Fighting Corporate Abuse: Beyond Predatory Capitalism - Softcover

Collective, Corporate Reform

Softcover

ISBN 10: 0745335160 ISBN 13: 9780745335162

Verlag: Pluto Press, 2014

Inhaltsangabe

Fighting Corporate Abuse demonstrates, though compelling and revelatory analysis, the legislation and regulation needed to deal with the abuses in the corporate sector that have been revealed in recent years. It highlights the more general contribution of company law and practice to the current crisis in capitalism. The first section develops a controversial argument, using detailed illustrations and vivid examples which show how the various abuses of predatory capitalism have been carried out through the manipulation of the corporate form and the creation of highly complex corporate groups. The group of authors, all experts in their fields, tackle head-on the issues of tax evasion, extraction of value and asset stripping, environmental destruction and managerial self-interest. In doing so, they paint a picture of a system that is abusive, and degenerated, but also a system which can be reformed. In the run up to the UK general election, the authors develop of a set of practical proposals for an incoming government, outlining how each of these abuses could be curtailed and how a more acceptable and accountable form of corporate capitalism can be developed through national and international action. Drawing on the group’s activism, as well as their academic experience in law, politics, economics and human rights, this will be an authoritative as well as a highly practical book.

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Über die Autorin bzw. den Autor

The members of the Corporate Reform Collective are: Tom Hadden (Emeritus Professor, Queens University Belfast), Paddy Ireland (Professor of Law at the University of Bristol Law School), Glenn Morgan (Professor of International Management at Cardiff Business School), Martin Parker (Professor of Organisation and Culture at the School of Management, University of Leicester), Gordon Pearson (author of Strategic Thinking, Integrity in Organizations), Sol Picciotto (Senior Adviser to the Tax Justice Network), Prem Sikka (Professor of Accounting at the Essex Business School) and Hugh Willmott (Research Professor in Organisational Studies at Cardiff University).

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Fighting Corporate Abuse

Beyond Predatory Capitalism

By Corporate Reform Collective

Pluto Press

Copyright © 2014 Corporate Reform Collective
All rights reserved.

ISBN: 978-0-7453-3516-2

Contents

Introduction, 1, 
Part I The Abuses, 9, 
1 Tax Evasion and Avoidance, 11, 
2 Cover-Up Accounting and Auditing, 20, 
3 Avoiding Liability, 27, 
4 Extracting Value, 34, 
5 Managerial Self-Interest, 42, 
6 The Mirage of Corporate Social Responsibility, 52, 
7 Bad Banking and Market Manipulation, 60, 
Part II The Reforms, 79, 
8 A New Political Economy for the Corporation, 81, 
9 Controls on Multinationals, 87, 
10 Controlling International Tax Avoidance and Evasion, 99, 
11 Reforming Systems of Governance, Accounting and Auditing, 114, 
12 Banking Reform and the Control of Market Manipulation and Short-Termism, 133, 
13 Small and Locally Based Alternatives, 146, 
14 Towards New Corporate Forms, 163, 
Notes and Additional References, 181, 
The Corporate Reform Collective, 197, 
Index, 

CHAPTER 1

Tax Evasion and Avoidance

Modern corporations are not independent of the state, but intricately connected with it in many ways. Yet our political leaders generally behave subserviently to businesses bosses, so that corporate power dominates political power. Much of this results from manipulation of the corporate form itself. Nowhere is this seen more clearly than in relation to taxation.

The revenues lost through tax avoidance, including those relating to corporate practices, are hard to estimate, but the European Union claims 'the level of tax evasion and avoidance in Europe to be around &8364;1 trillion [£830 billion or US$1.25 trillion]', equivalent to 7–8 per cent of the gross domestic product (GDP) of all EU member states. The US Treasury has estimated its tax gap (tax avoidance, evasion and arrears) to be $385 billion. A large number of corporations, including Amazon, Apple, eBay, Facebook, Google, Microsoft and Starbucks, have been on the radar of parliamentary committees for avoiding taxes through complex organisational structures. The amounts are a stark reminder of how tax avoidance forms an integral part of corporate profitability.

It is sometimes argued that companies should not be taxed at all, since taxes are a cost which they pass on to their customers. This rests on the mistaken view that a company is no more than a bundle of contracts. In reality, a company is a form of property protected by the state. The privilege – it should not be regarded as a right – of incorporation gives shareholders the protection of limited liability, justified by the advantages of enabling the combination of factors of production for large-scale economic activities. This protection enables companies to reap super-profits from economies of scale and scope, and to accumulate large concentrations of capital. Unless their profits are taxed, they will grow even bigger, further distorting competition. Furthermore, if companies were not taxed, the corporate form could easily be used to shelter all kinds of income from taxation.

Behind a wall of secrecy corporations are able to devise complex schemes to boost their profits and meet incessant stock market pressures to report higher profits. Tax avoidance also personally benefits business executives because their remuneration and status is often related to reported profits. In these tasks, corporations are advised and guided by an established tax avoidance industry fronted by accountancy firms, lawyers and financial services experts. The system sustains a vast army of professionals engaged in both avoidance and evasion not only of tax but also banking and financial and other forms of regulation, resulting in enormously wasteful expenditures for both firms and governments.

In a globalised world, the distinctions between domestic and global are blurred, and almost all big companies are able to play the tax avoidance games. A few examples will help to illustrate the issues

Corporate Tax Trickery

Within major corporations, the taxation department/division often acts as a profit centre. It is assigned profit and revenue generation targets, and the promotion and the salary increments of its members often depend on meeting the targets. The promotion of tax avoidance schemes by a highly profitable division within Barclays Bank is a telling example, which unusually led to a public rebuke from the government. This rebuke might have curbed two tax avoidance schemes but does not deal with the corporate love affair for tax avoidance or tax havens. A 2013 report published by Action-Aid, summarised in Box 1.1, chastised Barclays for promoting investment in Africa through tax havens, all with the aim of increasing corporate profits and depriving millions of people of much-needed education, healthcare and social infrastructure.

It is not just financial institutions: other corporations can also arrange their financial affairs in ways that avoid taxes. Companies can use their ownership structures to effectively shift profits and avoid taxes. A good example of this, as shown in Box 1.2, is the strategy adopted by a US private equity firm to enable it to capture and relocate the finances of Boots the Chemists, a major pharmacy chain in the United Kingdom, and to save around £1 billion in tax.

Corporate tax avoidance is not just a problem in the United Kingdom, but an issue wherever the corporate form has taken hold. US companies like Enron and WorldCom used offshore havens and artificial royalty programmes and management fees to reduce taxable profits. The Chinese government claims that 'Tax evasion through transfer pricing accounts for 60 percent of total tax evasion by multinational companies'. A Chinese government official added that 'almost 90 per cent of the foreign enterprises are making money under the table. ... most commonly, they use transfer pricing to dodge tax payments. A former senior fellow of the Brookings Institution has argued that transfer pricing is used by virtually every multinational corporation to shift profits at will around the globe. So in the next section we look at the root cause of the ease with which companies are able to shift profits and avoid taxes.

International tax avoidance by multinational or transnational corporations (TNCs) exploits the tax haven and 'offshore' secrecy system, which was originally devised by and for them. However, tax havens are now also used for all kinds of evasion, not only of taxes, but of other laws, facilitating money-laundering for public and private corruption, terrorism, and other criminal activities. The offshore system has particularly distorted the finance sector, as an element in shadow banking and other techniques which contributed to the excessive leverage, helping to feed the bubble which caused the financial crash of 2007–09.

Outdated Principles in International Tax Law

These problems result from a deep structural flaw in the international tax system. This flaw is the failure to treat multinationals according to the economic reality that they operate as integrated firms under central direction. Instead, a principle has become gradually entrenched that they should be taxed as if they were separate enterprises in each country dealing independently with each other. This can be referred to as the Separate Enterprise – Arm's Length Principle (SE-ALP). For example, FTSE100 companies have 34,216 subsidiary companies, joint ventures and...

Details zur Ausgabe

• Verlag: Pluto Press
• Erscheinungsdatum: 2014
• Sprache: Englisch
• ISBN 10: 0745335160
• ISBN 13: 9780745335162
• Einband: Taschenbuch
• Anzahl der Seiten: 216
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar