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Tax Flight, Tax Avoidance and the Contribution of the Rich to Society

Multinational businesses cause the greatest losses through tax flight and tax avoidance. Between $21 and $32 trillion are invested in tax havens. Whoever can buy expertise and services can utilize tricks and tax havens. Tax flight is a problem for democracy. Without tax revenues, politics renounces on creative possibilities. Without state investment programs, the Internet, GPS and the touch-screen would not exist.
TAX FLIGHT, TAX AVOIDANCE AND THE CONTRIBUTION OF THE RICH TO SOCIETY


By Silke Otsch


[This blog-article published on September 29, 2015 is translated abridged from the German on the Internet,  http://blog.arbeit-wirtschaft.at.]


Parties that polemicize against refugees with cost-arguments promote tax flight of the rich as in advocacy of banking secrecy. Criticizing the rich is hardly encouraged although they profit disproportionately from tax flight and tax avoidance. This is a democratic problem. A coalition of elites influences legislation so counter-strategies should be followed.


THE RICH PROFIT DISPROPORTIONATELY FROM TAX FLIGHT AND TAX AVOIDANCE


Multinational businesses cause the greatest losses through tax flight and tax avoidance followed by rich private persons. Sums in the triple-digit billions up to one trillion euros are annually withdrawn in the European Union. Between $21 and $32 trillion are invested undeclared in tax havens out of worldwide private wealth of around $160 trillion... In the US, the top one percent of the population possesses 52\% of corporate wealth. The rich profit indirectly from the tax flight and avoidance of businesses. Tax havens have an indirect effect on tax systems. They encourage lowering tax rates on business profits and on the general tax on capital income of 25\%.


TAX PRIVILEGES THROUGH WEALTH AND GEOGRAPHICAL POSITION


Whoever can buy expertise and services of specialized technicians, banks, law offices or auditors can utilize tricks and tax havens. Until the turn of the millennium, black money could be hidden through simple techniques like accounts with banking secrecy. With expansion of information exchange, tax avoiders now need more expertise. Banks and law offices demand fees or minimum investment sums for this expense. The fees start at 500,000 euros. According to the tax flight model, the expense is worthwhile for investments of 5-10 billion euros. Experts assume tax flight increases among owners of massive assets.


Tax havens and businesses of the tax flight branch are above all in the global North... Poor countries have few resources to build functioning tax authorities. Multinational businesses and rich elites use their wealth for tax minimization. Advances in regulating tax flight benefit states of the North first of all. International tax affairs involve the OECD, the "Club of the Rich," not the UN.


TAXES, DEMOCRACY AND THE POWER OF DONORS


Tax flight and avoidance is above all a problem for democracy. Public services like education, health care, infrastructure, culture or social services are available to many citizens. Without tax revenues, politics renounces on creative possibilities. Politics should implement long-term projects and speed up innovations. Without state investment programs, the Internet, GPS and the touch-screen would not exist. Funds can have macro-economic effects like economic measures or resource distribution around different groups of the population. Funds are allocated in the economic cycle between the real economy and financial wealth. In Austria, taxes reduce inequalities in the primary distribution of resources...


According to the theory of critics of taxation, businesses would give on a voluntary basis when taxes are lowered. However facts demonstrate the opposite. Donations are far below the saved tax funds, even in countries with high fundraising revenue like the US. If two percent of the Austrian GDP is lost through tax avoidance and flight, that is equal to 5 billion euros...


Even higher repayment in the form of donations should be judged as ambivalent because donors exert social-political influence. The influence of the US billionaires Charles and David Koch is a frightening example. These two influence politics through think tanks, donations of billions in election campaigns, support the Tea Party and organizations denying climate change.


MANIPULATION OF LEGISLATION BY THE OFFSHORE COALITION


Non-observance of tax laws is not because of the complexity of tax systems or location competition. A coalition of the beneficiaries influences legislation in the long-term with intensive support from other social forces. This offshore coalition includes:


• tax fugitives and evaders motivated by financial advantages and money-washing possibilities


• service providers (banks, law offices, auditors) with interest in income and (labor-) markets


• politicians who expect potential support by financial- and economic elites, avoid conflicts, act ideologically or are poorly informed


• lobbies and think tanks that inveigh against payment and ideology-driven conduct


• bureaucracy and authorities that are hindered in carrying out their activity, cooperate with the regulators and expect financial incentives (change of job, corruption)


• journalists and academics who offer justifications through convictions, financial incentives (advertisements, royalties or career advantages)


• voters who tolerate practices out of opportunism or ignorance.



Changing practices requires a long breath because organized and well-supplied organizations and groups of persons have great interest in maintaining offshore services. Alongside fighting tax avoidance and flight, the primary distribution of incomes and assets should be intensely leveled so inequalities do not first arise. Tax systems should be simplified and harmonized with minimum standards. Politics should plead offensively for public funds. These funds are needed for a social-ecological transformation on the national plane and for the North-South perspective.


RELATED LINK:


Citizens for Tax Justice, "Offshore Shell Games 2014," The Use of Offshore Tax Havens by Fortune 500 Companies, 56 pp
 http://ctj.org/pdf/offshoreshell2014.pdf

homepage: homepage: http://www.freembtranslations.net
address: address: http://ctj.org


Stephen Hawking on Technology and Redistribution 20.Oct.2015 15:41

marc

If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever-increasing inequality.

In other words, the problem is not with machinery per se—which has the potential to create a "life of luxurious leisure"—but the capitalist use of machinery—which means "most people can end up miserably power." Stephen Hawking on Facebook.com, Oct 19, 2015

http://www.booktv.org
www.onthecommons.org

But we do need to distinguish 21.Oct.2015 05:21

Mike Novack

"Tax flight" (choosing not to be in or do business in the taxing jurisdiction) and "tax avoidance" (structuring taxable activities so as to minimize tax liability) are very different from "tax evasion" (not paying taxes that the tax laws require). I doubt there are any of us who choose to:

1)Move into a jurisdiction just so we can pay higher taxes there.
2)Fill out our forms in such a way as to pay higher taxes than if we filled them out a different way (and yes, tax forms sometimes DO offer such an option -- in some cases paying one taxing agency more means paying another less and a lesser total of the two).

In other words, nothing wrong with proper "tax flight" or "tax avoidance"and we need to be careful to distinguish between these and "tax evasion". Remember, just because the person trying on a scheme of "tax flight" or "tax avoidance" and gets ruled against "that scheme was really tax evasion" does not mean that either "tax flight" or "tax avoidance" were wrong, just that this scheme wasn't either of those.

Pure Tyranny Is When The Rich Own Everything 21.Oct.2015 17:43

blues

The rich tyrants solemnly address the masses about "regrettable necessities" and "shared sacrifices," then launch more drones and cut school lunch programs yet again. Why merely react to what they are perpetrating?

The very concept of rich people (and even of modestly affluent people) would be bleached into meaninglessness if the poor ones ceased to exist. That is, the rich need the poor and oppressed for the sake of their own self-definition. So therefor they "launch more drones and cut school lunch programs yet again." (Really only a neocon subset of the rich and powerful actively promote these pogroms; the others just jet-set and so on.)

No one should be allowed to own more that 20 times what they need to make a living and live comfortably. People should be required to register their substantial holdings, and if they exceed the 20 times limit, a random jury should force them to sell off the excess, and reduce their holdings to 15 times what they need. The proceeds should go to the commonwealth. Anything they fail to register should be confiscated, and those who willfully avoid registering assets should be punished. That is the only way to control economic royalism and protect freedom and human rights.

Most of our industry has been sold by the rich for profit and shipped down the river to other nations, and there is perhaps only one way to rebuild it. All large industry should be owned and completely controlled by democratic communities and towns. Each community would own an industry, which could only be sold to another community. Some communities would have to be larger than others. For example, an ironmaking operation would require a large community, or consortium of communities. There could be government sponsored research and development communities too. Employees would have to live in the communities, and thus there would be a powerful incentive to minimize pollution. Small businesses would be operated by ordinary companies.

There will be no more rich political parties. No more rich to be protected by vicious policing. No more rich capitalists selling our industrial facilities down the river to China. There must be some regulation, unless we want to be utterly ruled by ultra-rich tyrants. Wealth control would bring freedom and prosperity at last!

I have known about half a dozen billionaire's kids, due to my unusual background. About 2/3rds of them seem like nice people; they seemed friendly and decent. About 1/3rd seemed like exploitative creeps. Most of their family names appear on products that may be found in an average person's home. They were already rich. To me, rich today is having about $250,000,000.00 of relatively expendable money.

I think maybe 30% just live on trust funds and party. Maybe 60% have jobs of some sort, such as sitting in boardrooms from perhaps 10 to 50 hours a week. And maybe about 10% participate in fascistic political "foundations" which do vast harm to our nation and its people. So all in all, the rich screw us over, and thus bestow toxic negative benefits.

Average people do not envy these rich ones. "Envy" is universally defined as "resentful desire of something possessed by another or others." Ordinary folks, and activists also, do not possess energy to waste contemplating resentful desires — they are too preoccupied with dealing the latest toxic negative benefits being foisted on them by the fascistic elements among the rich.

We would all be happier and safer if the rich went away. For example, if no one was allowed to own more than 20 times what they need to live comfortably and to have a good income.

And get machine-free casting and tallying simple score voting with no single-selection, no two-party lock-in!!! (And this is NOT the same as "approval voting".)