Is the OECD Sincere in Its Attempt to End Profit Shifting?

I write this blog because the predatory elite have created a wealth gap that causes the financial despair fueling the attack on democracy. Their methods have been successful because they are not exposed. I expose them here.

This post is part two of a critical look at the new 15% minimum global tax promoted as a solution to profit shifting. Part one is here.

The $70 billion a year in revenue that the United States is deprived of [by profit shifting] is nearly equal to all of America’s spending on food stamps.

-Gabriel Zucman

Australia introduced legislation to force corporations to reveal -

* their country-by-country sales and deductions

* all related accounting information to check on the accuracy of the report

* all to be public.

Australia would tax every sale made in its country and not allow a single sale to be ported to a tax haven. And the legislation went further, it would force every company to show details such as expenses. Also, another dodge is to claim deductions for imaginary or contrived expenses such as transferring intellectual property rights to a related corporation in a tax haven, then paying that corporation royalties on the intellectual property for a tax deduction. The tax haven would then tax the royalties at a very minimum rate, or not at all.

The corporate community was alarmed: full disclosure of their tax planning! And make it public so investigative reporters and tax departments could check on it! They went into intense lobbying mode forcing the government to severely weaken the disclosure requirements and keep the information confidential — free from the prying eyes of reporters and critics.

While that was a great victory for corporate interests, that was not the worst. Two whistleblowers revealed to the Financial Timesthat the OECD pressured the Australian government to severely weaken its proposed legislation:

One person, with knowledge of the situation said, “There was heavy, heavy opposition from the OECD to the Bill and that was one of the critical factors behind the decision to pull back from the measure.”.

OECD Secretary General Mathias Cormann took to Twitter publishing a two-page statement saying the claims about pressure were “false”.

There has been no official statement on the issue from the OECD.

Responding to the statement on Twitter, Alex Cobham, Chief Executive of the Tax Justice Network, identified the Corman statement as political spin: “The OECD claims the Financial Times reporting is ‘false’ — not inaccurate, but outright false — to suggest the OECD pressured Australia over its planned legislation. But in the very same statement, they admit that they ‘raised a number of technical issues leading Australia to delay its law’”.

In Common Dreams, Cobham commented further:

● “It is genuinely shocking to see it confirmed that the OECD has lobbied its own member country against introducing a key measure to fight corporate tax abuse.”

● “The OECD has put itself firmly on the side of secrecy-on the side of tax abuse-against one of its members. That’s an extraordinary state of affairs.”

He then added. “And it couldn’t send a clearer signal to countries wondering whether the OECD’s proposed tax rules will help them to curb tax abuse. They won’t. Instead, countries should pursue their own alternatives while preparing for negotiations to establish a proper tax body at the United Nations.”

I can’t put it better than Swiss Journalist Dominik Gross: “Rather than bring an end to the race to the bottom, the OECD’s new rules will preserve it in a perfect, perverse loop”.

Once again, complexity has been used to hide ineffectiveness. Continuing the Colonial Exploitation of Developing Nations

As Julia McCarthy of the Brookings Institute observed in an article titled, The New Global Tax Deal Is Bad For Development , “…G-7 countries were projected to receive 60 percent of the estimated $150 billion in new tax revenue generated, despite being home to only 10 percent of the world’s population.”

The African nations have understood this. Tijjani Muhammad-Bande, the Nigerian representative to the UN, commented, “African people are tired of numbers about assistance, assistance for development. They do not request more assistance. They request every partner running a business, the physical or digital, individuals and companies making profit, should pay the right price, the fair and just percentage in terms of tax. Then we could keep our promise to transform our world, to ensure the world we want, the future we want is a reality.”

In an attempt to break the hold from the club of the rich nations over the OECD- as the developing world sees the OECD- Nigeria introduced a resolution at the UN to have the UN take charge of making the tax rules. Whether the countries in the UN can break the power of the corporate controlled G7 countries remains to be seen.

Knowledge is Power

The US does not have to wait another decade to see if the African nations can bring effective legislation to the profit shifting problem. The solution is the simple one Australia tried to implement: require all corporations to publically report their sales in the US, as sales in the US for tax purposes. But merely stating the solution invokes the reaction that it won’t be easy. And this is true for a number of reasons:

* The powerful corporate lobbyists will go into full resistance mode to ensure the politicians they control vote against it.

* The media, both left and right, have uncritically praised the 15% tax as a step in the right direction instead of realizing that it is a step backwards.

* All influential economists, like Janet Yellen, promote it.

But even if the media ran articles critical of the OECD solution:

* Not enough people have an understanding of the issues involved in profit shifting.

* A course is needed in universities to give voters sufficient background to examine the aspects of predatory capitalism such as this one.

At present the foundation for understanding these issues is only taught to students such as lawyers and accountants- who will join the ranks of those who benefit from the exploitation. This exclusive knowledge gives the predatory elite their power (thank you Francis Bacon). But is there any university educator willing to develop a program for the general arts student to give them the knowledge to take back the power?

Acknowledgement: Tax image by Gerald on pixabay

Originally published at https://jandweir.substack.com.