Friday, October 29, 2010

Google Tax Avoidance and Global Responsibility

So Google avoids US and UK taxes among a host of other countries that it shorted--what a shocker! The company that has the motto "do no evil" has managed to pay only a fraction of the tax it owes. In the US it comes to about $3.1 billion the company has avoided and in the UK the amount is estimated to be more than a £100m. This practice of shipping money off-shore is common among the multi-nationals that feel they owe their shareholders the responsibility of maximizing profits ahead of tax obligations to any individual countries. The effective tax rate Google paid was 2.4 percent rather than the average of 20-25 percent that was really due. If we all enjoyed that rate what fun life would be. As Tapped, American Prospects' blog states

"It did so not just by taking advantage of tax breaks available to corporations for research and development, depreciation and the like, but also by more dubious techniques known as the "Double Irish" and the "Dutch Sandwich" -- “the sandwich leaves no tax behind to taste." These tactics involve shuttling earnings through various foreign subsidiaries with no business purpose other than tax evasion.

The American Prospect asks whether this action was "evil" and answers as follows:

"If Google's definition of not being evil is 'doing more than the average corporation to support the public interest,' then sure it is. It's one thing to take advantage of legitimate tax law, but exploiting these loopholes for the sole purpose of paying less tax violates the spirit of the law, if not the letter. That would be fine if Google was content as a typical business, relentlessly pursuing profit with no thought to the public interest. They simply shouldn't pretend they're somehow better than the Exxons and Goldman Sachs of the world."

The issue is symbolic of the uneasy relationship that exists between powerful multinational corporations and sovereign governments. As governments lose power and global corporations gain it becomes difficult for any single governmental entity to control their excesses. As Steve Pearlstein notes in today's Washington Post only a few days before:

"President Obama made an offer that no one in the business community seems to have picked up on. The "anti-business" president said he supported the idea of reducing the corporate tax rate to a more globally competitive level - 25 percent is the number frequently mentioned - but only as part of a package that tightened rules on inter-company transfers and eliminated enough corporate tax breaks so that there was no overall reduction in revenues or increase in the federal deficit."

Despite some bipartisan support there chances that this will occur are slim as Pearlstein notes reducing the rate down even by a few percentage points will  not win the support of companies as large as Google since their dodges are extremely lucrative;

"Right now, it's big global companies like Google that have the most to lose if rules are tightened and tax breaks eliminated, while smaller domestic firms would gain most from a reduction in the rate. Similarly, companies in the insurance, pharmaceutical and energy sectors probably benefit disproportionately from existing tax breaks that do little for profitable companies in retail, distribution, manufacturing and business services. If history is any guide, the odds are that certain losers will out-shout and out-lobby the potential winners.The conventional wisdom is that it will take presidential leadership to reform the tax code and balance the budget, but the reality is that it will require the support of the business community. Up to now, the refrain from the corporate sector has been almost exclusively, "What's good for business is good for America." Are there no leaders left in the boardroom who still believe it works the other way around?"

We badly need an informed debate about the role of global corporations which might lead to a code of ethical behavior that can be monitored carefully based on transparent information. The media at the moment show very little interest in this issue, this maybe due to the fact that so many of the large ones are owned by business conglomerates that are well versed in the tax dodges themselves.

Wednesday, October 13, 2010

Chilean Miners--A Global Opportunity to Unite?

One amazing thing about the brave Chilean miners rescue drama was that if you turned on US TV last night and this morning you would see uninterrupted coverage of one miner after another emerging sunglassed  from their hellish underground location to be greeted by his overjoyed family. For the US to give up “regularly scheduled programming” for anything let alone a foreign mine disaster for such an extended period is highly unusual and worthy of some comment. When we taken into account that a 1,000 strong press corps is situated at the mine representing over 30 countries we seem to have approached a McLuhanesque global village moment. .The last time something like this happened was possibly the Moon landing. What made this event so important not just for a headline or two but for continuous TV coverage? The human story of course which transcends borders–there was no thought of rescue of anyone for 17 days before the famous note was found written in Spanish in red ink, it read simply: "The 33 of us are fine in the shelter."

But there was also another story to be told about the international cooperation that went into the rescue as the LA Times reports:

“Twenty private mining companies from around the world — usually rivals — coordinated efforts to penetrate the rock, loaning equipment and personnel; the state-run mining company fashioned a telephone system through a second probe hole. The U.S. National Aeronautics and Space Administration sent a team to Chile to share expertise about the psychological and physical toll of living in cramped quarters, and when the miners exercise — to be rescued, they must fit into a capsule called the Phoenix, whose diameter is less than two feet — they wear gear that is standard for astronauts and which monitors their heart, lung and other functions. When they are finally brought out into the light they will wear special sunglasses provided by Oakley, based in Orange County..”

We also learn that “long-time enemies Bolivia and Chile are cooperating to support Bolivian miner Carlos Mamani, 23, and Bolivia's leftist President Evo Morales is expected to greet the newly freed miners along with Chile's conservative President Sebastian PiƱera..”

It is also reported that “work crews have raised the flags of Canada, the US, and Argentina, among others. Palestinian ambassador Mai Al Kaila visited the site, adding her flag to the collection.”

So let peace light and global cooperation spread ! Perhaps this incident will lead to globally recognized standards concerning mine maintenance and worker safety so that future incidents (most sadly the recent tragedy in  West Virginia) can be avoided.