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.
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