‘Panama Papers’: It’s actually quite simple – corporate taxation is a fraud

counting dollars in carNo information has been released so far in “The Panama Papers” from the International Consortium of Investigative Journalists with all its bells and whistles about any U.S.  or Canadian millionaires, monopolies or government officials hiding wealth in offshore tax havens. The six Canadians of the 350 reportedly in the data dump who have been identified so far by the collaborating media in this country, the Toronto Star and the CBC, are small fish, e.g., a sports physician from Sault Ste. Marie, Ont.

What did you expect?

Canada is a corporate tax haven. It is no mystery. On August 19, 1993 the Canadian Press reported about the probated will of K.C. Irving, in which he left most of his multi-billion-dollar empire to his three sons in a trust they cannot run unless they live outside Canada, i.e., avoid Canadian taxes. One of Canada’s biggest business empires, the Irving group of companies in New Brunswick, is “owned” by a series of family trusts registered in Bermuda where there are virtually no income taxes. Nothing secret about it. So too is Irving’s Kent Line, enabling it to circumvent Canadian maritime labour and safety laws by using flags of convenience for its fleet of oil tankers, freighters and other cargo vessels. The links of these oligarchs to the ruling Liberal Party and how they have been systemically enriched from the public treasury, including the largest warship contract in history, are a matter of record. 

Then there is Paul Martin’s Canada Steamship Lines, also registered in Bermuda with a subsidiary in Lebanon, and which reflagged several former Canadian-registered vessels throughout the 1990s. On January 28, 2004, the federal government, in response to opposition party and media enquiries, revealed that CSL Group Inc. had received $162 million in federal government contracts, grants and loans since Paul Martin became Minister of Finance in 1993. He became prime minister on December 12, 2004.

In Bermuda, companies are subject to decreasing local taxation. In other words, the more money one makes, the less income tax one pays. The rate is meaningless: the maximum tax rate is 2.5 per cent and the minimum rate is 1 per cent. Under its favourable tax agreement with Canada, companies registered in Bermuda pay no income taxes in Canada until 2016. Profits are imported into Canada. Here the government tells them, “Since you already paid income tax in the countries where you are doing business, you do not have to pay any here.” [1]

Similarly, Magna Corp. founder Frank Stronach and his family dodged Canadian taxes beginning in 1994 when he became a resident of Switzerland. But he still ran the company until recently and his daughter became a Tory then Liberal cabinet minister in the Martin government. He then launched a vain bid to be Austria’s head of state.

And yet he boasted to Financial Post columnist Diane Francis, author of a book called Underground Nation, about leaving in 1994: “Corporate income taxes in Switzerland are negotiable. The government sat down with me and said, ‘You’re our customer,’ and that was its attitude.”

PP.Bloomberg.Illustration-Steph DavidsonThe USA is one of the biggest corporate tax havens in the world. Bloomberg reported in January 2016 that “the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.” But just foreigners?

It’s actually quite simple. A recent article in TML Weekly, which did not take 376 journalists from over 100 media organizations working in 25 languages a year to research, nor 11.5 million leaked documents and 2.6 terabytes of data, provided readers the following information on U.S. monopolies:

Click to enlarge

Click to enlarge

“Twenty-seven of the most profitable U.S. monopolies paid no corporate taxes in 2015. They include General Motors, American Airlines, United Continental, Hewlett-Packard, Loews, Xerox, News Corp, Weyerhaeuser and other well-known companies that reported substantial pre-tax profits but paid no taxes.

“Many other monopolies do not even file income taxes in the U.S. or Canada. They move their headquarters abroad into tax havens where rates are so low as to be meaningless. The pharmaceutical monopoly Pfizer has drawn up plans to merge with erstwhile rival Allergan and move their joint headquarters to Ireland, which has low corporate rates and rules that allow declared profits to disappear for tax purposes. Other monopolies following in their footsteps to Ireland are Johnson Controls and its planned merger with Tyco.

“Not only do they pay no taxes, the monopolies regularly receive public funds in bailouts, loans, tax credits, free infrastructure and other inducements from the public treasuries wherever they operate. GM and Johnson Controls were two of the large group of vehicle and financial monopolies that received billions in pay-the-rich schemes following the economic collapse in 2008.

“The companies in the no-tax list include Mallinckrodt, a health care monopoly that profits from the lack of a public health care system in the U.S. Several are real-estate investment trusts (REITs) that practice fraudulent “pass-through” accounting, which declare no income at all by shifting money to owners of units who disappear the income in other investments and schemes.

“The reasons that companies can magically reduce profits for income tax purposes are many and imaginative. One of the favourites is income tax credits. These tax credits can be booked for future use even when a profit is declared. For example, Level 3 Communications booked a tax credit of $3.2 billion in 2015 despite recording a pre-tax profit of $283 million in the same year. This creative accounting arises in some cases from the large number of subsidiaries the main monopoly controls and the ability it has to move money around electronically to this and that subsidiary even from country to country.

“In 2015, General Motors gained a tax credit of $1.9 billion, even though its earnings in the U.S. before taxes hit $7.7 billion. GM was calculated to pay $1 billion in taxes but this was not only reduced to $0 but converted to a $1.9 billion tax credit because the company moved a tax break from its subsidiary, General Motors Europe, to the U.S. for accounting purposes.” [2]

It is no mystery. Otherwise, as noted yesterday, the “Panama Papers,” like the recent Trudeau 2016 budget, provides an opportunity to broaden the discussion on taxation. The corruption of income taxes on individuals and corporations, pay-the-rich schemes and private financing of public projects together with the refusal to claim publicly-produced value consumed by the monopolies are proof that control of governments has fallen into the hands of private interests. This is discussed in more detail by K.C. Adams in TML Weekly, “The Production, Reproduction and Transfer of Value and Its Realization,” March 26, 2016. See here.

Endnote

1.CSL and fiscal evasion House of Commons debate – Hansard, June 8, 2000

2.“Corporate Taxation is  Fraud,” TML Weekly, March 26, 2016, No. 13. Sources: USA Today, S&P Global Market Intelligence

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Filed under Media, Journalism & Disinformation, United States

2 responses to “‘Panama Papers’: It’s actually quite simple – corporate taxation is a fraud

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