heart of the global tax haven network, and continues to lead the fight against its regulation.
The 11 and a half million leaked documents from Panamanian law firm Mossack Fonseca have proven, once again, what we have already known for some time – that the ‘offshore world’ of tax havens is a den of money laundering and tax evasion right at the heart of the global financial system.
Despite attempts by Western media to twist the revelations into a story about the ‘corruption’ of official enemies – North Korea, Syria, China and, of course, Putin, who is not even mentioned in the documents – the real story is the British government’s assiduous cultivation of the offshore world. For whilst corruption exists in every country, what enables that corruption to flourish and become institutionalized is the network of secretive financial regimes that allow the world’s biggest criminals and fraudsters to escape taxation, regulation and oversight of their activities. And this network is a conscious creation of the British state.
Of the 215,000 companies identified in the Mossack Fonseca documents, over half were incorporated in the British Virgin Islands, one single territory in what tax haven expert Nicholas Shaxson calls a “spider’s web” of well over a dozen separate UK-controlled dens of financial chicanery.
In addition, the UK was ranked number two of those jurisdictions where the banks, law firms and other middlemen associated with the Panama Papers operate, only topped by Hong Kong, whose institutional environment is itself a creation of the UK. And of the ten banks who most frequently asked Mossack Fonseca to set up paper companies to hide their client’s finances, four were British: HSBC, Coutts, Rothschild and UBS.….
The entire UK-controlled web is home to offshore deposits estimated in 2009 to be worth $3.2 trillion, 55 percent of the global total….The remnant of empire.
Whilst ostensibly involved in a process of ‘decolonization’, in fact the UK hung on to a large global network of small, sparsely-populated islands: “The British empire”, Shaxson wrote, “had faked its own death.” These islands were to serve the same imperial purpose the empire had always had: the projection of British power and the channeling of African, Asian and Latin American wealth into Britain. But whilst some of the islands, such as Diego Garcia and the Falklands, were to serve as crucial military outposts, many of the others were developed as a means of facilitating the financial plunder of the former colonial world.
In Shaxson’s words, the role of these tax havens is to “capture passing foreign business and channel it to London just as a spider’s web catches insects” whilst also acting as a “money laundering filter that lets the City get involved in dirty business while providing it with enough distance to maintain plausible deniability.”…
Indeed, much of Cameron’s battling with Europe has been driven precisely by the desire to maintain the impunity of the City and its web of tax havens in the face of attempts by the EU to regulate the banking sector.…RT
The biggest scandal in the Panama Papers leak, which revealed that political leaders around the world were hiding money in offshore accounts, isn't about corruption or organized crime.
The 11.5 million files stolen from the Panamanian law firm Mossack Fonseca revealed just how unequal the world is.
The economist Gabriel Zucman estimated in his 2015 book, The Hidden Wealth of Nations, that worldwide more than $7.5 trillion is squirreled away in offshore tax havens — 8 percent of the world's financial wealth. While some of it is properly declared to world governments, about 80 percent, or $6 trillion, is never taxed at all.
Zucman, an assistant professor of economics at the University of California Berkeley, argues that this tax avoidance worsens the vast global gap in wealth and income between the rich and the poor. Hiding vast sums of wealth from taxation makes it easier for the rich to stay rich and avoid tax policies meant to help the poor. Offshore accounts also make it harder for everyone else to get rich, because they're paying higher taxes to make up for the tax dollars the wealthy don't pay when they shelter their assets overseas.
"If we want to deal with rising inequality seriously, then we need to make these forms of tax dodging much, much more limited," Zucman told me in an interview.
We discussed how Zucman totaled up that $8 trillion number by solving a puzzling mystery in global economics, the disturbing lessons from the Panama Papers, and the drastic steps toward transparency Zucman argues are necessary in order to stop tax evasion.
The transcript of our conversation follows, edited and rearranged for length and clarity….Vox
See, we all have it all wrong. We all need to read the WSJ and the NYT and celebrate the good news of massive tax fraud by business elites and join together to denounce government. Ignore the tens of thousands of wealthy men behind the screen of bank secrecy evading taxes. They are a “distraction.”The neoliberal spin machine.
Examine democratic and budgetary crises across the world and you’ll find a running theme – tax havens. Let’s take a look: in the last three years alone, in France the budget minister has had to resign because he had cheated on his taxes for 20 years through unreported offshore accounts. In Spain, the former treasurer of the party in power has gone to jail after having revealed a hidden system of financing through Swiss banks. In the United States, Congress has revealed that Apple avoided tens of billions in taxes by manipulating the location of its profits, at a time when US infrastructure is crumbling.
Accepting the status quo seems irresponsible.…
There have been numerous journalistic investigations, which have pushed forward our understanding of the tricks used by multinational firms, but from careful case studies it is hard to infer the overall cost to government coffers.
In my new book, The Hidden Wealth of Nations, I try to fill this gap. I gathered the available data sources on the international investments of countries, the balances of payments, the on- and off-balance sheet positions of banks, the wealth and income of nations, the accounts of multinational companies and more.
Some of these statistics have never been used before and this is the first time that all this information has been collected, confronted and analysed with a single objective: to expose the true activities of tax havens and their costs to foreign nations.Longish but definitely worth a read.
The sheer scale of the hidden assets held by the super-rich also suggests that standard measures of inequality, which tend to rely on surveys of household income or wealth in individual countries, radically underestimate the true gap between rich and poor.
Milorad Kovacevic, chief statistician of the UN Development Programme's Human Development Report, says both the very wealthy and the very poor tend to be excluded from mainstream calculations of inequality.
"People that are in charge of measuring inequality based on survey data know that the both ends of the distribution are underrepresented – or, even better, misrepresented," he says.
"There is rarely a household from the top 1% earners that participates in the survey. On the other side, the poor people either don't have addresses to be selected into the sample, or when selected they misquote their earnings – usually biasing them upwards."So it is actually worse than we thought.
Shares of Windstream Holdings surged more than 12 percent Tuesday when the Little Rock, Arkansas-based telecom company said it was going to spin out some of its fiber and copper cable and other real-estate assets into a real-estate investment trust, or REIT. The move will allow Windstream to cut down its debt load and save millions every year in taxes—and the company said it has the blessing in the form of a 'favorable private letter ruling' from the Internal Revenue Service.You can see where this is going.
To really understand the extent of Google and Apple’s innovative zeal, you may want to look past their groundbreaking products – and more at their tax avoidance strategies. In a new scheme that defies belief, some of the nation’s top tech giants are managing to evade taxation on money by parking it overseas – and then somehow taking government payments on it....
The tech sector has led the way on this, moving their patents and other intellectual property to low-tax countries to give the appearance that their profits have been earned offshore....
At current tax rates, the companies would have to pay $119.45 billion of that to the IRS if they repatriated it. Much of this money is held in segregated U.S. bank accounts, solely for the purpose of avoiding taxes by nominally keeping it offshore.
Sure enough, tech firms are among the companies lobbying for a repatriation tax holiday, which would allow them to return that money home at ultra-low rates....
But it’s actually worse than all this. A report from the Bureau on Investigative Journalism shows that these tech firms are actually taking government payments on the money they have parked overseas to avoid taxation. That’s because that money isn’t sitting under a mattress somewhere in Bermuda or the Cayman Islands; it’s invested, and the No. 1 investment these firms use is the ultra-safe, ultra-liquid instrument of U.S. government debt.
Yet another Senate report, yet another bank is busted for tax evasion. The Senate permanent subcommittee on investigations has released a report on Credit-Suisse bank detailing their systemic offshore tax evasion of U.S. funds.Economic Populist
Here's another recent finding in experimental economics:
We analyze how tax evasion is affected when the same income is earned without any effort, or with a moderate or high level of effort.We find that subjects who have invested high levels of time and effort evade significantly more taxes.
"In other words, people who feel more entitled to their income, by virtue of sweating for it, are more likely to try to keep it.
You might think this unsurprising."
But I think it highlights something I've said before - that neoliberalism is performative; it doesn't just describe the world, but creates it.
One claim of neoliberalism is that individuals are entitled to their incomes, as these are the result of work and contribution to society rather than to, say, luck or accidents of history. If people believe this, then they will have lower tax morale, and so will try to dodge taxes either legally or not. The neoliberal claim that higher tax rates reduce revenues will therefore be true. But this will be only so by virtue of people believing they are entitled to their incomes. Neoliberalism then becomes a self-fulfilling belief equilibrium....
This poses the questions: is it possible to shift the belief equilibrium away from the neoliberal to the social democratic one, and if so how?Stumbling and Mumbling
Forbes Magazine likes to call itself a “capitalist tool,” and routinely offers tool-like justifications for whatever it is that profit-seeking corporations want to do. Recently it has deployed its small army of corporate defenders and apologists in the multi-billion dollar fight to keep the effective tax rates of global corporations low.
One of its contributors, Tim Worstall, recently took me to task for suggesting that a way for citizens to gain some countervailing power over large global corporations is for governments to threaten denial of market access unless corporations act responsibly.
He argues that the benefits to consumers of global corporations are so large that denial of market access would hurt citizens more than it would help them. The “value to U.S. consumers of Apple is they can buy Apple products,” Worstall writes. “Why would you want to punish U.S. consumers, by banning them from buying Apple products, just because Apple obeys the current tax laws?”
Wortstall thereby begs the central question. If global corporations obeyed all national laws — the spirit of the laws as well as the letter of them – and didn’t use their inordinate power to dictate the laws in the first place by otherwise threatening to take their jobs and investments elsewhere, there’d be no issue.
It’s the fact of their power to manipulate laws by playing nations off against one another – determining how much they pay in taxes, as well as how much they get in corporate welfare subsidies, how much regulation they’re subject to, and so on – that raises the question of how citizens can countermand this power.Beware Capitalist Tools
U.S. and UK financial firms are pretending they haven't been deeply involved in the dark side of banking.Alternet
Companies in the Fix the Debt coalition, which advocates for federal austerity policies, qualified for $1 billion or more in tax breaks tied to executive pay packages from 2009 to 2011, according to a new report by the liberal think tanks Institute for Policy Studies and Campaign for America's Future....
Fix the Debt is one of several austerity advocacy groups tied to Wall Street billionaire Peter Peterson, who started a think tank devoted to deficit reduction in 2008 and has bankrolled multiple public relations campaigns on the issue.
A total of 125 CEOs are officially members of the coalition, including CEOs of 90 public companies. The IPS-CAF report only examined tax perks for public companies in the coalition. The same CEO pay loophole is available to private companies, but private firms do not have to disclose executive pay to the SEC.
The coalition urges a host of spending cuts and tax reforms, including benefit cuts for Social Security, Medicare and Medicaid, as a means to reduce the federal budget deficit. A spokesman for the group told HuffPost that while the group doesn't advocate for specific policies, it does insist that comprehensive tax reform be part of any debt deal.
The CEO pay loophole being used by Fix the Debt companies is extremely popular in corporate America. According to a report by Citizens for Tax Justice, Fortune 500 companies skipped out on $11.2 billion in taxes in 2011 alone thanks to this loophole.
"The stock option loophole is a major reason why corporations are paying record-low federal income tax rates," said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy. "The worst of it is that there is no 'cost' to a corporation that uses stock options to pay its executives, so there's no justification for allowing them to deduct it as an expense. It's not an expense."The Huffington Post
The global super-rich are stashing trillions of dollars offshore with the help of some of the world's biggest banks, putting billions of dollars out of the taxman’s reach and masking wealth inequality's true heights
Wealthy people were hiding between $21 and $32 trillion in offshore jurisdictions around the world as of 2012, according to a 2012 study from the Tax Justice Network, an organization which aims to promote tax transparency. The study,highlighted by a recent Bloomberg News report, found that more than $12 trillion of that money was managed by 50 international banks, many of which received bailouts during the financial crisis, according to James Henry, the study’s author
“There’s a lot more missing wealth in the world than we had known about from previous estimates,” Henry told The Huffington Post. “The real scandal is not all these individual scandals but the fact that world’s policy makers who know about this stuff, have basically done nothing.”“The real scandal is not all these individual scandals but the fact that world’s policy makers who know about this stuff, have basically done nothing.” Right, because they are in on the scam.
Particularly successful at luring Russians, Cyprus has built up a large infrastructure of lawyers, accountants and other professionals schooled in the arts of tax avoidance. Its corporate registry now has 320,000 registered companies, a staggering number for a country with only 860,000 people.Calculated Risk
