ALLIANCE FO§ DEMOCRACY

Clever Shifting Tactics

Big companies make big profits, but almost all are stingy when it comes to paying taxes. The greedy ones shift their profits to other countries. The paths by which they do this are often untraceable or concealed. Developing countries, or even developed countries like Germany, lose hundreds of billions in revenue in this way. All of these countries need this revenue to fund their educational and healthcare systems.
Back in 2012, European Commissioner Algirdas Šemeta warned that “around one trillion euros is lost to tax evasion and avoidance every year in the EU.” The German government has called for tougher action against tax evaders. The OECD has developed the BEPS (Base Erosion and Profit Shifting) action plan to fight tax evasion and avoidance. And as though all that were too simple, the German Finance Ministry issued the following statement after the plan was approved: “The new standards that have been worked out must now be implemented by the (EU-member) states to take effect. Moreover, the international community has agreed that the work must continue. Implementation of the new regulations in the states, as well as their effectiveness in practice, should be closely monitored. Furthermore, Germany is committed to expanding international cooperation on tax questions. The German government is firmly convinced that international cooperation is the best way to meet future fiscal challenges as well.” It would be nice if such words were finally followed up with real action.
An initiative was supposedly negotiated at this year’s G20 summit meeting to close loopholes for reluctant taxpayers. However, no action was ultimately taken and so the loopholes in the EU will continue. So, there has been a lot of talk, and what little action has been taken was blocked by Luxembourg and the Netherlands, as Der Spiegel reported. The United States continues to provide tax relief and guarantees of confidentiality. Investigators in Germany are declared insane - as in the case of Gustl Mollath, and another failed case involving against the tax investigators Marco Wehner, Rudolf Schmenger and Tina and Heiko Feserin. The latter were removed from their posts in 2013 after their investigations brought the state millions in repayments and led to numerous criminal proceedings against financial institutions. The four were declared insane via falsified expert testimony and forced into retirement. A few days ago, they were vindicated and received compensation for damages. Questions remain about whether they can continue to work as tax investigators. The Mollath case and the proceedings against the aforementioned investigators shows the extent of the state’s interests in big business, with the cover-up and secrecy around such intrigues. If we continue to accept these as isolated cases gone astray, we as citizens are missing an opportunity to demand accountability from the state and high finance so that high-level corruption and cronyism, which harms all citizens, disappears.
Since European Commissioner Šemeta published his report on the loss of tax revenue, a study by Oxfam titled “Still Broken” has revealed that U.S. multinationals still shift US$500-700 billion (about €465-650 billion) to countries where these profits are either not taxed at all or at very low rates.
The practice of allowing profits to be underreported and shifted to tax havens such as Bermuda, the Netherlands, Luxembourg, Switzerland or Ireland will continue as long as there are no laws and regulations to stop it. The current disorganised approach, the partial measures of individual countries known as official cooperation, which sets goals but virtually no penalties, and the strife within countries or alliances, play into the hands of those who do not want to pay any taxes. They report low profits, pay very little taxes and go unpunished, while ordinary citizens pay all of the taxes approved almost every year by their legislatures. Apparently, the governments of these countries are glad to absorb these extremely high losses in their national economies so they can take care of these big corporations. This is all of little use to citizens, who pay their taxes and support the social system, which is also supported by the economies of both developing as well as industrialised countries. The inability of governments to do anything about this horse trading puts the burden on national budgets and on citizens, and does not help the economy at all because it sets a bad example for the leadership and workforce of the future. Suspicions that German politicians also keep money and assets in the aforementioned countries, or somewhere else, to hide them from tax authorities lead people to believe that politicians, like the business sector, have little interest in going after tax havens and in taking action like creating double taxation treaties. Therefore, it can be assumed that there are so many advantages for politicians and the business sector in maintaining the status quo that they see no need for change. This also shows that a few privileged people – an anti-social elite – enjoy advantages not available to others – to the German taxpayers, for example, who are forced to pay the social costs. Incidentally, Oxfam reports that US multinational companies reported US$80 billion of profits in the tax haven of Bermuda. That is more than the profits these companies reported in Germany, France Japan and China combined. This amount is so large that it clearly does not reflect the real economic activity in Bermuda. How healthy and educated the people there must be.