Counterparties: Industrial-strength tax avoidance
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Everyone loves corporate tax reform these days. In his state of the union speech, Barack Obama called for closing corporate tax loopholes; the G20 and OECD say they’re also on the case. The US and Switzerland are vowing to share more information, as a part of the 2010 Foreign Tax Compliance Act, which intends to do pretty much what its title suggests.
Tim Fernholz cites a recent report that says the US lost between $57 billion and $90 billion in revenue in 2008 thanks to overseas tax shifting. That’s real money: the sequester of cuts Congress is arguing over are worth $110 billion.
But finding that money is easier said than done. Whether it’s John Paulson’s reinsurance company in Bermuda, Dell’s MBO, David Einhorn’s idea for extracting value from Apple, or even Starbucks classifying coffee-roasting as manufacturing, tax avoidance is an entrenched global industry, endemic to all multinational corporations.
The Economist’s new cover package reveals the magnitude of the problem globally: there’s a “missing $20 trillion” stashed in offshore in a patchwork of 50-60 tax havens, ranging from Delaware (home of “dodgy shells”) to the Seychelles (“shadier” and reportedly favored by Russians and Africans).
Amid all this heat, the tax-avoidance industry is working on a rebranding: “‘Offshore’ is considered pejorative, ‘tax havens’ unmentionable”, the Economist writes. The preferred nomenclature is “international financial centre”. — Ryan McCarthy
On to today’s links:
Our historically weak recovery in three charts – Ezra Klein
The world’s developed nations need to start having more kids right now – WSJ
How robots are eating the world’s manufacturing jobs – Quartz
Horsemeat, brought to you by a Russian arms dealer – Guardian