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G7 TAX AGREEMENT
You may have heard: the G7 group of rich democracies (it was the G8 thanks to Russia “A remarkable economic and democratic transformation” under Vladimir Putin, but we don’t talk about it anymore) has agreed to new rules for the taxation of multinational companies. The agreement is “seismic”, “truly historic” and “ambitious”, according to the British government, who is chairing the talks.
- “This global minimum tax would end the race to the bottom in corporate taxation and ensure fairness for the middle class and working people in the United States and around the world. mentionned Secretary of the Treasury Janet Yellen.
It is undoubtedly brilliant. The global tax system is flawed and concerted efforts to improve it are welcome.
If there’s one thing I know about international tax agreements, it’s that I don’t understand them; my brain freezes before I even get to the end of the summary of terms of the initial agreement. If there’s one more thing I know about international taxation, it’s that I don’t need to have an opinion on it, because I know Ronen Palan, professor and fiscal whisperer, and he does.
If you’re not familiar with his work, he analyzed the public returns of many of the world’s largest countries, piecing together how much (or, more likely, how little) tax they pay, where they pay them, and what. that this means. He is also generous with his time and ready to talk to people like me about the complexity of what he has discovered, which often concerns “Jurisdictional arbitration” – the clever way in which companies exploit the tiny differences between the laws of different countries, to squeeze through the gaps.
- “Judicial arbitration is only for beginners. Sophisticated companies – notably Amazon – are also taking advantage of accounting rules associated with financial instruments such as derivatives and swaps to modify the very accounting data used in the tax calculation. They can change the location, timing or even accounting categories of income, turnover, etc., to shift profits either from one place to another, or often to a future that never comes ”, did he declare. written.
Read his article and marvel at the complexity of the labyrinth, even before you exit the first room. If that doesn’t exhaust you, this is Palan’s comprehensive study of how Amazon structures its tax affairs, somehow generating losses to be offset against tax and profits to be invested in their business, at the same time and at the same in law. Schrödinger’s accounting.
- “Tax and reporting arbitration is enabled not only by a specific set of jurisdictions, typically branded offshore financial centers, but can occur accidentally or even intentionally in competitive geopolitical markets,” he writes.
I don’t know about you, but I’m afraid that – no matter how hard the finance ministers of the world try and whichever route they choose – Jeff Bezos turns out to be many steps ahead of him. them. Perhaps go to space Will it help it to completely escape terrestrial taxation?
About the super rich Americans and their tax rates, this is an amazing survey of how they pay even less than I imagined. Corporate titans of the caliber of Bezos, Elon Musk, Carl Icahn and George Soros have consistently paid little or no tax at all, for years.
- “Many Americans live on paycheck after paycheck, amassing little wealth and giving the federal government a percentage of their income that increases if they earn more. In recent years, the median American household earned about $ 70,000 a year and paid 14% federal taxes. The highest tax rate, 37%, was applied this year, for couples, on income over $ 628,300. The confidential tax files obtained by ProPublica show that the ultrarich do indeed bypass this system.
Over the past 15 years, according to ProPublica’s calculations, Bezos has paid an effective tax rate of just under one percent. He may not be the richest man in the world anymore, but is it any wonder he got so rich? We would all be richer if we didn’t have to pay taxes.
By the way, in case you were concerned about the ethics of publishing information about a taxpayer’s private affairs, ProPublica explained why it did. here. If you find this explanation compelling and approve of his work, please consider helping to pay for it.
LET’S ALSO END CORRUPTION …
It was a little difficult to know where to start the newsletter this week, due to the matter just as important as the White House. memorandum declaring that the fight against corruption is a priority of national security. I was a little alarmed to see – again – the zombie statistic that corruption costs us between two and five percent of the global economy (that was a guess when the IMF’s Michel Camdessus suggested it, back in the 1990s, and he wasn’t even talking about corruption at the time; it’s no longer accurate just because it’s been around for so long), but it was still great that Joe Biden was so fully on the edge of battle.
- “Corruption threatens US national security, economic fairness, global anti-poverty and development efforts, and democracy itself. But by effectively preventing and combating corruption and demonstrating the benefits of transparent and accountable governance, we can secure a critical advantage for the United States and other democracies, ”the memo reads.
And Biden was not alone. Speaking on behalf of the UK, Foreign Secretary Dominic Raab stood up at the United Nations to quote this same zombie statistic and said the corruption was horrible.
- “It is the acid that burns the rule of law, democracy and public confidence in their institutions. It slows down development, robs the poorest nations of their wealth and keeps their people trapped in poverty, ”he said. intoned.
And then came the French.
- “The fight against corruption is an imperative that we must all tackle together. France is very actively involved in the international fight against corruption and intends to continue its action in this direction ”, mentionned Franck Riester, Minister Delegate in charge of Foreign Trade and Attractiveness (I make this “Minister Delegate for Foreign Trade and Attractiveness”, which is a gloriously French-sounding job title).
And yet the interventions kept coming; you wait forever for the big talk about corruption, then so many talk shows up all at once that there is no more room for them in your newsletter. At one point, however, the avalanche of demands that the world start taking action against corruption began to prove – for me, anyway – counterproductive, and remind me of nothing more than this scene in Monty Python Brian’s life where the revolutionaries hold a committee meeting to discuss that they are having too many committee meetings, when Judith bursts in with the news that Brian is being crucified, at which point the delegates offer an “immediate discussion” .
- “It’s the action that counts, not the words, and we need action now”, as Eric Idle character Loretta the dish, before doing nothing at all.
All of these countries have the power to tackle corruption on their own, or team up with a coalition of allies to do so, and they know full well what they need to do: order and leave officers to enforce the law; introduce verified transparency of shareholder companies, to reveal the real owners of shell companies; help the poorest countries to follow the wealth stolen from their treasures.
Once they have achieved all of this, they can move on to other areas. One profitable sphere might be to fund academics to research a more accurate assessment of the cost of corruption to the global economy, so that we can find out if it really is between two and five percent of gross domestic product. At least then, in future speeches, world leaders could cite more precise statistics.
WHAT I’M READING
As usual, this week I read countless articles on the scheming of the rich and powerful, many of which were published in UK based media and written by UK based journalists. As such, I was very interested in this open letter signed by the nation’s most renowned free speech and anti-corruption organizations, warning of the potential precedents created by the aggressive legal tactics employed by the billionaires behind Eurasian Natural Resources Corporation.
“The UK and US courts will have to decide on the merits of these cases, but we are deeply troubled by the chilling effect this wave of legal action is having on the legitimate investigative and anti-corruption work of journalists. , law enforcement officials and others, ”civil society groups said. “We cannot allow powerful actors with deep pockets to silence their critics, thwart legitimate investigations and target those whose efforts are crucial to ending corruption. “
It is well known that UK courts are a particularly welcoming forum for high net worth claimants seeking to sue journalists, critics and rivals, and the groups are calling on the UK government to urgently introduce legal measures to isolate “watchdogs and journalists” from attempts to silence them. It sounds like a great idea to me.
If you want to learn more about EHRC and its owners, I highly recommend it. Tom Burgis’ Kleptopia, which itself is the target of one of the many court cases.
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