Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Tuesday, February 12, 2013

Corporate profit shifting erodes the developed world’s tax base: report

Governments in the developed world are losing important sources of tax revenues, according to a landmark report, and a “significant” reason is that multinational companies are shifting profits to places where they pay little or no tax.

Profit shifting is a “current and pressing” issue and needed urgent reform, says the report, released Tuesday by the 34-country Organization for Economic Cooperation and Development (OECD), which sets international tax guidelines.

The report, which has been sent to G20 ministers, confirms what many tax campaigners, politicians and economists have been warning about since the global economic crisis began in 2008.

Its findings, however, are likely to sound even louder alarms because OECD promotes free-market capitalism and issues reports used by its members to draft policies.

It comes as European governments face increasing pressure to crack down on tax avoiders and force them to pay their share of national welfare programs, many of which are being cut drastically to cope with the budget deficits.

The report warns if nothing is done ordinary taxpayers might refuse to pay their share of taxes on the grounds that the system is unfair.

“The inherent challenge of dealing comprehensively with such a complex subject has encouraged a perception that the domestic and international rules on the taxation of cross-border profits are now broken and that taxes are only paid by the naive,” it states.

The OECD did not provide figures on how widespread profit shifting is but the report calls for new rules that would stop companies from moving revenues from locations where they do business to offshore havens where they pay little or no tax.

These gaps in the system undermine the concept of how societies pay tax, it states.

The latest company to come under fire is Associated British Foods, a major sugar producer accused by the ActionAid charity of paying “virtually no corporate tax” despite earning $123 million in profits since 2007. The charity said the company moves pre-tax revenues to tax havens like the Netherlands and Mauritius.

Google and Starbucks were criticized last year by a British parliamentary committee for moving money to offshore havens to minimize their tax bills in the U.K. and depriving the British government of badly needed income.

Google chairman Eric Schmidt said at the time he was “very proud” of the tech giant’s tax structure. The ensuing public outrage forced Starbucks to pledge $32 million to the British taxman.

Corporate tax rates have been falling steadily over the last decade in OECD member states, the report notes. Between 2000 and 2011 the statutory corporate tax rate has fallen from an average of 32 per cent to 25 per cent. Across OECD countries, which include Canada, corporate income tax makes up 10 per cent of government revenues.

Original Article
Source: thestar.com
Author: Hamida Ghafour 

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