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TechnoratiTax Haven Racket
Lucy Komisar of the Tax Justice Network—USA (taxjustice-usa.org) spoke at the Conference on Taming the Giant Corporation last week about "Closing Down the Tax Haven Racket." Her words were so compelling that the rest of this column is devoted to excerpts from her presentation:
"The tax haven racket is the biggest scam in the world. It's run by the international banks with the cooperation of the world's financial powers for the benefit of corporations and the mega-rich…. [M]ost Americans, including progressive activist Americans, don't know what I'm going to tell you. And that's part of the problem.
"Tax havens, also known as offshore financial centers, are places that operate secret bank accounts and shell companies that hide the names of real owners from tax authorities and law enforcement. They use nominees, front men. Sometimes offshore incorporation companies set up the shells. Sometimes the banks do it. Often someone will use a shell company in one jurisdiction that owns a shell in another jurisdiction that owns a bank account in a third. That's called layering. No one can follow the paper trial.
"Offshore is where most of the world's drug money is laundered, estimated at up to $500 billion a year, more than the total income of the world's poorest 20 percent. Perhaps another $500 billion comes from fraud and corruption.
"Those figures fit with [International Monetary Fund] numbers that as much as $1.5 trillion of illicit money is laundered annually, equal to two to five percent of global economic output.
"Wall Street wants this money. The markets would hurt, even shrivel without that cash. That's why Robert Rubin as Treasury Secretary had a policy, as Joseph Stiglitz told me, not to do anything that would stop the free flow of money into the US. He was not interested in stopping money laundering because the laundered funds ended up in Wall [Street], maybe in Goldman Sachs where he had worked, or Citibank, where he would work.
"Attempts to find laundered funds are usually dismal failures. According to Interpol, $3 billion in dirty money has been seized in 20 years of struggle against money laundering -- about the amount laundered in three days.
"The other major purpose of offshore is for tax evasion, estimated to reach another $500 billion a year.
"That's how corporations and the rich have opted out of the tax system.
"They have sophisticated mechanisms. There's transfer pricing. A company sets up a trading company offshore, sells its widgets there for under market price, the trading company sells it for market price, the profits are offshore, not where they really were generated.
"Two American professors, using customs data, examined the impact of over-invoiced imports and under-invoiced exports for 2001. Would you buy plastic buckets from the Czech Republic for $973 each, tissues from China at $1874 a pound, a cotton dishtowel from Pakistan for $154, and tweezers from Japan at $4,896 each!
"U.S. companies, at least on paper, were getting very little for their exported products. If you were in business, would you sell bus and truck tires to Britain for $11.74 each, color video monitors to Pakistan for $21.90, and prefabricated buildings to Trinidad for $1.20 a unit.
"Comparing all claimed export and import prices to real world prices, the professors figured the 2001 U.S. tax loss at $53.1 billion.
"Or a company sets up subsidiaries in tax havens — to "own" logos or intellectual property. Like Microsoft does in Ireland, transferring software that was made in America, that benefited by work done by Americans, to Ireland so Microsoft can pay taxes there (at 11%) instead of here (at 35%). Why is Ireland getting the benefit of American-created software? It's legal. We need to change the law.
"When logos are offshore, the company pays royalties to use the logo and deducts the amount as expenses. But the payments are not taxed or are taxed minimally offshore where they are moved…. When Cheney ran Halliburton, it increased its offshore subsidiaries from 9 to at least 44.
"Half of world trade is between various parts of the same corporations. Experts believe that as much as half the world's capital flows through offshore centers. The totals held offshore include 31 percent of the net profits of U.S. multinationals.
"The whole collection of tax scams is why between 1989 and 1995, of US and multi-national corporations operating in the United States, with assets of at least $250 million or sales of at least $50 million, nearly two-thirds paid no U.S. income tax.
"In 1996-2000, Goodyear's profits were $442 million, but it paid no taxes and got a $23-million rebate. Colgate-Palmolive made $1.6 billion and got back $21 million. Other companies that got rebates in 1998 included Texaco, Chevron, PepsiCo, Pfizer, J.P. Morgan, MCI Worldcom, General Motors, Phillips Petroleum and Northrop Grumman. Microsoft reported $12.3 billion U.S income in 1999 and paid zero federal taxes. (In two recent years, Microsoft paid only 1.8 percent on $21.9 billion pretax U.S. profits.)
"During the 1950s, U.S. corporations accounted for 28 percent of federal revenues. Now, corporations represent just 11 percent.
"Those unpaid taxes can buy a lot of politicians and power. When Nixon needed money to pay the Watergate burglars, he got it from some corporate offshore bank accounts.
"The system has given the big banks and corporations and the super-rich mountains of hidden cash they use to control our political systems.
"The offshore system must be dismantled.
"So why isn't the progressive movement doing something about this? This is a case where some people in Congress are ahead of the activists. There are a handful of Democrats like Senators Levin (MI), Dorgan (ND) and Conrad (ND), like Rep. Doggett (TX), who are speaking out and introducing legislation. But there is no movement behind them. And while Obama has signed onto the Levin Stop Tax Haven Abuse Act, Clinton, Biden and Dodd have not."
Ms. Komisar spreads out the proposed strategies at taxjustice-usa.org. One or more are structured so that you can play a part in furthering them toward adoption.
As she concluded: "Let's get the country to tell the corporations that the taxes they are dodging is our money."
Ralph Nader is a consumer advocate, lawyer, and author. His most recent book is The Seventeen Traditions.
35 Comments so far
Show AllBluesmoke, you are missing the whole point of the article (actually, I suspect you already know that and are just trying to obfuscate the point). It isn't that Microsoft doesn't pay taxes on their REPORTED income, it is that they use tax havens so they don't have to report all their income. The title of the article, "Tax Haven Racket," should have been your first clue. There is an enlightening story about this practice in an Irish publication, see: http://www.finfacts.com/irelandbusinessnews/publish/article_10005150.shtml
One of MS's Ireland havens saved them about $500 million in US taxes in 2004. I should add that MS has more than one tax haven in Ireland, and no doubt more elsewhere. Now, would you care to tell us again how they are paying all their US taxes... or were you just blowing smoke, eh Bluesmoke?
Ralph Nader has previously endorsed the idea of taxing assets(as opposed to income). This is important with respect to the material in this article. Most of the assets deposited into these offshore bank accounts are in fact invested in countries like the US or EU. One way to adapt to the current situation is simple to have a hefty per citizen exemption in a asset tax-and tax all offshore investment at the rate the wealthy are taxed-and move away from taxation of income.
Assets are more concentrated than income. The rich would pay more under this type of system-and the basic exemption for taxation could be greatly raised(in nader's campaign position papers they estimated to $50-100K per family(and that includes FICA taxes).
all is going according to plan.....
the illuminati
Most Naderites blindly accept his proclamations, and the proclamations of those he favors, without bothering to do anything as mundane as verifying a few facts. Ms. Komisar throws out many figures and alleged facts, some easier than others to verify. One that is easy to verify or refute is what Microsoft paid in taxes for 1999.
Komisar states "Microsoft reported $12.3 billion U.S income in 1999 and paid zero federal taxes. (In two recent years, Microsoft paid only 1.8 percent on $21.9 billion pretax U.S. profits.)"; a quick review of Microsoft's income statement for 1999 shows Komisar's statement to be false; pre-tax income for fiscal year 1999 was $11.9 billion, net income was $7.8 billion, meaning Microsoft paid $4.1 billion (34%) in taxes. In 2000 pre-tax income was $14.2 billion, net income was $9.4 billion, meaning Microsoft paid $9.4 billion (34%) in taxes. Komisar's claim that Microsoft paid 1.8% on $22 billion pre-tax "profits" during the preceding 2 years is also false, more than $10 billion (29%) was paid on a combined $34.8 billion in pre-tax income.
Many other statements Komisar makes have no factual basis; half the world's trade is between various parts of the same corporation? Nixon got money to pay the Watergate burglars from an offshore account? Where do these "facts" come from?
Do any of the sheep who blindly follow Nader the Shepard ever stop to consider the so-called evidence? It's doubtful; generally, it's enough that Nader says it.
The problem is that Corporations are virtual creations and human are physical creation.
We don't live in the same element because we don't have the same needs !
Humans don't have the same freedom as those virtual creations they themselves created. Man's creation became a brutal monster.
They don't have to follow our rules. They don't have the responsabilities towards life that we have and they just don't care.
Although, we have to admit they are runned by human beeings just like you and me. Amazing.
Thanks ezeflyer. I think I like the 23% sales tax idea better than shakker's idea since after thinking about it, only taxing the extremely wealthy just gives them more power. It means they'd be footing the bill for everything and would essentially be taking care of the rest of us. They'd have us under their bootheels if they don't already.
iwarrior said:
"What does everyone think of Mike Gravel's taxation idea?"
Nader recently wrote a very favorable article about Mike Gravel on Common Dreams. I think he likes Gravel's taxation idea. Who would not like it? Besides tax accountants and tax attorneys, H&R Block and others who would lose their cash cow, that would be the people who would have to pay their fair share: the oligarchy and those who own stock in its banks and corporations. But the best part of all his ideas is that if they don't work, in fact if any government idea doesn't work, we the people can easily change it and introduce ur own laws. More on his taxation proposal here:
http://www.gravel2008.us/
Its time to start treating corporations like people.
Ralph, I wonder if you realize this upcoming presidential election might be the perfect time for you to run?
All these disillusioned Democrats might just be ready this time.
Vic Anderson said:
"So Ralph, why don't you LEAD the rest of US to similarly incorporate en masse (or establish a trust fund) as America, Inc., move our assets offshore, avoid the taxes and thereby END our BushCo-dependency (and BTW the Bush wars, as well)!?"
I wonder if that could actually be done.. I think it's a great idea. Use their system against them. I know this is wishful thinking, but hey.. you never know til you try right?
This article at least gives people a small idea of how much robbery is going on right under our noses, and we are all so cowed, continue to pay taxes, follow the law, go to work, and 'drink the kool aid', so long as we personally are not under fire (to say nothing of Ed and Elaine Brown). Those folks are currently surrounded by black clad SWAT type guys in Armored Personell Carriers.. and why aren't those same guys surrounding the White House?
Saila: You modest thing, you... that was a damned good economics lesson on the likes of Cheney, and I, too, LOVE Shakker's idea. Problem is with our congress in bed with the lobbyists who whore for these offshoring corporations, where is the lever to implement a change as just, fair, balanced and intelligent as this one?
News for Spike: Ron Paul is a Libertarian conservative. While he would be against corporate welfare he is not for expanding or tightening the tax code on business or corporations. He is opposed to universal health care coverage, etc. More of an Ayn Rand point of view.
I don't know anything about economics, and I'm not very smart either. Speaking at the primary school language level, this is what I understood from the article. I'll give you an example:
Cheney sets up two companies, one in China the other in Japan. He buys raw material from his Chinese company at $50.00 per kilo, but his company actually bought it at $5.00 per kilo from the real Chinese supplier. So, he cheats $45.00 per kilo. Figure how much that is for 500 tons.
The raw material arrives in the U.S. and is turned into manufactured articles. Cheney now sell each article to his Japanese company at $2.00 per article instead of the actual value, which is $100.00 each. He thus shows a net loss of $500 million, and is eligible to get rebate from the IRS, which is actually from your tax dollars and mine. The scheme is not yet finished. His Japanese company that purchased the articles at $2.00 each now sells it at its actual value of 100.00 each, and pockets another $98.00 per article. Figure how much that is for, say, 800,000 articles.
So, Mr Cheney pocketed $45.00 on each kilo of raw material and $98.00 on each manufactured article. This amount of money is, of course, considered chicken feed for Cheney. The real money is in wars. That's probably why he needs a war, any war, with any country, to enrich Halliburton (is that how you spell it?).
The moral of the story: Send a copy of the article to the IRS and say you refuse to pay any taxes on your $15,000 per month salary.
We jail those who work the system to get an extra SS check, yet we let these corporations and wealthy individuals rob us blind and cause more damage than an elderly woman who forgot to report's her husband's death or a single mom who sold her food stamps to someone.
hburbank-Glad to see someone bring up Mr. Ruppert.
shakker-Good idea.
What does everyone think of Mike Gravel's taxation idea?
They changed the tax law in Australia to exempt any off shore company from paying capital gains tax, all in the name of 'investment'. Unfair to average Australians and easy for corporations.
Forward this Nader article to everyone you know.
The answer is to tax corporations at a fixed % of their gross receipts on goods and services sold in the U.S. with the only deduction other taxes paid in the U.S.
This would level the playing field between U.S. corporations and those based elsewhere. This would amount to a consumption tax.
Individuals in the top 10% should pay income tax. The top 5% of estates should pay a 25% estate tax on the amount above the 95 percentile.
Otherwise citizens should pay no other taxes to the federal government. If they are not getting enough they can raise only the corporate tax.
State and local should not be required to put a dime towards any federal mandate. State and local could make any taxes they see fit.
This would eliminate most opportunities to cheat. It would be fair and remove tons of wasted effort dodging the tax system.
Unknown Arts: I find your posts very evocative and informative and thank you for sharing them. I see you feel as passionately as I do about the use of welfare MOM when as you've carefully pointed out, the lion's share of treasure is being squandered on everything a rich nation should NOT be investing in. "God shed his grace on thee..." Not for long. I am sorry that the good people of America will have to (if they remain) participate in what can best be described as karmic blowback. All my life I have written, done some TV & radio before the rightwing take over made liberal voices like mine as rare as sightings of the Abominable snowman. Where I live I would not VENTURE to talk to locals as they are so processed by their churches, right wing radio, poorly educated, unable to really reason things out... as THEY like to say in their churches, "unteachable." So much of what I write is for the NEW generation, not yet entirely programmed or processed. I am grateful for this forum, I learn a lot, enjoy sharing what I have found to be true; and need to find a way to balance it with my writing assignments. This forum is invigorating... like a good swim in an oasis of clean waters for the mind. Blessings to all who post here (except the occasional right wing plant, who, perhaps might???? learn something.)
So Ralph, why don't you LEAD the rest of US to similarly incorporate en masse (or establish a trust fund) as America, Inc., move our assets offshore, avoid the taxes and thereby END our BushCo-dependency (and BTW the Bush wars, as well)!?
See Michael Ruppert's book "Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil", Chapter 3, "The CIA is Wall Street, and Drug Money is King". Published in 2004, Ruppert concluded the world must evolve a new money control and distribution system, and thus a new type of society, to avoid WW III and worldwide fascism.
Thank you Siouxrose.
When I was an undergraduate, I took a class on Multinational Corporations where we learned all about what this article is explaining (do you suppose that class is exactly why we have the "No Child Left Behind" act working to destroy education and a college system that is moving further and further beyond the reach of ordinary US citizens?). Transfer pricing is why so many corporate dollars entered the debate on the legality of encryption in electronic communications. The increased speed of communication has allowed corporations an easier road to hiding profits in the global market and the encryption of communications means that government oversight is impossible.
Corporations live on our backs. We fund their wars for the resources of other nations. We fund the repression of their workforces across the globe. And all the while, the claim that they cannot afford to pay US workers. They claim that they cannot afford to compete in the global market and meet environmental standards. They claim that they cannot afford to provide insurance for their employees.
Corporations offer us nothing and take from us everything. We have been raised to hate the redistribution of wealth promised in communism or socialism, but we are living with the redistribution of wealth. That wealth simply moves UP instead of DOWN. We hear about trickle down ecnomics, but nothing trickles from a thirsty sponge. It aborbs everything it touches and leaves its envrioment DRY. That's us, kids. Wal-Mart COUNTS on public assistance for its employees while the Walton family have become MULTI-BILLIONAIRES.
The well-orchestrated campaign against poverty stricken welfare recipients is OBSCENE when one realizes that these people are struggling for existence while the MOTHER of all WELFARE MOTHERS is Corporate America. That these Corporations BLOATED with wealth would direct a campaign of such viscious and misguided PR on the MOST VULNERABLE members of our society is against every ethic ever attached to the American Dream. It is against every instinct of humanity. I can tolerate, but hate, avarice on such a grand scale, but the assault on the defenseless--the program to turn our better instincts--the instincts of charity and compassion--into righteous indifference or worse--is beyond what I can stand. It earns my hatred.
Our tax dollars fund death around the globe. Fund the firing of the very hatred for which we will pay with our lives in future acts of terrorism while those who direct those dollars are hidden behind fortified walls and private armies. It is past time to curb corporate power.
I told people, I used to work selling tax shelters. Now, do they believe me?? I was "just a secretary" but still.
I respect Nader so much I cloned him (in a fictional movie script Hollywood didn't particularly appreciate.) Remember Thomas Friedman's comment that there could be no McDonalds without MacDonnell Douglas? Well apply that axiom to this war, and wonder if Bechtel, Haliburton, Exxon Mobil (for oil) and others are offshoring their profits, while using US troops as their fodder? And how often have we heard the angry lament about welfare mothers... how many times have I told these idiots that the REAL welfare is what the corporations get away with. How 'bout those rebates for stealing in the form of not paying a dime towards the same US infrastructure their companies profit by and through? The rightwing anti-welfare Mama is the eqivalent of "Willie Horton" to confuse voters as to who really profits from "free" trade.
Fantastic eye-opener!
Thank you Mr. Nader for all you continue to do.
It's unfortunate that the majority of Americans will never see this article or sadly even care if they did see it. And so, it continues.
Great article Ralph!!
I am getting hounded for $3,000 that I do not owe. No matter what proof I give they tell me I am wrong. A lousy $3,000! If I had it I'd give it to them for the illegal and immoral war!
And these crooks get away with billions! Un-Fking believable!
I think they need to pay for their own wars. Leave our money to education and health care. They can play with their own money and their own children!
I will be in DC on the 4th. Everyone else needs to be there too. It's time to take back Our Country!!
Listen to Ron Paul and Nader on taxes. Act accordingly.
Incredible! The right wing poor see tax evaders as heroes even while they end up paying for the rich man's wars with their money and blood.
"We live in a nation hated abroad and frightened at home. A place in which we can reasonably refer to the American Republic in the past tense. A country that has moved into a post-constitutional era, no longer a nation of laws but an autotocracy run by law breakers, law evaders and law ignorers. A nation governed by a culture of impunity ... a culture in which corruption is no longer a form of deviance but the norm. We all live in a Mafia neighborhood now."
Sam Smith
Nader knows that short of a violent revolution, Mike Gravel is the only candidate with a workable plan for the people to take direct control of their government.
The rich get away with not paying their fair share of taxes...
...while the poor are harrassed like crazy by the tax collectors!
We didn't even owe the $100 they hounded us over- we even filled out the form they needed (though we didn't really owe it) so they would leave us alone. Did that happen? oh-no- the tax collector who bugged us on the phone decided to drop in on us one day with no warning (and smelling of alcohol), a two hour drive from the city- do they do this to the rich? Doubt it!
Corporations should not have citizenship privileges!
Corporations should not have the same legal status as a person.
Corporations should not be allowed to contribute funds to political parties or candidates.
These article is excellent. Why is basic financial education not part of public school K-12 education? This article holds the seed of the answer.
Thank-you Ralph.
"The whole collection of tax scams is why between 1989 and 1995, of US and multi-national corporations operating in the United States, with assets of at least $250 million or sales of at least $50 million, nearly two-thirds paid no U.S. income tax."
I assume that situation has only worsened from 1995 to the present.
Yet, (at least some) universities are teaching that U.S. corporations are "over taxed" compared to corporations in other countries, and we need to further reduce corporate taxes. They graduate newly-minted globalist monkeys who screech the globalist, "free" trade, "trickle-down" doctrine of their corporate patrons. Disgusting.
Here's a solution. If the corporation is claiming that it is more than 50% "off-shore" than strip that company of its U.S. citizenship. If they don't want to pay U.S. taxes, then don't give them U.S. citizenship priviledges.
The law breakers are the law makers. As long as we the people continue to work for the corporations and pay our fair share of taxes, offshore tax evasion will not be felt or addressed. Tell your employer to pay you as a contract laborer, incorporate, move said corporation offshore. Pay yourself three times the amount of your current salary and claim a loss. See how fast you are incarcerated. There are laws in place to stop this. But they don't apply to the law makers.
For anyone wanting to know more about this, you can go to the archives for the Dave Emory show - broadcast on WFMU, and over the web at http://wfmu.org/playlists/DX
Dave Emory has interviewed Lucy Komisar on a number of occasions: (FTR # 589, 531, 485, 463, 458). His shows also provide a broader context into which offshoring fits among the corporate/fascist elements around the globe.
How the richest man in Britain avoids tax:
http://www.guardian.co.uk/uk_news/story/0,3604,682157,00.html
http://www.guardian.co.uk/uk_news/story/0,,682232,00.html
Now that we are pursuing the financial flows of would be terrorists, this country should be able to track, in fact it must track what is going on with all those offshore tax heavens. The IRS should be getting its money soon.
corporations, as a british statesman once observed, are dangerous because "they have neither a soul to save nor a body to incarcerate."
if constitutional democracy is to survive the 21st century, we have to strip corporations of all political power---especially the ridiculous notion that a corporation is a "person" having the same rights as you or i.