G20 Meets to Act on Corporate Taxes – But More Needed on Corruption

The often highly complicated approaches used by giant corporations to lower their tax bills will be under attack at this weekend’s key meeting of finance ministers of the Group of 20 most powerful nations in Cairns, Australia.

The G20 is expected to act to end systems where companies like Apple, Amazon, Starbucks and many others can take advantage of very low tax rates in countries like Ireland and the Netherlands, while avoiding high tax bills in countries where they have very large sales, such as the United States and the United Kingdom.  The G20 is acting because there has been large-scale public outrage over tax avoidance by multinational corporations.

The G20 should not confine itself to these questionable, albeit legal, schemes deployed by international companies. The finance ministers need to pursue a major assault on illegal activities, notably the payment of bribes by companies to foreign government officials and money-laundering.

The G20 has taken some steps in this direction with the formulation of an “Anti-Corruption Action Plan” but much more needs to be done. Campaigning by Transparency International and many others is seeking to encourage the finance ministers this weekend to promote a powerful anti-corruption and anti-money laundering set of actions that can be agreed on at the G20 Summit in Brisbane, Australia, in November.

The degree to which there is action will crucially depend on building greater public awareness of how pervasive corporate-sponsored corruption is. We need to learn from the progress that has been made to end the questionable tax practices of the major multinational firms.

In the UK citizens pushed a major domestic TV, radio and general media debate about why they were spending so much on buying the products of companies that returned minimal taxes to the UK Treasury.

So far, we are not seeing similar outrage on the “illegal” activities of corporations that bribe and facilitate money-laundering and illicit financial flows. In the US, for example, the banking authorities and the Department of Justice have found themselves under considerable attack for pursuing anti-money laundering violations by major global banks and this has deflected focus on the underlying crimes.

A number of banking leaders have recently suggested that there is too much international banking regulation, making it harder to do business. Led by the French government, there were strong protests about the decision by the US authorities to fine BNP Paribas, the largest bank in France, US$9 billion for a series of violations to which it pleaded guilty. The Economist, for example, ran a cover story recently that attacked the Justice Department’s high fines.

Almost lost in the debate is the fact that BNP Paribas hid the identities of clients in countries with vicious dictatorships (Sudan, Iran, Cuba) so that they could launder their cash and end up owning billions of dollars of US assets.  There has been no meaningful discussion of how the clients of BNP obtained their vast wealth in the first place.

Indeed, prosecutions of corporate bribery have become largely routine, gaining media attention as the news breaks and then fading from public view and interest. For example, when the UK Serious Fraud charged Alstrom UK (the subsidiary of the giant French company) with corruption and conspiracy to corrupt in India, Poland and Tunisia, there was negligible comment by the press and politicians in France or in the UK.

So far, in none of the high-profile (let alone the lower profile cases) corporate corruption and money laundering cases have top executives been placed on trial or gone to prison.

The danger is that many companies may see the payment of fines for their illegal actions as just the costs of doing business. That appeared to be Walmart’s rationale when it bribed its way to expand operations in Mexico but was caught out following an investigation in the New York Times in 2012. It recently tried to show its civic concern by publicising the fact that it had spent US$439 million to investigate possible bribes that it paid to government officials in Mexico, Brazil, India, and China.

But, so far, justice authorities in these countries and in the US have refrained from bringing charges against the company.

Insufficient public attention to these cases and others is allowing politicians to avoid critical issues: how can more be done to stop corporate corruption? How can penalties be increased? How can effective actions be taken to greatly reduce money laundering?

The public at large needs to have a clearer understanding that these corporate crimes leave victims across the world. That’s why Transparency International campaigns for the G20 to take action against corporations and also why we have just launched a campaign called Unmask the Corrupt to target corrupt individuals that use the international financial system and the companies that run it to hide their ill-gotten gains.

The G20 is likely to trumpet its efforts to stop the tax avoidance schemes of major global companies this weekend. We now need them to do the same for real crimes, money laundering and corruption, at the G20 summit in November.

Carousel image: Flickr, epSos .de

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Frank Vogl

About Frank Vogl

Frank Vogl is a founding member of Transparency International and the author of: Waging War on Corruption – Inside the Movement Fighting the Abuse of Power, published in 2012.

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3 Responses to G20 Meets to Act on Corporate Taxes – But More Needed on Corruption

  1. Wakeup Frank 19 September 2014 at 9:35 am #

    96% of YOUR Organizations funding is from Government? $23.5 million, 2014

    Its amazing then that you support raising taxes on supposed BAD corporations like Starbucks since they the tax payer are thus paying your bills apparently.

    Is this why you fail to address the real issues of fairness.

    A. Unsustainable Government Overspending and Debt.
    B. Government Pension Funding overtaking public spending entirely.
    C. Printing of Fiat Money on top of the debt on the backs of our children.
    D. Illegally lowering interest rates and devastating the GOOD saving pensioners of the world (Japan for example and now Australian savers with ANZ rates at why ZERO 0%)

    Fairness is what you aspire you say…

    yet you are so off track on your boondoggle to Cains on the apparent tax payer dollar.

    Can you say Hypocritical, Complicit and Unfair.

    Why are the OECD countries in such a dire state of debt and despair. Its not because of Starbucks, but rather their dereliction of fiscal responsibility and duty. Spending and then borrowing beyond their means after they are bankrupt even.

    Now they are forced to compete with one another to attract capital, Jobs and thus economic viability to survive for yet another day. In the intentional arena of taxation models, jurisdictional taxation vs global income taxation are at play.

    There are 240 odd countries now with “computers” and their own currencies not to mention Bitcoin that can compete with an over weighted out of control western civilization that has run out the clock on its keynesian model.

    Government Pension Plans are now more important than actual government programs.

    How did treasury pay its bills when the house cut off its funding. Why they delayed a quarterly payment to the federal governments pension plan. They did what…. How much was that quarterly payment. $125 billion per quarter or $500 billion per year. What…

    What is total discretionary spending. Why about $500 billion. Defense.. Why $575 billion

    Debit payments are estimated to hit $535 billion for 2014. But despite rising debt levels, interest costs have remained at approximately 2008 levels (around $450 billion in total 2013) due to lower interest rates paid to Treasury debt holders (3 year average maturity now). However, should interest rates return to historical averages, 6% since inception in 1946, the interest cost would increase dramatically. 18trillion X 6% =1.08 trillion or a 60+% increase on top of the 100% increase since 2000. We payed 235 Billion in 2000. So a whopping 400% total increase in interest. 750 billion additional per year. You go on about this phantom 100billion in tax revenue lost. LOL

    According to the Government Accountability Office (GAO), the United States is on a fiscally unsustainable path. This is the Accounting office of the government saying this. David Walker the comptroller (Head Auditor) quit in despair for god sake…

    The Pentagon now says publicly we are our own worst enemy in 2020.

    Yet you keep on about Starbucks an international entity competing in the international world and that they don’t pay enough tax.

    I am dumbfounded:
    A. By your organizations apparent lack of non governmental funding.
    B. Complete ignorance of the dire situation we now face because of Government mismanagement of its spending, borrowing and now printing.

    You and the OECD Paris types crow on about phantom black markets and 35Trillion of secrete non taxable assets and that somehow you will find it and tax it by god…

    and that will save all the OECD governments from their dereliction of financial duty.

    You have 5 years and I am not holding my breath. Just fastening my own safety belt at this point.

    Interest Paid
    Year Historical Debt Outstanding, US$[101] Interest paid[102] Interest rate
    2013 17,023,234,543,635.67 $415,668,781,248.40 2.44%
    2012 16,066,241,407,385.80 $359,796,008,919.49 2.24%
    2011 14,790,340,328,557.10 $454,393,280,417.03 3.07%
    2010 13,561,623,030,891.70 $413,954,825,362.17 3.05%
    2009 11,909,829,003,511.70 $383,071,060,815.42 3.22%
    2008 10,024,724,896,912.40 $451,154,049,950.63 4.50%
    2007 9,007,653,372,262.48 $429,977,998,108.20 4.77%
    2006 8,506,973,899,215.23 $405,872,109,315.83 4.77%
    2005 7,932,709,661,723.50 $352,350,252,507.90 4.44%
    2004 7,379,052,696,330.32 $321,566,323,971.29 4.36%
    2003 6,783,231,062,743.62 $318,148,529,151.51 4.69%
    2002 6,228,235,965,597.16 $332,536,958,599.42 5.34%
    2001 5,807,463,412,200.06 $359,507,635,242.41 6.19%
    2000 5,674,178,209,886.86 $361,997,734,302.36 6.38%
    1999 5,656,270,901,615.43 $353,511,471,722.87 6.25%
    1998 5,526,193,008,897.62 $363,823,722,920.26 6.58%
    1997 5,413,146,011,397.34 $355,795,834,214.66 6.57%
    1996 5,224,810,939,135.73 $343,955,076,695.15 6.58%
    1995 4,973,982,900,709.39 $332,413,555,030.62 6.68%
    1994 4,692,749,910,013.32 $296,277,764,246.26 6.31%
    1993 4,411,488,883,139.38 $292,502,219,484.25 6.63%
    1992 4,064,620,655,521.66 $292,361,073,070.74 7.19%
    1991 3,665,303,351,697.03 $286,021,921,181.04 7.80%

  2. Miriam Ramirez MD 21 September 2014 at 9:40 pm #

    CORPORATE GREED is also the reason for the sad financial situation of Puerto Rico. –

    Puerto Rico a US Territory with US citizens for over 100 years is the largest victim of the Corporation’sTax Evasion Scheme. Greedy politicians in Puerto Rico, a USTerritory of American citizens, in alliance with interested sectors in the island, including corporate lobbyists, CFC’s, the local opposition parties, workers unions, local Banks, etc. have lobbied Congress for decades to obtain tax exempt privileges for US Corporations who do business in Puerto Rico. This has consisted in obtaining legislation that have created IRS Codes that define Puerto Rico as a foreign country for their tax benefit purposes. CFC (Controlled Foreign Corporations) does not mean they are foreign, it means Puerto Rico is foreign! This is a legal violation of the US Constitution Territorial Clause.

    Puerto Rico is right at the center of this storm. Our US Territory is their top choice for corporate money laundering. Many in Puerto Rico have been led to believe these corporate tax breaks are the only solution to our stagnant economy. However, these tax breaks have been around for over 60 years and we still continue with high unemployment and serious social problems which have escalated in high crime statistics, comparable to a war zone. It has also contributed to the economic debacle hitting the US taxpayer and workers, by taking jobs away from the US, increasing unemployment and then obtaining tax benefits to bring the money home under the false pretense of helping the US economy.

    Over the decades, this has not resulted in benefits for our island or our people. It has created a filthy rich governing elite class which has enjoyed these privileges, while the rest of the 3.5 millions of Puerto Ricans live under the US poverty standards and with an unemployment rate of over 18%.

    3.5 million US citizens live in Puerto Rico and 4.5 million have already opted to abandon ship and relocate to the other States of the Union, the most recent ones, our most talented professionals.

    Whenever the people put pressure for a process of self determination, millions of dollars appear out of nowhere to campaign against statehood, since it will be the death knoll for this scam.
    As we speak, the Government of Puerto Rico, a US Territory of American citizens, in a shameful historical move, in cohorts with interested sectors in the island, including Corporate lobbyists, CFC’s, the local opposition party, workers unions, etc., lobby Congress for a more tax sparing benefits and continue to code Puerto Rico, a USA territory, as a foreign country so it can continue to be the “American-Foreign” offshore tax haven for multinational corporations and Corporate Welfare. This bill will scam the US Treasury for billions of dollars. It will not help the US economy, and will not create jobs for Americans. Not in Puerto Rico and not in the 50 states. Not anywhere in the world.
    Miriam Ramirez Md
    Former State Senator in PR
    Grassrots leader.
    THE MJR REPORT – http://themjreport.blogspot.com

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