By Lucy Komisar,
Pacific News Service – April 12, 2005
A new global movement is tracking the increasing number of offshore tax shelters and pressuring governments to make multinationals pay up.
As Americans fret over their personal income taxes, there is a movement afoot to reduce the tax burden on ordinary people by getting corporations and wealthy individuals to pay their fair share.
Concern over Social Security has put the problem into relief. In 1984, Congress raised payroll taxes significantly on workers to expand the Social Security trust fund to assure funding for when the baby boom generation retires. Instead of those receipts being put in a lock-box, they were used to offset the federal deficit, replacing lost tax revenues. Now there’s a demand to re-engineer Social Security and cut back benefits or raise taxes on workers.
That’s not needed. The government just has to collect taxes from big corporations doing business in the United States, and from the mega-rich who benefit from living in the United States. Both use fancy foot-work accounting to move assets to tax havens.
The new movement in the United States and other countries seeks first to raise the awareness of the public and political leaders about the impact of offshore tax evasion. Last month, the Tax Justice Network issued a report based on publicly available statistics from the Bank of International Settlements and Merrill Lynch, the investment company. The data showed the following:
–Approximately $11.5 trillion of assets are held offshore by high net-worth individuals, or about a third of the total global GDP, the value of goods and services, which in 2003 was $36.2 trillion.
–The annual income that these assets might be expected to earn amounts to $860 billion annually.
–The tax not paid as a result of these funds being held offshore would exceed $255 billion a year.
These figures, the first such an analysis, do not include the vast amounts stashed in tax havens by multinational corporations. Those multi-trillions include 31 percent of the net profits of U.S. multinationals. Last year, the Government Accountability Office reported that from 1996 through 2000, nearly two-thirds of the companies operating in the United States reported owing no taxes. Large corporations — with at least $250 million in assets or $50 million in gross receipts — own over 93 percent of all assets reported on U.S. corporate returns. In 2000, an estimated 82 percent of large U.S. corporations and 76 percent of large foreign corporations reported taxes of less than 5 percent of income.
As recently as 1943, U.S. corporations provided nearly 40 percent of U.S. tax revenues. Now they pay about seven percent. They use offshore companies and accounts in places such as the Cayman Islands, Liechtenstein and Switzerland to “launder” profits, to pretend that money is earned in tax havens instead of where business is done — in the United States.
It is a pernicious aspect of globalization. The Financial Action Task Force (FATF), set up by the G-7 in 1989, says that there has been a 1,500 percent increase in the money deposited offshore over the past 15 years. Offshore companies are being formed at the rate of about 150,000 annually. In the 1970s, there were just 25 tax havens; now there are about 70.
The threat to social programs in the industrial world and the inability of developing countries to raise people out of poverty have moved analysts and activists with varied concerns to realize that they have something in common. None can have economic and social development as long as corporations and the very rich opt out of paying taxes.
That prompted the founding two years ago at the World Social Forum in Porto Alegre, Brazil, of a new global movement, the Tax Justice Network (TJN), headquartered in London, to bring together groups in civil society to combat offshore tax evasion.
In Washington, D.C., on April 7, a week before tax day, TJN/US held a briefing on Capitol Hill with the sponsorship of Sen. Carl Levin (D-Mich.) and Rep. Lloyd Doggett (D-Tex.), both of whom are working to end big-ticket tax evasion. It was co-sponsored also by civil society groups that work on economic and finance reform, environment, labor, women’s rights, social welfare and third world development issues.
Jack Blum, an expert on international money laundering who ran the Senate investigations into BCCI and Iran Contra and is a senior advisor to TJN, warned, “We are very rapidly heading toward having every society agree that no corporation will pay taxes, and further, they will give them cash subsidies for doing business.” Simultaneously, Blum said, nations “will allow the executives and wealthiest shareholders of these corporations to use the offshore world to avoid taxation of their own wealth.”
That the richest and most powerful in the world are not supporting the needs of government and leaving that obligation to the middle classes, working people and the poor, Blum said, “is an unacceptable amendment to the social contract.”