Greedy transnational corporations and their tax havens cause poverty

Just finished reading 'Tax us if you can' a report published last year by the Tax Justice Network (TJN).

In 'Tax us if you can', TJN explain how rich individuals and transnational corporations have taken advantage of the 'globalisation' of the world economy to avoid their fair share of tax, by locating their wealth in offshore jurisdictions offering minimal or zero tax rates.

In March 2005, TJN estimated that US$11.5 trillion of personal wealth is held offshore by the rich, with a large amount of this sent to around 70 tax havens scattered around the world. If this income from this wealth was charged to tax in the countries where the rich were resident or derived their wealth, TJN estimate an additional tax revenues of US$255 billion would be available to fund public services and investment around the world. They explain explains how global tax avoidance and fraud has a significantly disproportionate negative impact on developing countries, where the rich minority in these countries hold a far larger proportion of their income in offshore tax havens (70% in the case of the Middle East). Such unethical and sometimes downright illegal behaviour comes at a serious cost. TJN make the point very plainly on the back cover of 'Tax us if you can', in large point type - "Tax havens cause poverty".

TJN are also highly critical of pro-business political actors (such as our own Business Round Table, National and Act) who argue that nations should compete with each other to attract inward international investment by offering lower tax rates, little regulation and other related concessions. TJN point out that such 'tax competition' can lead to investment being directed to territories where, in many cases, it is inefficiently used.

"The only winners in such a process are the mobile businesses that can play one government off another in order to secure tax advantages and subsidies"
..
"Taken to its logical extreme, tax competition will lead to a race to the bottom, meaning that Governments will be forced to cut tax rates on corporate profits to zero and subsidise those companies choosing to invest."

So the next time you hear the BRT or other business lobbyists bleating for a lower corporate tax rate and a regulation nuddy run - ask the question - do we really want to play their zero sum game?

If our Government bows to pressure to lower tax rates it not only reduces the amount of money available to improve public services in New Zealand - it also places pressure on the governments of other countries keep playing the game. Many developing countries, faced with massive capital flight and tax avoidance have shifted the burden of tax onto consumers through sales taxes (like GST). Such taxes are widely regarded to be regressive as lower income households spend a higher proportion of their income on consumption. So playing any attention at all to the zero sum tax competition game promoted by the transnationals hits the poor of the world, whether they be in New Zealand or overseas.

'Tax us if you can' includes a very telling quote from 'Growth Strategies" from the Economic Policy Institute (2004)
"There is little evidence that state and local tax cuts - when paid for by reducing public services - stimulate economic activity or create jobs. There is evidence, however, that increases in taxes, when used to expand the quality and quantity of public services, can promote economic development and employment growth."

"Tax us if you can" is an excellent introduction to the topic of tax havens and is well worth reading. Especially as the report contains a number of constructive recommendations to stop the transnationals from free riding on the tax paid by everyone else, most notably encouraging greater cooperation between countries on tax matters and insisting transnationals make public who they are, what they do and how much tax they actually pay. I look at some of these recommendations in a future post.

Tags: Politics, Economics, Corporates, Tax, Mulitnationals

Campaign against sale of Lyttelton Port gathers steam

The Keep Our Port Public coalition (KOPP) is holding a public meeting in Christchurch opposing the sale of Lyttelton Port Company to Hutchison, a Hong Kong based multinational corporation. The sale represents the restart of the agenda to privatise publicly owned assets, and there are good indications the sale of the port could be followed by the privatisation of the bus company and Citycare.

For some background on this issue see my earlier post here.

We already have an impressive list of speakers for the meeting, including

• Sir Kerry Burke (the current chair of Environment Canterbury but I don't think he is speaking in this capacity)
• Green MP Metiria Turei
• Maritime Union of New Zealand
• Wayne Butson, Rail and Maritime Transport Union
• Murray Horton, CAFCA

So at 7.30 pm on Monday 10 April come along to the Limes Room of the Christchurch Town Hall and stop the privatisation of our port!

An opinion piece by Murray Horton of KOPP, 'Moore's mighty sellout' was published in the Press on Friday, and Murray has already received a lot of positive feedback about the article.

Murray says the proposed port sale sets a dangerous precedent for the future of other publicly owned assets in Christchurch.
"This is the latest move by the Council ideologues who want to convert the People's Republic into Christchurch Inc. It graunches back into life a process that was stalled and discredited back in the unlamented 1990s, namely privatisation. This is the first such sale here since National forced it to sell Southpower. But this one has not been forced on it by anyone else, it is all the Council's own work. It will set off a stampede for port "restructuring and rationalisation" around the country, a process that progressed as far as corporatisation during the 1980s' Rogernomics pandemic. And it looks like there will more to come - the Council has removed both the Red Bus Company and City Care, from its list of strategic assets to be protected. It would now appear that the Mayor's policy on publicly-owned city assets is that less is definitely Moore. It sets a dangerous precedent."

A leaflet and poster advertising the meeting is currently filling up email inboxes all over the country. Once the leaflet, poster and Murray's article are available online I will post up a link. Till then I am happy to email them to interested people :)

Tags: Politics, Lyttelton, Corporates, Hutchison, Privatisation, Christchurch

Corporate Human Rights Violators

International human rights organisation, Global Exchange have named the multinational corporatations most noted for human rights violations in 2005.

"Corporations carry out some of the most horrific human rights abuses of modern times, but it is increasingly difficult to hold them to account. Economic globalization and the rise of transnational corporate power have created a favorable climate for corporate human rights abusers, which are governed principally by the codes of supply and demand and show genuine loyalty only to their stockholders."

It is a sorry list of 14 big corporates, including
- Caterpillar
- Chevron
- Coca-Cola
- Dow Chemical
- Dyancorp/CSC (private security contractor)
- Ford Motor Company
- Kellog Brown and Root (subsidiary of Halliburton)
- Lockeed Martin
- Monsanto
- Nestle USA
- Phillip Morris USA/Altria Group Inc.
- Pfizer (drug company)
- Suez-Lyonnaise Des Eaux (SLDE) (French water mulitnational)
- Wal-Mart

The Global Exchange report includes a writeup detailing the human right abuses committed by each money hungry corporate, together with some helpful links to other watchdog organisations with a special interest in each company (eg. Coke Watch).

Several of these corporates are being sued under the Alien Tort Claims Act, a law that allows citizens of any nationality to sue in US federal courts for violations of international rights or treaties.

"When corporations act like criminals, we have the right and the power to stop them, holding leaders and multinational corporations alike to the accords they have signed. Around the world, in Venezuela, Argentina, India, and right here in the United States —citizens are stepping up to create democracy and hold corporations accountable to international law."

With the Bush Administration demonstrating nothing but absoulte contempt for international law with its invasion of Iraq in 2003, it ought to be no surprise there are so many US based corporations on the Global Exchange List.

DynCorp, Kellog Brown and Root and Lockeed Martin are all eager Iraq war profiteers, keen to help Bush suck the oil money out of Iraq by exporting the profits back to the States. These three corporates rogues deserve a post of their own.

Some other lowlights,
Caterpillar has refused to end their corporate participation in house demolition by cutting off sales of specially modified D9 and D10 bulldozers to the Israeli military, supplying equipment that kills Palestinian civilians and peace activists.

Chevron: In Nigeria, this large petrochemical company "has collaborated with the Nigerian police and military, who have opened fire on peaceful protestors who oppose oil extraction in the Niger Delta". Watching BBC World last night I caught an advertisement from Chevron aiming to cast doubt at the potential of wind power - the message appeared to have a remarkable similarity to the line promoted by our very own Contact Energy in their the so-called 'Positive Energy' campaign last year!

Coca-Cola Company: "...leads in the abuse of workers' rights, assassinations, water privatization, and worker discrimination. Between 1989 and 2002, eight union leaders from Coca-Cola bottling plants in Colombia were killed after protesting the company's labor practices. Hundreds of other Coca-Cola workers who have joined or considered joining the Colombian union SINALTRAINAL have been kidnapped, tortured, and detained by paramilitaries who intimidate workers to prevent them from unionizing. In Turkey, 14 Coca-Cola truck drivers and their families were beaten severely by Turkish police hired by the company, while protesting a layoff of 1,000 workers from a local bottling plant in 2005."

Dow Chemical is involved in human rights abuses worldwide: "environmental destruction, water and ground contamination, health violations, chemical poisoning, and chemical warfare.". In their hometown of Midland, Michigan, Dow has been "producing chlorinated chemicals and burning and burying its waste including chemicals that make up Agent Orange. In New Plymouth, New Zealand, 500,000 gallons of Agent Orange were produced and thousands of tons of dioxin-laced waste was dumped in agricultural fields."

Ford Motor Company. "Every year since 1999, the US Environmental Protection Agency has ranked Ford cars, trucks and SUVs as having the worst overall fuel economy of any American automaker. Ford's current car and truck fleet has a lower average fuel efficiency than the original Ford Model-T...Amazingly, despite the company's recent greenwashing PR campaign, its record has actually worsened. According to Ford's own sustainability report, between 2003 and 2004, the company's US fleet-wide fuel economy decreased and its CO2 emissions went up".

Monsanto, more widely known as the largest producer of genetically modified seeds on the planet, are not as well known for their use of child labour. They should be. "In India, an estimated 12,375 children work in cottonseed production for farmers paid by Indian and multinational seed companies, including Monsanto. A number of children have died or became seriously ill due to exposure to pesticides."

Nestle: Earlier this year "the International Labor Rights Fund and a Birmingham law firm filed a class-action lawsuit against Nestlé and several of its suppliers on behalf of former child slaves...In 2001, Save the Children Canada reported that 15,000 children between 9 and 12 years old, many from impoverished Mali, had been tricked or sold into slavery on West African cocoa farms, many for just $30 each."

Pfizer: One of the largest and most profitable pharmaceutical companies in the world (Revenues of $52.5 billion in 2004). Produces Viagra, Zoloft and many HIV/AIDS related drugs (Rescriptor, Viracept and Diflucan/fluconazole). "Like other drug companies, they sell these drugs at prices poor people cannot afford and aggressively fight efforts to make it easier for generic drugs to enter the market....Pfizer and other drug companies have refused to grant generic licenses for HIV/AIDS drugs to countries like Brazil, South Africa, and the Dominican Republic, where patients are forced to pay $20 per weekly pill for drugs like fluconazole, though the average national wage is only $120 per month....To ensure its profits, Pfizer invests heavily in US campaign contributions. Though it can't seem to afford to offer life-saving drugs at affordable prices, it was able to scrounge up $544,900 for mostly Republican candidates in election cycle 2006 (still in progress) and $1,630,556 in the 2004 election cycle."

Worst transnational operating in New Zealand: The finalists

CAFCA and GATT Watchdog have announced the finalists for the 2005 Roger Award for the worst transnational corporation (TNC) operating in New Zealand.

The nominees are, in no particular order:

• Telecom
• Westpac
• BNZ
• Toll (took over Tranz Rail in 2004)
• Comalco (including subsidiary NZ Aluminium Smelters Ltd)
• Guardian Healthcare (owns private aged care rest homes and hospitals)
• Merck Sharp and Dome (a drug company)
• British American Tobacco

In reaching their decision a team of eminent judges will assess the negative impact of the finalists in each or all of the following categories:

• Economic Dominance - monopoly, profiteering, tax dodging, cultural imperialism.
• People - unemployment, impact on tangata whenua, impact on women, impact on children, abuse of workers/conditions, health and safety of workers and the public, cultural imperialism.
• Environment - environmental damage, abuse of animals.
• Political interference - cultural imperialism, running an ideological crusade.

ADVERTISEMENT

In a novel move, Action on Smoking and Health (ASH) have "congratulated" British American Tobacco on being a finalist in the 2005 Roger Award.
“In light of the fact that half of their best customers will die as a result of smoking their products, it is only right that British American Tobacco New Zealand be recognised for their contribution to our society,” says Becky Freeman, Director, ASH NZ.

Judges for the 2005 Roger Award are John Minto, Laila Harre, Maire Leadbeater and Mary-Ellen O'Connor. May the very worst transnational win!

PS: If you have any goss on irresponsible deeds committed by the TNCs listed above please feel free to comment. Who do you think should win?

Dangers in the addition of an 'Investment Chapter' to CER

On Thursday this week the Minister of Finance Michael Cullen and his Australian counterpart announced “solid progress” towards the creation of the ‘Single Economic Market’ between Australia and New Zealand. “ Ministers also decided to investigate the possibility of adding an investment component to the Closer Economic Relations (CER) agreement.”

Thus the idea of an ‘investment agreement’ was floated again, with no analysis or explanation of what an ‘investment’ chapter of CER would entail. Perhaps Cullen gave nothing away because giving such an explanation would reveal an ‘investment chapter’ as a direct threat to democracy.

The benchmark for ‘investment agreements’ is the infamous ‘Chapter 11’ of the North American Free Trade Agreement (NAFTA). These provisions give multinational corporations the right to sue governments for compensation or reversal of laws/regulations that threaten their profits.

For example, the Canadian Government placed a ban on a toxic petrol additive, MMT on the grounds it caused nervous system damage and interfered with car emission control systems. In response, the producers of MMT, the Ethyl Corporation, used the provisions of the NAFTA to sue for $250 million, claiming lost Canadian profits and damages. Faced with lengthy court action, the Canadian Government was forced to revoke the ban in 1998, pay the company US$13 million damages and issue an apology. There are many other similar examples. As Bill Rosenberg (2001) has noted, even the threat of such proceedings acts as a break on a government acting in the interests of its citizens. Mary Lou Malig (July 2004) reports;

Canada had good reason to want to avoid a large damage reward. Since the implementation of NAFTA, the total amount of damages claimed by foreign investors has been a total of $US13 billion - $US1.8 billion from US taxpayers, $US249 million from Mexican taxpayers and $US11 billion from Canadian taxpayers"

These provisions are a direct threat to democracy, as they give foreign investors the right to challenge the mandate of governments to implement policies in the public interest; even in the case such policies formed part of a successful electoral platform.

A likely model for the CER investment agreement is the ‘Investment Promotion and Protection Agreement’ (HKIPPA) New Zealand signed with Hong Kong in 1995 (signed by National’s former Don, Don McKinnon that is). This agreement contains equivalent ‘expropriation’ clauses to those found in NAFTA, which aim to also cover Government actions that have an ‘effect equivalent’ to direct expropriation. In NAFTA this has been interpreted to include loss of an investment’s value through loss of profitability.

It also must be noted that the Government's new Overseas Investment Bill, currently before the house, allows the Government to further liberalise investment law by regulation (such as the threshold for business investments and the definitions of associated land). In the context of negotiations over the extension of CER or any other 'free trade' agreement this would allow the government to make further concessions largely free of parliamentary scrutiny (the RR committee is not sufficient!).

While at present it may seem unlikely that an Australian investor would make such a claim, it does beg the question why overseas investors are being given greater rights than local citizens or businesses. Consider the clearly signaled, high profile policy of the Labour party in 1999 to renationalise ACC. ‘Investment protection’ agreements could have affected or prevented the implementation of this policy following the election of the Labour/Alliance Government, especially if private insurance companies had a legal presence in Hong Kong. In this case, it was probably lucky the private ACC market had not been going for very long.

To give a contemporary example, any attempt to further regulate the privatised electricity market created by Max Bradford and embedded by Pete Hodgson could be met by a challenge by the new Australian owners of Contact Energy, who could claim that Government actions negatively affected the profitability of their ‘investment’.

Given the NAFTA experience of Canada and Mexico, perhaps such challenges are not so unlikely after all. Any proposals to include NAFTA or HKIPPA like clauses in CER, or any other ‘free trade’ agreement, should be steadfastly exposed and opposed. Such provisions are a direct threat to democracy as they could prevent our Government from implementing policies given a democratic mandate by the New Zealand people. And that, at the end of the day, is what democracy is all about.