The excesses of abusive corporate power are multiple and mounting. I’m not going to write about the carefully engineered efforts to privatize the Post Office in the UK, nor about similar efforts to sell off the Tennessee Valley Authority (TVA) in the US, nor the outsourcing of various tasks at the UK’s National Health Service, nor even about the corrupt acceptance by some Members of Parliament of paltry sums of money from corporate lobbyists. These are all minor diversions in the larger corporate game. The tightening corporate grip on government and public institutions is increasingly becoming apparent in the media,1 but my focus is on foundation of our modern democracies: the ability of the state to collect taxes.
Undermining the tax collecting process are the large multi-national corporations whose obsession is maximizing their take to the exclusion of all else. Their flagrant abuse of the new opportunities offered by globalization has enabled them to shift their money and even their accounts into offshore tax shelters. Some of the big time tax avoiders, like Amazon, Apple, Goldman Sachs, Microsoft, Google and Starbucks have recently come to the attention of the tax collecting states, but this handful is merely the frosting on the corporate cake.
The hundreds of top global corporations, hedge funds, banks, investment groups and their innumerable dependencies (like the big four manipulative accounting firms, the PR and Consultancy giants, and the foremost law firms) are all involved in obfuscating and manipulating the balance sheets and their financial obligations so that the nation states in which the profits are produced are deprived of the tax revenues necessary to cover their universally mounting debts. Admittedly, as Chrystia Freeland has pointed out, “closing the tax loopholes or tightening the lax tax enforcement … is politically difficult and technically complicated.”2
Thus the battle lines are being drawn. Prime Minister David Cameron is trying to control the multiple tax-havens located in overseas British territories that are siphoning-off undeclared corporate profits. The Cayman Islands, for example, has a government accountable to Westminster but does not level company tax, maintains strict banking secrecy and is consequently the headquarters for huge money laundering and tax-avoidance & evasion schemes.
President Obama is still finding it difficult to distance himself from Wall Street and the vast corporate lobbying industry in Washington. For their part, the corporations are cleverly keeping as low a tax profile as possible while bloating the media with advertising lauding all that is being done by their individual enterprises on behalf of the environment, education, health, the world’s poor etc. At the same time these corporations are studying how best to shift their overseas accounts to states, such as Ireland or Fiji with the lowest taxes and the most relaxed regulations or regulators, as the opportunity might provide. This overall process of avoidance is the key to the corporate furtherance of “globalization without responsibility.”
Which party is going to come out on top? The nation state, dependent on corporations for employment, investment, political funding and economic growth — or the corporations focused narrowly on profits and how to keep these from the grasping hands of governments? The corporate strategy has also focused on merging their corporate and financial power into the very heart of the nation state: revolving doors have been opened between top political & public officials and the corporate hierarchy in order to shape policies in their best interests. Companies like Nestle, Unilever, Cisco, Telefonica Procter & Gamble, and Statoil have all been paired with ministerial “buddies” in the British cabinet. Such cozy relationships always favor privatization, low taxation on the rich, low taxation on capital gains, lower expenditures on protection of the environment etc.3
Personally, I believe the creeping incursion of corporate influence into the mechanisms of the national state is too strong for the elected officials to take decisive action to curb its advance. An international agreement on the taxation of corporate profits would be a step in the right direction, but it is not likely to be forthcoming. Nobel Prize winner Joseph Stiglitz wrote at the end of May that “It is time the international community faced the reality: we have an unmanageable and unfair global tax regime.” Even Vince Cable, Britain’s Business Secretary, suggested before the G8 meeting in Northern Ireland in June that reforming “a dysfunctional international tax system” was necessary. “The underlying problem is a messy patchwork of international tax rules, some almost a century old.”4
Drastic change is needed. However, as I noted in a previous blog, radical change is viewed with trepidation by both the electorate and elected officials. I have long advocated that the state use its full powers to enforce something far more fundamental to the entire structure of our economic system: a measure which would help tackle such fundamental problems as economic inequality, youth unemployment, environmental degradation, as well as the current obsessive focus on “growth.” However, that major shift will be the subject of my next blog.
1See Seumas Milne, The Guardian, May 2013
2International Herald Tribune, “Taxes, titans and the greater good,” May 3, 2013
3‘More multinationals to get access to ministers,’ The Guardian, January 19, 2013, p.4
4Vince Cable, “International tax law is a mess,” The Observer, June 9, 2013