Monday, December 12, 2005

Our Tax Dollars At Work? Not!

How do multinational corporations rip off the poor? Here's one I hadn't been aware of. From an interview on Australia's ABC Network with Raymond Baker, guest scholar and the Brookings Institute in Washington DC and author of Capitalism's Achilles Heel: dirty money and how to renew the free-market system.

RAYMOND BAKER: (A) thousand billion dollars a year of dirty money crosses borders.

Half of that, in my estimate, comes out of the poor countries of the world, developing and transitional economies, and those are the countries that are tremendously hurt by these flows, because that is for the most part, a one-way flow out of those countries into western accounts.

MARK COLVIN: And so there you're talking about corrupt, say, African dictators just shovelling what's often aid money into Swiss bank accounts for instance?

RAYMOND BAKER: That's part of it. I'm also including in that calculation transfer pricing, that multinational corporations use to move money that is tax evading out of developing countries.

MARK COLVIN: How do they do that?

RAYMOND BAKER: They price transactions in such a way as to reduce taxes in one place and shift profits, for example, into a tax haven. If you vary prices of what you're selling, the same thing can be sold at different prices to different countries for the purpose of moving money out of those countries, and particularly lodging it in tax havens.

MARK COLVIN: So it must be keeping the world's accountants very busy, all of this stuff?

RAYMOND BAKER: It certainly does. In fact, the larger accounting companies typically maintain transfer pricing departments that advise their clients, advise corporations on the efficacy of transfer pricing and in effect, how to get away with it.

MARK COLVIN: Is that done mainly in the developing world, or would that be affecting all countries, countries like Australia and the United States?

RAYMOND BAKER: All countries, including Australia, the United States. The United States has a great deal of money flowing into tax havens through transfer pricing. The same thing is true out of European countries. It's done by virtually all multinational corporations.

MARK COLVIN: Is it illegal or is it just to difficult to police?

RAYMOND BAKER: It is illegal. It breaks laws against mail fraud, wire fraud and normally, it would break laws against filing false customs documents. However, because these laws are so seldom enforced in the United States, in Europe and Australia and elsewhere, it's done with a great deal of frequency.


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