Thursday, August 2, 2012
Can't Keep Denying Climate Change!
Bill McKibben: Even Industry-Funded Climate Change Deniers Can’t Ignore Planet’s Warming
Published: Thursday 2 August 2012
Responding to climate skeptic Richard Muller’s reversal on global warming, McKibben says: “It’s scientifically not very interesting because most scientists figured it out 20 years ago.”
Hundreds of new U.S. counties were declared disaster areas on Wednesday amidst the country’s worst drought in decades. We’re joined by famed environmental activist and 350.org founder Bill McKibben, whose new article for Rolling Stone magazine is called "Global Warming’s Terrifying New Math: Three simple numbers that add up to global catastrophe — and that make clear who the real enemy is." Responding to climate skeptic Richard Muller’s reversal on global warming, McKibben says: "It’s scientifically not very interesting because most scientists figured it out 20 years ago, and all [Muller] has done is confirm their work. Politically, it’s interesting because we’re reaching the point where even industry-funded deniers can’t with a straight face say that [the earth] is not warming."
Get Email Alerts from NationofChange
ABOUT Amy Goodman
Amy Goodman is the host of "Democracy Now!," a daily international TV/radio news hour airing on more than 900 stations in North America. She is the author of "Breaking the Sound Barrier," recently released in paperback and now a New York Times best-seller.
FEATURE A
Connect with your friends
Find new content you might like and see what your friends are sharing!
Top Stories
Wednesday, August 1, 2012
Oil Company Profits, Where Our Money Goes; Read It For Yourself
Big 5 Oil Companies Going for the Gold
Published: Wednesday 1 August 2012
“Despite slightly lower oil and gasoline prices over the past three months, these companies still made a combined $236,000 per minute this year.”
Second-Quarter Earnings Race Ahead, Boosted by Tax Breaks
Middle-class families may have gotten some relief in the second quarter of 2012 due to slightly lower gasoline prices compared to the first quarter of the year, but billions of dollars in big profits continue to pile up at the Big Oil companies. In the first half of 2012, the five biggest oil companies—BP plc, Chevron Corp., ConocoPhillips, ExxonMobil Corp., and Royal Dutch Shell Group—earned a combined $62.2 billion, or $341 million per day. This compares to an average dip in the average price of gas at the pump for American consumers of a mere 3 cents per gallon between the first and second quarters.
Despite slightly lower oil and gasoline prices over the past three months, these companies still made a combined $236,000 per minute this year. This income is more than what 96 percent of American households earn in an entire year.
Profits continued to grow for ExxonMobil and Chevron, while dropping slightly for ConocoPhillips and Shell compared to last year. ExxonMobil saw a 67 percent increase in profits while Chevron enjoyed an 11 percent increase. The New York Times reported that these slightly lower profits compared to the second quarter of 2011 were linked to “international benchmark prices for oil [which] had declined by more than 7 percent in the second quarter, compared to the same period last year when turmoil in North Africa and the Middle East caused a spike in oil prices.
BP, the second-largest oil company in Europe, reported a loss of $1.4 billion for the second quarter of 2012. The Associated Press reported that BP said:
The underlying results were depressed by weaker oil and U.S. gas prices together with reductions in output due to extensive planned maintenance, particularly affecting high-margin production from the Gulf of Mexico.
Without BP, profits for the other big four companies are only 4 percent lower compared to the first quarter of 2012. Despite the 7 percent decline in oil prices, second-quarter 2012 gasoline prices were only 2 percent lower than the second quarter of 2011.
The huge earnings this quarter for four of the companies follow the big five companies’ record profit of $137 billion in 2011—amounting to $375 million per day—thanks again to high oil and gasoline prices. ExxonMobil, Chevron, and ConocoPhillips were the first-, second-, and 13th-most profitable public U.S. companies in 2011, respectively.
What are these companies doing with this treasure? Some of these funds provide their $72 billion in cash reserves. And these five companies used 31 percent of their 2012 profits to buy back their own stock, which enriches shareholders but doesn’t add to oil supplies or investments in alternative fuels or other new technologies. ExxonMobil spent 42 percent of their profits repurchasing their own stock. Even with these huge earnings and large cash reserves, however, these companies produced 6 percent less oil than one year ago. (see table)
What’s more, the big five oil companies continue to spend millions of dollars on lobbying and political donations. They have spent a combined $25.7 million lobbying Congress so far this year, and more than $91 million over the last 18 months. ExxonMobil alone spent $17 million lobbying for the past 18 months, making it the top spender in the oil and gas industry. Collectively, the oil and gas industry, including the big five companies and Koch Industries, has spent nearly $70 million on lobbying this year.
Their efforts are paying off. An analysis by the House Energy and Commerce Committee Democrats determined that the House of Representatives passed many provisions that benefit Big Oil:
The oil and gas industry has been the largest beneficiary of the anti-environment votes in the House. Since the beginning of 2011, the House has voted 109 times for policies that enrich the oil and gas industry, including 45 votes to weaken environmental, public health, and safety requirements applicable to oil companies; [and] 38 votes to block or slow deployment of clean energy alternatives.
This suggests that the millions of dollars Big Oil companies spent on lobbying are worthwhile investments. In 2011 the House of Representatives voted against three separate amendments that would have revoked a collection of oil company tax giveaways. In March the Senate voted 51-47 to end a debate and pass the Repeal Big Oil Subsidies Act, S. 2204, sponsored by Sen. Robert Menendez (D-NJ). Unfortunately, 60 “aye” votes were necessary to break this filibuster, so the bill was blocked.
Big Oil’s successful lobbying cost $69 million to protect tax breaks worth at least $4 billion annually. They received $58 in tax breaks for every dollar spent on congressional pressure and lobbying. That is a rate of return that would make Warren Buffett envious.
In addition to high-pressure arm twisting, the oil and gas industry political action committees, individuals, and other donations provided more than $30.5 million in federal campaign contributions this election cycle as of July 9. Republican candidates received 88 percent of these funds. House of Representatives incumbents have already received more Big Oil campaign cash this year than incumbents in 2008 and 2010, and there are still more than four months until Election Day.
While these companies are spending freely on their own wealth and for political influence, they are paying relatively low tax rates. The big three U.S. publicly owned oil companies—Chevron, ConocoPhillips, and ExxonMobil—paid relatively low federal effective tax rates in 2011. Reuters reports that their tax payments were “a far cry from the 35 percent top corporate tax rate.” It reported that ConocoPhillips paid an effective federal tax rate of 18 percent last year. In addition, ExxonMobil paid 13 percent of its U.S. income in taxes after deductions and benefits in 2011, according to a Reuters calculation of securities filings. Chevron paid about 19 percent.
In addition to these relatively low federal income tax rates, these companies also benefit from tax breaks worth $24 billion over a decade, according to the Congressional Joint Committee on Taxation. These special preferences include one designed to keep manufacturing facilities in the United States, and another that was enacted way back in 1916, when it made economic sense to help the fledgling oil industry to grow, but little sense today for the big five companies that routinely earn multibillion-dollar profits.
These tax breaks serve no economic or fiscal function any longer, yet in testimony before the Senate Finance Committee in June, Harold Hamm, chairman and CEO of Continental Resources Inc., said that the United States must retain tax breaks for the oil and gas industry. His position ignores that the big five oil companies had lower oil production and fewer U.S. employees over the last half decade despite growing profits.
The House of Representatives-passed budget, authored by Rep. Paul Ryan (R-WI), would retain these tax breaks. Rep. Ryan claims that his budget would eliminate tax breaks in exchange for lower rates, but his plan didn’t specify a single tax break that it would eliminate. The Ryan budget lowers the top corporate income tax rate by nearly one third. A Center for American Progress Action Fund analysis estimates that the Ryan budget’s cut in the corporate tax rate could lower the big five oil companies’ annual tax bill by $2.3 billion per year, based on an assessment of their 2011 financial statements filed with the Securities and Exchange Commission.
U.S. taxpayers should no longer foot the bill for antiquated tax breaks for Big Oil. The Energy Information Administration predicts that 2012 gasoline prices will average $3.49 per gallon, just 4 cents less than the record-setting $3.53 per gallon in 2011. If this prediction holds, 2012 will have the <>second-highest gasoline price in inflation-adjusted dollars since 1949. The next closest average annual price was $3.07 per gallon in 2008.
Since there are few fuel alternatives to gasoline for passenger vehicles, Americans are forced to spend more at the pump and less on other goods and services. High gasoline prices lead to a huge transfer of income from middle-class families to huge, wealthy oil companies and their mostly wealthy shareholders. Then there are the $2.4 billion in annual special tax breaks received by the big five oil companies, and essentially paid for by other taxpayers. This makes little sense when these companies’ 2012 profits leave them flush with cash. And the proposed cut in the corporate tax rate by the Ryan budget plan would add an estimated $2.3 billion to this annual inequity.
After falling since April 6, U.S. gasoline prices rose by a dime per gallon in the past two weeks, according to CNN. As oil prices rise, so will the big five oil company profits. Yet they will continue to collect billions of dollars in existing tax breaks, while the House-passed budget would provide an additional $2.3 billion tax cut.
None of this makes sense when these five companies have made $66 billion in profits in the first half of 2012, while the federal budget faces steep automatic cuts due to the sequestration procedures included in the Budget Control Act of 2011. If Congress doesn’t address this soon, thislaw will likely lead to automatic cuts in discretionary spending, including funds for U.S. Marshals, food safety inspections, enforcement of pollution reductions, and multiple other vital government safeguards and services beginning in 2013.
Big Oil needs to lose its tax breaks as part of any compromise. Their second-quarter profits reinforce that need anew.
Middle-class families may have gotten some relief in the second quarter of 2012 due to slightly lower gasoline prices compared to the first quarter of the year, but billions of dollars in big profits continue to pile up at the Big Oil companies. In the first half of 2012, the five biggest oil companies—BP plc, Chevron Corp., ConocoPhillips, ExxonMobil Corp., and Royal Dutch Shell Group—earned a combined $62.2 billion, or $341 million per day. This compares to an average dip in the average price of gas at the pump for American consumers of a mere 3 cents per gallon between the first and second quarters.
Despite slightly lower oil and gasoline prices over the past three months, these companies still made a combined $236,000 per minute this year. This income is more than what 96 percent of American households earn in an entire year.
Profits continued to grow for ExxonMobil and Chevron, while dropping slightly for ConocoPhillips and Shell compared to last year. ExxonMobil saw a 67 percent increase in profits while Chevron enjoyed an 11 percent increase. The New York Times reported that these slightly lower profits compared to the second quarter of 2011 were linked to “international benchmark prices for oil [which] had declined by more than 7 percent in the second quarter, compared to the same period last year when turmoil in North Africa and the Middle East caused a spike in oil prices.
BP, the second-largest oil company in Europe, reported a loss of $1.4 billion for the second quarter of 2012. The Associated Press reported that BP said:
The underlying results were depressed by weaker oil and U.S. gas prices together with reductions in output due to extensive planned maintenance, particularly affecting high-margin production from the Gulf of Mexico.
Without BP, profits for the other big four companies are only 4 percent lower compared to the first quarter of 2012. Despite the 7 percent decline in oil prices, second-quarter 2012 gasoline prices were only 2 percent lower than the second quarter of 2011.
What are these companies doing with this treasure? Some of these funds provide their $72 billion in cash reserves. And these five companies used 31 percent of their 2012 profits to buy back their own stock, which enriches shareholders but doesn’t add to oil supplies or investments in alternative fuels or other new technologies. ExxonMobil spent 42 percent of their profits repurchasing their own stock. Even with these huge earnings and large cash reserves, however, these companies produced 6 percent less oil than one year ago. (see table)
What’s more, the big five oil companies continue to spend millions of dollars on lobbying and political donations. They have spent a combined $25.7 million lobbying Congress so far this year, and more than $91 million over the last 18 months. ExxonMobil alone spent $17 million lobbying for the past 18 months, making it the top spender in the oil and gas industry. Collectively, the oil and gas industry, including the big five companies and Koch Industries, has spent nearly $70 million on lobbying this year.
Their efforts are paying off. An analysis by the House Energy and Commerce Committee Democrats determined that the House of Representatives passed many provisions that benefit Big Oil:
The oil and gas industry has been the largest beneficiary of the anti-environment votes in the House. Since the beginning of 2011, the House has voted 109 times for policies that enrich the oil and gas industry, including 45 votes to weaken environmental, public health, and safety requirements applicable to oil companies; [and] 38 votes to block or slow deployment of clean energy alternatives.
This suggests that the millions of dollars Big Oil companies spent on lobbying are worthwhile investments. In 2011 the House of Representatives voted against three separate amendments that would have revoked a collection of oil company tax giveaways. In March the Senate voted 51-47 to end a debate and pass the Repeal Big Oil Subsidies Act, S. 2204, sponsored by Sen. Robert Menendez (D-NJ). Unfortunately, 60 “aye” votes were necessary to break this filibuster, so the bill was blocked.
Big Oil’s successful lobbying cost $69 million to protect tax breaks worth at least $4 billion annually. They received $58 in tax breaks for every dollar spent on congressional pressure and lobbying. That is a rate of return that would make Warren Buffett envious.
In addition to high-pressure arm twisting, the oil and gas industry political action committees, individuals, and other donations provided more than $30.5 million in federal campaign contributions this election cycle as of July 9. Republican candidates received 88 percent of these funds. House of Representatives incumbents have already received more Big Oil campaign cash this year than incumbents in 2008 and 2010, and there are still more than four months until Election Day.
While these companies are spending freely on their own wealth and for political influence, they are paying relatively low tax rates. The big three U.S. publicly owned oil companies—Chevron, ConocoPhillips, and ExxonMobil—paid relatively low federal effective tax rates in 2011. Reuters reports that their tax payments were “a far cry from the 35 percent top corporate tax rate.” It reported that ConocoPhillips paid an effective federal tax rate of 18 percent last year. In addition, ExxonMobil paid 13 percent of its U.S. income in taxes after deductions and benefits in 2011, according to a Reuters calculation of securities filings. Chevron paid about 19 percent.
In addition to these relatively low federal income tax rates, these companies also benefit from tax breaks worth $24 billion over a decade, according to the Congressional Joint Committee on Taxation. These special preferences include one designed to keep manufacturing facilities in the United States, and another that was enacted way back in 1916, when it made economic sense to help the fledgling oil industry to grow, but little sense today for the big five companies that routinely earn multibillion-dollar profits.
These tax breaks serve no economic or fiscal function any longer, yet in testimony before the Senate Finance Committee in June, Harold Hamm, chairman and CEO of Continental Resources Inc., said that the United States must retain tax breaks for the oil and gas industry. His position ignores that the big five oil companies had lower oil production and fewer U.S. employees over the last half decade despite growing profits.
The House of Representatives-passed budget, authored by Rep. Paul Ryan (R-WI), would retain these tax breaks. Rep. Ryan claims that his budget would eliminate tax breaks in exchange for lower rates, but his plan didn’t specify a single tax break that it would eliminate. The Ryan budget lowers the top corporate income tax rate by nearly one third. A Center for American Progress Action Fund analysis estimates that the Ryan budget’s cut in the corporate tax rate could lower the big five oil companies’ annual tax bill by $2.3 billion per year, based on an assessment of their 2011 financial statements filed with the Securities and Exchange Commission.
U.S. taxpayers should no longer foot the bill for antiquated tax breaks for Big Oil. The Energy Information Administration predicts that 2012 gasoline prices will average $3.49 per gallon, just 4 cents less than the record-setting $3.53 per gallon in 2011. If this prediction holds, 2012 will have the <>second-highest gasoline price in inflation-adjusted dollars since 1949. The next closest average annual price was $3.07 per gallon in 2008.
Since there are few fuel alternatives to gasoline for passenger vehicles, Americans are forced to spend more at the pump and less on other goods and services. High gasoline prices lead to a huge transfer of income from middle-class families to huge, wealthy oil companies and their mostly wealthy shareholders. Then there are the $2.4 billion in annual special tax breaks received by the big five oil companies, and essentially paid for by other taxpayers. This makes little sense when these companies’ 2012 profits leave them flush with cash. And the proposed cut in the corporate tax rate by the Ryan budget plan would add an estimated $2.3 billion to this annual inequity.
After falling since April 6, U.S. gasoline prices rose by a dime per gallon in the past two weeks, according to CNN. As oil prices rise, so will the big five oil company profits. Yet they will continue to collect billions of dollars in existing tax breaks, while the House-passed budget would provide an additional $2.3 billion tax cut.
None of this makes sense when these five companies have made $66 billion in profits in the first half of 2012, while the federal budget faces steep automatic cuts due to the sequestration procedures included in the Budget Control Act of 2011. If Congress doesn’t address this soon, thislaw will likely lead to automatic cuts in discretionary spending, including funds for U.S. Marshals, food safety inspections, enforcement of pollution reductions, and multiple other vital government safeguards and services beginning in 2013.
Big Oil needs to lose its tax breaks as part of any compromise. Their second-quarter profits reinforce that need anew.
$32 Trillion (not billion) Hiding Offshore!
Exhaustive Study Finds Global Elite Hiding up to $32 Trillion in Offshore Accounts
Published: Wednesday 1 August 2012
“Mitt Romney has failed to make an economic disclosure that every president and candidate for president has made in the last 36 years.”
A new report reveals how wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in what are known as offshore accounts or tax havens. The actual sums could be higher because the study only deals with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts. The inquiry was commissioned by the Tax Justice Network and is being touted as the most comprehensive report ever on the "offshore economy." It also finds that private banks are deeply involved in running offshore havens, with UBS, Credit Suisse and Goldman Sachs handling the most assets. We’re joined by the report’s author, James Henry, a lawyer and former chief economist at McKinsey & Company.
Transcript
AMY GOODMAN: We turn now to a new report that reveals how wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in what are known as offshore accounts or tax havens. The conservative estimate of $21 trillion—conservative estimate—is as much money as the entire annual economic output of the United States and Japan combined. The actual sums could be higher because the study only deals with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts.
The inquiry was commissioned by the Tax Justice Network and is being touted as the most comprehensive report ever on the "offshore economy." It’s called "The Price of Offshore Revisited." The study finds private banks are deeply involved in running offshore havens with UBS, Credit Suisse, Goldman Sachs handling the most assets offshore. According to the report, less than 100,000 people worldwide own almost $10 trillion of the wealth held in tax havens.
To talk about the implications of these findings, we’re joined by the report’s author, James Henry, economist, lawyer, board member of the Tax Justice Network, former chief economist at McKinsey & Company.
Welcome to Democracy Now!
JAMES HENRY: Thanks very much, Amy.
AMY GOODMAN: It’s great to have you with us. Tell us what you found.
JAMES HENRY: Well, the $21 trillion figure is the headline story, that’s a shock to a lot of people, actually represents about 10 to 15 percent of global wealth. So, from that standpoint, we think it’s a reasonable number. But the interesting thing is that all of this wealth accrues to the top 10 million people on the planet, and a lot of it just to the top 100,000, people with assets over $30 million per household.
The second thing that’s striking about this is the role of the great international banks that we’ve all come to know and love, the ones you described—UBS, Credit Suisse, HSBC, JPMorgan—all these banks—Goldman—big recipients of bailout money from taxpayers, and also deeply implicated in the financial crisis of 2008 to the current period. These are the same folks that have specialized in helping the wealthiest people on the planet take their money offshore and hide it from tax authorities.
AMY GOODMAN: You talk about pirate banks.
JAMES HENRY: Right.
AMY GOODMAN: What do you mean?
JAMES HENRY: Well, I mean that this is the business of taking money and moving it to secret offshore accounts and sheltering it from taxes. For example, if you are a wealthy Mexican investor, you can hold your bank deposits in New York City in Citibank or UBS tax-free. The U.S. government doesn’t collect taxes on bank deposits by nonresident aliens. And it doesn’t tell the Mexican authorities that you’re earning all that money. So, basically, we have designed our tax laws—the United States, the U.K., Switzerland—to become the largest tax havens in the world. The actual offshore islands, like the Caymans, are just conduits to these ultimate destinations.
AMY GOODMAN: People would say, well, we knew that about Swiss banks, but that’s not the same for U.S. banks.
JAMES HENRY: Oh, yeah, absolutely. The leaders in the pack here historically have been U.K. banks, U.S. banks and Swiss banks. And so, you know, we are all upset—our Treasury is trying to get the Swiss private bankers to stop coming to the United States and taking money from wealthy Americans. But our banks have been doing the same thing for decades with respect to Latin America, the Philippines, you know, much of Africa. And that’s a system that the banks have really designed.
AMY GOODMAN: Let’s talk about the continent of Africa and what this means for various countries and, most importantly, the majority of the populations there.
JAMES HENRY: Yeah. Well, for example, Nigeria is supposedly a debtor country. But when you look at all the unrecorded capital outflows that have flowed out of Nigeria, it turns out that Nigeria is actually, like many other developing countries, a net creditor of the richest countries in the world. So if you add up and accumulate all the unrecorded capital flows that have accrued to the Nigerian elite, political as well as private sector, you know, the tiny share of that country’s population owns a vast amount of offshore wealth. So the debt problem is not really a debt problem. It’s a tax problem. Developing countries account for about a third, we estimate, of the $21 to $32 trillion of financial assets that’s offshore.
AMY GOODMAN: Some of the critiques of the report, the investigation you did—this is from CNBC: quote, "The problem, says Dan Mitchell, a senior fellow at the Cato Institute, is that the estimate is based on a series of assumptions aimed at making people 'believe that much of cross-border investing is all about tax evasion and that all this money should go to government, and that this would be a good thing.'" That’s what he says. "The real problem facing governments, Mitchell says, is spending not revenues." Your response, James Henry?
JAMES HENRY: Well, my response is that he hasn’t read the report, basically. We’ve been very careful to estimate the size of this black hole using three different methods. We’ve looked individually at the top 50 banks in the world and have detailed numbers for each one of them. We’ve looked at 139 developing countries where we can get data on how much their unrecorded capital flows were, and we’ve built detailed models of those. And we looked at data published by the Bank for International Settlements. So the numbers are the best ever recorded here.
We’re not suggesting that the—you know, there may not be problems on the spending side, but it’s outrageous for the wealthiest people on the planet to pay zero taxes. And what this does to developing countries, in particular, because they can’t tax income, because they can’t tax wealth, they end up taxing low- and middle-income people with VAT taxes and sales taxes that are regressive. So, basically, what you’re seeing is that globalization is driving a big hole through the nation state system that was designed to raise tax revenue.
AMY GOODMAN: Let’s go to Mitt Romney, because that’s why the whole issue of offshore accounts has come into the big consciousness of the overall American population right now, the presumptive Republican presidential nominee, speaking to Radio Iowa earlier this month about his foreign investments.
JAMES HENRY: Yeah, well, he’s not alone. That’s one estimate—one indication of our report. You know, basically, you’re looking at behavior that’s engaged in by a lot of Mitt Romneys, and, you know, essentially, the United States is facing kind of a stark choice in this election between the first president in history who, you know, has really had offshore accounts like this. You know, a lot of us who are tax experts—and not necessarily Democrats, by any means—just wonder what the heck is he hiding there. There must be something. You know, John McCain released 23 years of his tax reports, tax returns. Romney is still stopping with 2010. So, if there’s no problem, just release the returns.
AMY GOODMAN: I want to go more to Mitt Romney’s—the issue of his hidden wealth. He was speaking to Face the Nation. Senator Dick Durbin of Illinois challenged Mitt Romney to be more transparent with his finances.
JAMES HENRY: Well, I think that he’s absolutely right. We should demand disclosure. This is a situation where you have essentially representation without taxation, not only for individuals, but also for corporations that are able to move their money offshore, conceal it and then come back to Washington and have enormous political impact on the system, spending their money under Citizens United. You know, Romney is just one kind of stellar example of that.
AMY GOODMAN: Name more names of the banks, who people should be watching for. And what do you think should be done about this?
JAMES HENRY: Good example is HSBC. They’re number three on our list, a big U.K. bank. They recently had a deferred prosecution agreement with the Department of Justice for laundering $14 billion of cartel drug money. They got off with a $1 billion parking ticket, and their profits per year are about $20 billion. So, you know, this is the Obama administration basically deciding not to close this bank, even though investigators that I’ve talked to at the bank—who have looked at the bank closely, say this is like BCCI in the ’90s. The only difference is that that was a Pakistani bank, which we decided to close down.
HSBC is just one of the top 10 banks on this list. Collectively, those 10 banks manage about $6.3 trillion of the $12.3 trillion that we located in these top 50 banks. So, you know, the other names on the list, you’ve mentioned—UBS, Credit Suisse, HSBC, JPMorgan, Pictet, Deutsche Bank, BNP Paribas, Barclays. These are the—
AMY GOODMAN: What about large corporations? You talk about intellectual—moving intellectual property offshore—
JAMES HENRY: Yeah.
AMY GOODMAN: —corporations like Google and Pfizer.
JAMES HENRY: Right. Well, in our film, We’re Not Broke, which was a Sundance documentary, we discussed corporate tax evasion. And this is the latest trend in the software industry and also in the healthcare industry, drug industry. Pfizer, Google, Microsoft, companies like General Electric are parking their intellectual property, their brands and software, offshore in places like Bermuda and paying royalties to themselves and essentially parking the profits in these low-tax jurisdictions and not paying any taxes on it. So, Google last year saved about $3 billion by that. So if you have, you know, this core kind of value, intellectual capital, moving offshore to low-tax havens, where it’s never been produced, essentially is a kind of, you know, decapitalization of the U.S. And all of these countries now also parked all these profits abroad to get tax breaks, and then they want a deal when they bring the money back. They want a repatriation tax cut, 5 percent.
AMY GOODMAN: So, what should happen?
JAMES HENRY: Well, we’ve tried this repatriation tax cut in 2004. It didn’t produce any jobs. And we shouldn’t—absolutely shouldn’t get in—the corporate—give in to this lobby. The corporate income taxes and personal income taxes have dropped steadily since the 1980s on high-income corporations. And, you know, at the same time, we’ve seen the growth of this offshore haven. So it isn’t driven by tax rates; it’s driven by greed.
AMY GOODMAN: James Henry, why did you decide to do this report? I mean, you were chief economist at McKinsey, which isn’t so different from Bain, in some ways, a major business consultancy.
JAMES HENRY: Right. Well, I’ve done a few things since then. And I think—you know, I’m on the global board of Tax Justice Network, which is an organization that’s grown up in the last decade to fight offshore havens. And we are dedicated volunteers working on this problem of global tax justice. This is vital to democracy, as well as to the tax system, because if you can’t have fair taxes, you end up having representation without taxation. And I think the poorest countries in the world are forced to rely on very regressive taxes to pay their bills.
AMY GOODMAN: We’re going to link to your report, James Henry, economist, lawyer, board member of Tax Justice Network, former chief economist at McKinsey & Company, author of the report, "The Price of Offshore Revisited."
Transcript
AMY GOODMAN: We turn now to a new report that reveals how wealthy individuals and their families have between $21 and $32 trillion of hidden financial assets around the world in what are known as offshore accounts or tax havens. The conservative estimate of $21 trillion—conservative estimate—is as much money as the entire annual economic output of the United States and Japan combined. The actual sums could be higher because the study only deals with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts.
The inquiry was commissioned by the Tax Justice Network and is being touted as the most comprehensive report ever on the "offshore economy." It’s called "The Price of Offshore Revisited." The study finds private banks are deeply involved in running offshore havens with UBS, Credit Suisse, Goldman Sachs handling the most assets offshore. According to the report, less than 100,000 people worldwide own almost $10 trillion of the wealth held in tax havens.
To talk about the implications of these findings, we’re joined by the report’s author, James Henry, economist, lawyer, board member of the Tax Justice Network, former chief economist at McKinsey & Company.
Welcome to Democracy Now!
JAMES HENRY: Thanks very much, Amy.
AMY GOODMAN: It’s great to have you with us. Tell us what you found.
JAMES HENRY: Well, the $21 trillion figure is the headline story, that’s a shock to a lot of people, actually represents about 10 to 15 percent of global wealth. So, from that standpoint, we think it’s a reasonable number. But the interesting thing is that all of this wealth accrues to the top 10 million people on the planet, and a lot of it just to the top 100,000, people with assets over $30 million per household.
The second thing that’s striking about this is the role of the great international banks that we’ve all come to know and love, the ones you described—UBS, Credit Suisse, HSBC, JPMorgan—all these banks—Goldman—big recipients of bailout money from taxpayers, and also deeply implicated in the financial crisis of 2008 to the current period. These are the same folks that have specialized in helping the wealthiest people on the planet take their money offshore and hide it from tax authorities.
AMY GOODMAN: You talk about pirate banks.
JAMES HENRY: Right.
AMY GOODMAN: What do you mean?
JAMES HENRY: Well, I mean that this is the business of taking money and moving it to secret offshore accounts and sheltering it from taxes. For example, if you are a wealthy Mexican investor, you can hold your bank deposits in New York City in Citibank or UBS tax-free. The U.S. government doesn’t collect taxes on bank deposits by nonresident aliens. And it doesn’t tell the Mexican authorities that you’re earning all that money. So, basically, we have designed our tax laws—the United States, the U.K., Switzerland—to become the largest tax havens in the world. The actual offshore islands, like the Caymans, are just conduits to these ultimate destinations.
JAMES HENRY: Oh, yeah, absolutely. The leaders in the pack here historically have been U.K. banks, U.S. banks and Swiss banks. And so, you know, we are all upset—our Treasury is trying to get the Swiss private bankers to stop coming to the United States and taking money from wealthy Americans. But our banks have been doing the same thing for decades with respect to Latin America, the Philippines, you know, much of Africa. And that’s a system that the banks have really designed.
AMY GOODMAN: Let’s talk about the continent of Africa and what this means for various countries and, most importantly, the majority of the populations there.
JAMES HENRY: Yeah. Well, for example, Nigeria is supposedly a debtor country. But when you look at all the unrecorded capital outflows that have flowed out of Nigeria, it turns out that Nigeria is actually, like many other developing countries, a net creditor of the richest countries in the world. So if you add up and accumulate all the unrecorded capital flows that have accrued to the Nigerian elite, political as well as private sector, you know, the tiny share of that country’s population owns a vast amount of offshore wealth. So the debt problem is not really a debt problem. It’s a tax problem. Developing countries account for about a third, we estimate, of the $21 to $32 trillion of financial assets that’s offshore.
AMY GOODMAN: Some of the critiques of the report, the investigation you did—this is from CNBC: quote, "The problem, says Dan Mitchell, a senior fellow at the Cato Institute, is that the estimate is based on a series of assumptions aimed at making people 'believe that much of cross-border investing is all about tax evasion and that all this money should go to government, and that this would be a good thing.'" That’s what he says. "The real problem facing governments, Mitchell says, is spending not revenues." Your response, James Henry?
JAMES HENRY: Well, my response is that he hasn’t read the report, basically. We’ve been very careful to estimate the size of this black hole using three different methods. We’ve looked individually at the top 50 banks in the world and have detailed numbers for each one of them. We’ve looked at 139 developing countries where we can get data on how much their unrecorded capital flows were, and we’ve built detailed models of those. And we looked at data published by the Bank for International Settlements. So the numbers are the best ever recorded here.
We’re not suggesting that the—you know, there may not be problems on the spending side, but it’s outrageous for the wealthiest people on the planet to pay zero taxes. And what this does to developing countries, in particular, because they can’t tax income, because they can’t tax wealth, they end up taxing low- and middle-income people with VAT taxes and sales taxes that are regressive. So, basically, what you’re seeing is that globalization is driving a big hole through the nation state system that was designed to raise tax revenue.
AMY GOODMAN: Let’s go to Mitt Romney, because that’s why the whole issue of offshore accounts has come into the big consciousness of the overall American population right now, the presumptive Republican presidential nominee, speaking to Radio Iowa earlier this month about his foreign investments.
MITT ROMNEY: With regards to any foreign investments, I understand—and you understand, of course—that my investments have been held by a blind trust, have been managed by a trustee. I don’t manage them, don’t even know where they are. Those—that trustee follows all U.S. laws. All the taxes are paid, as appropriate. All of them have been reported to the government. There’s nothing hidden there. There’s nothing—if, for instance, you own shares in, let’s say, Renault or in Fiat, you still have to pay taxes, you still have to disclose that in the United States.AMY GOODMAN: That’s Mitt Romney. James Henry?
JAMES HENRY: Yeah, well, he’s not alone. That’s one estimate—one indication of our report. You know, basically, you’re looking at behavior that’s engaged in by a lot of Mitt Romneys, and, you know, essentially, the United States is facing kind of a stark choice in this election between the first president in history who, you know, has really had offshore accounts like this. You know, a lot of us who are tax experts—and not necessarily Democrats, by any means—just wonder what the heck is he hiding there. There must be something. You know, John McCain released 23 years of his tax reports, tax returns. Romney is still stopping with 2010. So, if there’s no problem, just release the returns.
AMY GOODMAN: I want to go more to Mitt Romney’s—the issue of his hidden wealth. He was speaking to Face the Nation. Senator Dick Durbin of Illinois challenged Mitt Romney to be more transparent with his finances.
SEN. DICK DURBIN: Mitt Romney has failed to make an economic disclosure that every president and candidate for president has made in the last 36 years. Goes back to his father, who disclosed 12 years of tax returns. He’s disclosed one. Secondly, he is the first and only candidate for president of the United States with a Swiss bank account, with tax shelters, with tax avoidance schemes that involve so many foreign countries. And the third is that when it comes down to his Swiss bank account, there is just no way to explain it. You either get a Swiss bank account to conceal what you’re doing, or you believe the Swiss franc is stronger than the American dollar.AMY GOODMAN: That’s Senator Durbin. James Henry?
JAMES HENRY: Well, I think that he’s absolutely right. We should demand disclosure. This is a situation where you have essentially representation without taxation, not only for individuals, but also for corporations that are able to move their money offshore, conceal it and then come back to Washington and have enormous political impact on the system, spending their money under Citizens United. You know, Romney is just one kind of stellar example of that.
AMY GOODMAN: Name more names of the banks, who people should be watching for. And what do you think should be done about this?
JAMES HENRY: Good example is HSBC. They’re number three on our list, a big U.K. bank. They recently had a deferred prosecution agreement with the Department of Justice for laundering $14 billion of cartel drug money. They got off with a $1 billion parking ticket, and their profits per year are about $20 billion. So, you know, this is the Obama administration basically deciding not to close this bank, even though investigators that I’ve talked to at the bank—who have looked at the bank closely, say this is like BCCI in the ’90s. The only difference is that that was a Pakistani bank, which we decided to close down.
HSBC is just one of the top 10 banks on this list. Collectively, those 10 banks manage about $6.3 trillion of the $12.3 trillion that we located in these top 50 banks. So, you know, the other names on the list, you’ve mentioned—UBS, Credit Suisse, HSBC, JPMorgan, Pictet, Deutsche Bank, BNP Paribas, Barclays. These are the—
AMY GOODMAN: What about large corporations? You talk about intellectual—moving intellectual property offshore—
JAMES HENRY: Yeah.
AMY GOODMAN: —corporations like Google and Pfizer.
JAMES HENRY: Right. Well, in our film, We’re Not Broke, which was a Sundance documentary, we discussed corporate tax evasion. And this is the latest trend in the software industry and also in the healthcare industry, drug industry. Pfizer, Google, Microsoft, companies like General Electric are parking their intellectual property, their brands and software, offshore in places like Bermuda and paying royalties to themselves and essentially parking the profits in these low-tax jurisdictions and not paying any taxes on it. So, Google last year saved about $3 billion by that. So if you have, you know, this core kind of value, intellectual capital, moving offshore to low-tax havens, where it’s never been produced, essentially is a kind of, you know, decapitalization of the U.S. And all of these countries now also parked all these profits abroad to get tax breaks, and then they want a deal when they bring the money back. They want a repatriation tax cut, 5 percent.
AMY GOODMAN: So, what should happen?
JAMES HENRY: Well, we’ve tried this repatriation tax cut in 2004. It didn’t produce any jobs. And we shouldn’t—absolutely shouldn’t get in—the corporate—give in to this lobby. The corporate income taxes and personal income taxes have dropped steadily since the 1980s on high-income corporations. And, you know, at the same time, we’ve seen the growth of this offshore haven. So it isn’t driven by tax rates; it’s driven by greed.
AMY GOODMAN: James Henry, why did you decide to do this report? I mean, you were chief economist at McKinsey, which isn’t so different from Bain, in some ways, a major business consultancy.
JAMES HENRY: Right. Well, I’ve done a few things since then. And I think—you know, I’m on the global board of Tax Justice Network, which is an organization that’s grown up in the last decade to fight offshore havens. And we are dedicated volunteers working on this problem of global tax justice. This is vital to democracy, as well as to the tax system, because if you can’t have fair taxes, you end up having representation without taxation. And I think the poorest countries in the world are forced to rely on very regressive taxes to pay their bills.
AMY GOODMAN: We’re going to link to your report, James Henry, economist, lawyer, board member of Tax Justice Network, former chief economist at McKinsey & Company, author of the report, "The Price of Offshore Revisited."
Subscribe to:
Posts (Atom)