Who is broke?

Last weekend thanks to the Tax Justice Network an TippingPointFilmFund i had a chance watch absolutely fascinating film “We are not Broke” which every single person in the USA and worldwide should watch. And, not because it probably will make you angry (i hope so), but because we need to leave the comfy zone of ignorance and wake up. In essence this film is about massive tax evasion by multinational companies (MNCs), which in a way is not illegal, but for sure is not right and fair either. Because of the tax regime loopholes, tax havens, transfer pricing and financial innovations, many billions of dollars and pounds and euros are never reaching the governments’ wallets.

Though official corporate tax rate in the USA is 35%, in reality some of the MNCs like Bank of America, GE, Chevron etc have been paying 0%! Now, when was the last time you were able to pay 0% tax of your salary??? Or, when have you been able to negotiate your tax rate?

In 2008 when Obama ran for elections it was one of his commitments to close tax loopholes. But, not much progress has been made so far. His dependence on donations from the financial sector and multinational companies (MNCs) in order to stay in power (last USA presidential elections cost about 7-8bn USD) is probably the answer to this. Moreover, in 2010 lobbying industry in USA was worth 3.5bn USD which is obviously working hard to maintain ‘status quo’ or make even greater loopholes. Complexity of tax system as such in itself is a problem which allows tax optimization experts to explore the limits of their creativity.

In this film though, there was hardly ever mentioned word ‘corruption’ but in all honestly this is what it is. In 2004 government did an experiment and for one year allowed repatriation of profits being hidden abroad for 5% tax only (instead of 35%). Ability to openly abuse the system without being punished has effectively been legitimized and accepted by the authorities.

This privilege to avoid tax or to negotiate tax is based on the argument that in such a way MNCs are creating more jobs and increasing the global competitiveness of these MNCs and hence the USA in general. This would make sense only if all companies in the USA would have a chance to negotiate their tax and if only that money which was not paid in tax would have really been invested in more jobs instead of being hidden in tax havens.

Also, by avoiding tax, MNCs de facto are subsidized by everyone who is paying tax as they use the public infrastructure and human capital which is a direct result of public investment (education, health, social welfare, roads, etc).

To sum up, indeed, we are not broke. Broke is the system.

for those who are in the USA – you can watch full film here.

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