To tackle climate change
and its resulting catastrophes,
food insecurity,
pandemics and rising inequality,
governments across the world
are in desperate need of money.
But where can they find it?
As states crumble under debt,
multinationals have
never been richer.
Most of them
have become past masters
in the art of avoiding tax
through clever tax schemes.
Faced with multinationals that are
more powerful than some countries,
ordinary people are
starting to fight back.
On the front line,
chosen from among
leading international experts,
tax justice warriors
are engaged in a fight to eliminate
this unfair tax optimisation.
Economists,
legal professionals
and former political leaders.
They represent a new hope.
They have already
successfully toppled
some of the remarkable
fiscal advantages
which multinationals
currently enjoy.
A first victory
in a conflict that is as old
as our civilisations themselves.
The Tax Wars.
Over the past few decades,
multinationals have seized
control of the global economy,
building their success through
the use of tax havens,
while denying governments
much needed tax revenues.
We urgently need to react in
the face of climate catastrophes.
From hurricanes and drought
to heatwaves,
our planet is on fire.
Healthcare systems have
been brought to their knees,
and more than 800 million people
are suffering from famine.
But a wind of change is
sweeping across our planet.
The power of multinationals
and their account manipulation
can no longer be justified.
Like in Star Wars,
the story that we are about
to tell you is about justice,
and a group of heroes fighting
against the dark forces
of globalisation.
They came together to form
the Independent Commission
for the Reform of
International Corporate Taxation,
the ICRICT.
This commission for tax justice
is made up of top economists
like the Nobel Prize in Economics
Joseph Stiglitz,
Thomas Piketty, author
of the global bestseller
Capital in the 21st Century,
and Jayati Ghosh, a specialist
on the issue of development.
They travel the world looking to
convince civilians and governments
of the urgency of overhauling
a century-old tax system
that is no longer fit for purpose.
Their aim couldn't be clearer:
to get multinationals
to finally pay their taxes,
like everyone else.
Governments all over the world are
in desperate need for funds
and increase in corporate profits
tells you where the money is.
The money is in the pocket
of the large corporations,
the multinationals.
We have a system
which has become deeply skewed
in favour of big multinationals,
which is disastrous for
the social contract.
Just like a citizen assumes
that he or she has to pay tax,
similarly large corporations,
big multinationals also
have to assume that
they have to pay tax.
Multinationals are responsible
for close to half of all
business trade worldwide.
How can it be possible
that they pay practically
no taxes on their profits?
CHAPTER 1: THE TAX EVASION EMPIRE
EMERGENCY EXIThe first step on our journey
through the galaxy of tax evasion
is the town of Belfort in France.
Eva Joly is one of the
founding members of the commission.
She was born in Norway,
but has spent the bulk
of her career in France.
She was an examining magistrate
before twice being elected
to the European Parliament.
She is now a lawyer,
and has made tackling
tax evasion her priority.
Right now, I'm on my way to Belfort.
This is about
the way in which multinationals
across the world have been
minimising their tax base
for decades now.
We're looking at the former
company Alstom,
which was very big in France.
The TGV we're travelling in
right now was built by Alstom.
They also built turbines
which are vital to
nuclear power plants.
This cutting-edge
French technology
was purchased in highly
suspicious circumstances
by General Electric in 2014.
Since the takeover of Alstom Energy
by the US firm General Electric,
profits have evaporated.
The company's trade unions
reached out to Eva Joly.
Together, they are accusing
General Electric of tax evasion,
to the detriment of employees.
I've printed you out a copy of
the press release to take a look at.
Right.
- Here you go.
- That's great, thank you.
Up until 2015 our profits were into
the hundreds of millions.
Employees were entitled
to a profit-sharing bonus
that could be worth as much
as two months' salary.
Through tax evasion
and an artificial deficit,
employees are no longer
receiving this money.
This has a direct impact
on employees' purchasing power.
In his job as a trade unionist,
Philippe Petitcolin
and his colleagues
have access to the company accounts.
They called in an expert
to try to unpack the tax schemes
employed by General Electric.
We found out that the company
is a closed environment.
Journalists aren't allowed in,
and neither are lawyers
or politicians.
We played a vital role in that
we were the only ones
who could tell the world what was
going on inside the company.
This is the plant that
the complaint was made about.
The trade unions discovered
that General Electric
was transferring Alstom Energy's
profits out of France
into a number of tax havens.
These are standard schemes which
are used by all multinationals.
First,
product marketing was
outsourced to Switzerland.
All of the profits made in France
are now entered into
the accounts in Switzerland.
How?
Using a tax optimisation mechanism
involving what is known
as transfer pricing.
Consider a turbine component
made in Belfort, which costs
100 euros to manufacture.
Before being
outsourced to Switzerland,
the site in Belfort would sell
this part to the end client
for 400 euros,
giving them a profit of 300 euros.
Now, the same spare part
is sold by Belfort for 110 euros
to General Electric's
Swiss subsidiary,
which then sells it on
for 400 euros to the end client.
The upshot of this
is that the Belfort factory
makes a profit of just 10 euros,
while General Electric
in Switzerland makes a profit
of 290 euros.
The same factory is
producing the same component,
only now almost all of the profits
are logged in Switzerland, where
almost no tax is paid on them.
All of the profits
are registered in Switzerland
but there's no
economic substance there.
There's no factory, no workers,
nobody working on the material.
The trade unionists uncovered
another ploy.
The patents that
the Belfort factory needs
were registered by
General Electric in Switzerland.
Now, each time the Belfort
factory produces a turbine,
it has to pay a licence fee
to the institution which
holds the patents in Switzerland.
There's also a third trick.
Belfort must now pay for the right
to use the General Electric brand,
which is registered
in the tiny state of Delaware,
the USA's tax haven.
In Delaware, in the USA,
it's a letterbox company.
There are no employees
working for the brand.
This is another way for
General Electric to move profits
to tax havens.
General Electric is not
an isolated case.
All major companies
employ this type of scheme,
which is why so much of
the profits of multinationals
are not taxed.
Creative accounting is not ill*gal,
but there are still limits.
Eva Joly sees the legal route
as a way of attacking
the tax evasion of multinationals.
She wants publicity for her fight
in order to get people thinking.
These are intentional offences.
Chief Financial Officers
who are responsible for tax evasion
totalling 550 million euros
over four years must be
held responsible
in terms of their freedom
and their wealth.
It is time now to put
an end to all of this.
Given the government's inaction
on fighting tax evasion,
trade unions have decided
to turn to the courts
to enforce the rules.
It is clear that the group
has a completely artificial deficit.
The most shocking thing
is that Belfort is being
made to pay royalties
for patents
which are in the public domain.
This is ludicrous.
If the accounts
hadn't been meddled with,
Belfort would be breaking even.
This has serious consequences
for government coffers
and the town of Belfort.
Tax optimisation comes at a cost,
a point Eva Joly is keen to stress.
Eva Joly, hello. Money is escaping
the French tax system,
is that the takeaway?
Yes, we can take them to court
for the laundering of
tax fund proceeds,
breach of trust
and false accounting.
SOLIDARITY WITH THE EMPLOYEES
OF GENERAL ELECTRIC
The General Electric site
was searched
at the request of France's
national financial prosecutor.
An investigation is underway
into aggravated tax fraud.
But this is likely
to last several years.
By this time, it could be
too late for the Belfort factory.
The worst thing is that
the artificial deficit
in Belfort is the argument
that General Electric
has continuously hammered home
as an excuse for
not increasing salaries,
for not investing,
as a justification for outsourcing
and as a justification for layoffs,
saying that we're not profitable
and so restructuring is required,
we need to be moved
somewhere cheaper,
and this has a direct impact
on long-term job
prospects for employees.
The courts going after
multinationals on tax
is long overdue.
For decades everything was hidden.
Ordinary people didn't understand,
they didn't know.
I believe now that it's
completely unacceptable.
The schemes employed by
General Electric are commonplace.
The vast majority of
multinationals use them.
These practices have been met
with widespread indignation,
including from the president of the
world's leading economic power,
Joe Biden.
Look, in 2020
55 of the largest corporations
in America, the Fortune 500,
made 40 billion dollars in profits
and paid zero in federal taxes.
Zero?
Folks, it's simply not fair.
This affects every country.
At a global level, the revenue
losses are enormous.
Close to 600 billion dollars
according to
the International Monetary Fund.
We have returned
to a privileged tax system
which has similarities
to the tax privileges
which existed during
the Ancien Regime in France
and in other countries in Europe
in the late 18th century.
Generally speaking,
the aristocracy
and the clergy were legally
exempt from paying tax.
Thomas Piketty is French.
A professor at
the Paris School of Economics,
he authored
the international bestseller
Capital in the 21st Century.
An expert on wealth and income
equality, Piketty's work
has inspired a whole
generation of economists.
We should be living in a very
different world,
but we have a tax system
where the most powerful
are able to avoid income tax,
which is obviously disastrous
for the social contract in general.
Now, those who benefit from
the current global tax system,
what they try to do is to stop
the debate from occurring.
And so they tell workers things like
"it's commercial in confidence",
"we can't tell you
about our tax affairs."
Or they say, "Look, there's
nothing you can do
to change it, we'll always
find a way around it."
Or they say, "It's very complicated,
you couldn't possibly understand."
Basically, this is a big con,
globally and nationally.
But if enough people realise it's
a con, only then can you change it.
Jayati Ghosh is Indian.
A specialist in development,
she teaches economics
in India and the USA
and is regularly consulted by
the UN on tax-related issues.
And at the moment,
because it's made so technocratic,
and in such a jargonistic
and complicated fashion,
people basically say,
"We don't understand it.
We can't deal with it, and so
we'll leave it to the experts."
Looking to the past might help
to put things in some perspective.
Let's go back to
the early 20th century,
to the origins of
the world's tax system.
The current multinational
corporate tax system was
built almost 100 years ago.
Capitalists would
build things in that country
with the workforce
from that country,
and then they would
sell things into that market,
or they'd put them on boats
and move them somewhere else.
The American automobile
manufacturer Ford
mass-produced its Model T,
exporting it by
the boatload in parts.
The cars were then
assembled in Europe.
The globalisation of the economy
was in its infancy,
as were multinationals.
These were mostly
American or European,
and were unhappy that
profits made overseas
were being taxed several times.
Taxing multinationals
is a complicated issue.
Do you tax them in the country
where the head office is?
Do you tax them in the country
where the consumers are located?
Do you tax them where
production takes place?
Gabriel Zucman is French.
The youngest member
of the commission,
he is head of the
European Tax Observatory,
which has revealed the extent
of tax evasion by multinationals.
He is one of the world's leading
experts on tax evasion.
In the 1920s the League of Nations,
a forerunner to the UN,
commissioned four economists
to write a report
on the best way of
taxing multinationals
in order to avoid double taxation.
Delegates from the
wealthiest countries got together
at the headquarters of
the League of Nations in Geneva
to agree on the very first
international tax system.
In 1928, a series
of conventions were signed to give
subsidiaries of multinationals
independent tax status.
They were judged to have no link
to their parent companies.
For multinationals, this marked
the beginning of a fiscal jackpot.
They could now
manipulate their accounts
to make their profits appear
wherever they wanted them to,
generally in places with
little or no taxation.
They were able to avoid
double or triple taxation.
Indeed, they were so successful
that in many cases nowadays
they pay zero tax.
What multinationals have done
is that they have
artificially shifted their profits
to places with little
or no taxation.
As taxes shot up as a result
of the Second World w*r,
there was even more incentive
for multinationals
to shift their profits.
In the USA, income tax
was raised above 50%
for corporations, while for
the richest individuals
it was even higher.
In the USA, on average,
between 1930 and 1980
the top rate of income tax
applied to the biggest earners
was 81%.
Not only did this not k*ll off
American capitalism,
but this was the period when
the USA was at its most productive.
Why? Because the key to prosperity
is education.
The USA was significantly ahead
of the game on education:
80 to 90% of a generation
in secondary education
during the 1950s.
At that time the figure was around
30% for France, Germany and Japan.
And so, that highly progressive
tax system in the mid-20th century,
not only did it not k*ll growth,
but it helped to build the social
state, which demands fair taxation.
The election of
Ronald Reagan in 1980
marked a shift in attitudes
towards the post-w*r
fiscal and social pact.
Government is not
the solution to our problem.
Government is the problem.
The US president believed that
state funding had to be slashed
and taxes cut if the economy
were to take off.
For multinationals, this was
the beginning of a new era.
Their profits were about
to go into orbit.
I want to talk about taxes,
about what we must do
as a nation this year.
Comparing the distance
between the present system
and our proposal is like
comparing the distance
between a Model and the space shuttle.
This then, is our plan.
America's tax plan.
A challenge to give
the USA the lowest
overall marginal rates of taxation
of any major industrial democracy.
Thank you, God bless you, goodnight.
This marked the start
of a global race
to see who could tax the least,
as countries engaged
in fierce competition
to attract investment
from companies.
As a result, over 40 years
the average rate
of income tax fell by 50%.
Right now, we have
a race to the bottom.
Countries think - wrongly -
but think - and were told
by the corporations -
"Lower the taxes,
business will come to you."
Joseph Stiglitz is American.
Nobel Prize in economics and former
Chief Economist of the World Bank,
he was one of the founding
members of the commission.
He views tax competition
as the most toxic
aspect of globalisation.
But, of course,
it's a zero-sum game.
I lower my taxes,
my neighbour lowers his taxes,
who's the winner? The corporations.
Who's the loser?
Ordinary people who have
to pay more in their taxes
because the corporations
aren't paying their fair share.
And, of course, if we
don't have public money,
our society can't function.
CHILE
After France,
the second stop on
our journey is Chile.
A country which waged
a decades-long w*r on taxes.
For a long time, it served as
a laboratory for neoliberalism.
In the 1970s, before Reagan or
Thatcher had even been elected,
a handful of economists convinced
the dictator Augusto Pinochet
to privatise most public services.
They were known as the Chicago Boys.
They had studied at
the University of Chicago
under Milton Friedman.
Friedman, who is often seen as one
of the godfathers of liberalism,
was also a personal advisor
to the Chilean dictator.
He was responsible
for the shock therapy
that was etched into
the stone of Chile's constitution.
In Chile, we have been the
laboratory of neoliberal policies
in which everything is privatised,
from education to health
to social protection.
Magdalena Sepulveda is from Chile.
She is a lawyer and was
the UN Special Rapporteur
on extreme poverty
and human rights.
We still have the constitution
that was drafted
during the Pinochet regime.
So, the constitution said
that first it's the private sector
that should provide
for education, health,
social protection, water,
and only when they cannot do it
or they don't want to do it,
then the public sector comes in.
And this is extremely damaging,
as you can imagine.
If public services
are only for the poor,
there are poor public services.
Three decades after
the end of the dictatorship,
the economic model of Augusto
Pinochet's regime is still in force.
Health is a fundamental right
which we as Chileans don't have.
That is, we have
first class healthcare
for those who can pay
with private insurance
in the expensive
clinics of Santiago,
and a second-rate health system
for those who can't pay.
I think the pandemic
highlighted the folly
of privatising health services.
Problems with infrastructure,
difficulties accessing drugs,
people can't get them.
There's a lack of resources.
ACCIDENT & EMERGENCY
- Is there a lack of resources here?
- Of course, all the time.
We have to do 12-hour shifts,
which are exhausting.
Then sometimes there isn't anyone
for the nightshift,
meaning we end up having
to stay the whole night,
working 24 hours in a row.
But we can't show we're tired
because we don't want any issues
when women are in to give birth.
At this hospital there's infinite
demand but limited resources.
The problems began when
the country decided
that health was a market product.
Health is a fundamental right
which cannot afford to be viewed
as a consumer product.
It's not a product.
The absence of public investment
has made Chile one of the most
unequal societies in the world.
On the slopes above Valparaiso,
two hundred families
have gradually settled
in what has become the Mesana slum,
which has been abandoned
by the authorities.
The country has developed
and Chile is wealthier,
but this wealth
has been appropriated
by a section of the elite,
and has not benefited
the population equally.
Here, water is distributed
once a month in tanker trucks.
- Do you see those tanks there?
- Yes.
These are filled with water
from the tanker trucks.
From there families have had
to install the pipes themselves.
This gives them at least
some comfort at home.
The most difficult aspect to living
in this slum is the access.
We're very far from the city centre,
very far from public transport.
Just living in the dirt,
in the mud,
that isn't easy.
This is a slum that was created
the best part of 30 years ago.
And the state has simply
washed its hands of it.
There are no pavements
and no easy access to healthcare.
There's no water,
no sanitation in these homes.
There are no public services.
And no taxes to solve
any of these problems.
Obviously, we're cut off
from a lot of things.
Not just from public transport,
but also from society.
I personally feel excluded.
I've never felt represented
by any government
that this country has had.
To them we are nothing,
we don't exist, yet we pay tax.
We want to democratise tax policy.
We want to say to people:
if multinationals won't
pay their fair share,
then that affects our daily lives,
it affects how we live.
It creates inequality
and social unrest,
as well as human rights violations.
In late 2019, an increase of a few
cents in the price of metro tickets
sparked riots across the country,
as Chileans vented their anger
at inequality.
The richest 1% had monopolised
a quarter of the country's income.
Students were forced into debt for
decades to pay for their studies
and only a minority of Chileans
had access to decent hospitals.
The army was deployed in response
to the scale of the demonstrations.
In October 2019,
fed up after more than 30 years
of neoliberal policies,
the people demanded to be granted
economic, social
and cultural rights.
Their demands focused on health,
education and pensions.
In Chile as elsewhere,
the withdrawal of the state
has had a devastating impact
on public services,
destroying social cohesion
and driving people to extremism.
But the consequences
of the w*r on tax
have been known about
for a long time.
As early as 1937,
the US Secretary of the Treasury
Henry Morgenthau
wrote the following
to President Franklin Roosevelt:
Taxes are what we pay
for a civilised society.
Too many individuals, however,
want the civilisation at a discount.
Without taxes there
can be no society.
The issue of taxation is fundamental
from both a philosophical
and a democratic perspective.
Without tax, it's every
man for himself,
there's no social cohesion,
no society.
Every country which has managed
to develop and grow wealthy
has successfully built
a system of taxation
with a high compulsory
contribution rate
and high ambitions
in terms of redistribution.
The Tax Wars
is a conflict between two ways
of viewing the world.
The first holds that taxes
restrict economic development,
while the second holds
that they drive it.
In any case, with the globalisation
of the economy in the late 1980s,
multinationals were
to enjoy a meteoric rise.
Beginning with just a few thousand,
over the space of 40 years
their numbers have swollen
to more than 120,000.
They make thousands
of billions of dollars
in profits each year,
and the majority pay
essentially no tax.
In 2008, an unprecedentedly
brutal financial crisis
forced governments to wake up.
CHAPTER 2: THE AWAKENING
The headlines this evening:
turbulence in the financial markets.
The US investment bank
Lehman Brothers
has filed for bankruptcy as
a result of the subprime crisis.
Financial market convulsions raced
around the world like a tsunami...
Europe is in despair,
Asia is flagging
and Mumbai is feeling the effects.
It seems the markets are not going
to return to their glory days.
The global economy fell into
the worst crisis since
the crash of 1929.
Unemployment skyrocketed,
as did deficits and national debt,
forcing governments
and central banks
to pump money into the economy.
For those in favour of deregulation
and an ever-smaller state,
this was a rude awakening.
When the global financial crisis hit
a lot of myths were cracked.
People became very angry,
and started to question the basis
upon which the global
economy was built,
and in whose interests it was built.
And that anger translates
into political pressure.
So, we had David Cameron,
who was a right-wing
Conservative in the UK:
I am a low-tax Conservative,
but I'm not a "companies
should pay no tax" Conservative.
And businesses who
think they can carry on,
well they need to wake up
and smell the coffee
because the public who buy
from them have had enough.
Nicolas Sarkozy in France:
We want to see an end to tax havens.
The message is clear:
we want to see an end to them.
They were forced,
for political reasons,
to begin to talk about
the need to raise taxation.
And that's how it was kicked off,
through a series
of quite conservative
and right-wing governments
feeling political pressure
to raise revenues
because they could not
implement any more austerity
without having to face
political consequences that they
didn't want to have to deal with.
Governments began searching
desperately for new tax revenues,
turning to the OECD,
an organisation made up of
the world's richest countries.
Pascal Saint Amans was then head of
the Tax Competition Division
at the OECD.
Over a period of ten years,
he oversaw negotiations
aimed at tackling the tax evasion
practices of multinationals.
When the crisis struck,
the G20 leaders,
who met for the first time
on 15 November 2008,
spoke of a need to reform
how multinationals are taxed.
International rules
that were created
in the 1920s were
no longer fit for purpose.
And it took the international
financial crisis
for these countries
to wake up and realise
that tax havens had
to be done away with.
From enhancing fiscal transparency
and preventing the most
nefarious schemes,
the OECD's intentions were laudable,
but there was a serious
lack of ambition.
For a number of NGOs
working to tackle tax evasion,
this failure to act
was unacceptable,
and so they decided
to launch the ICRICT,
the Independent Commission
for the Reform
of International Corporate Taxation,
made up of leading experts.
A new hope was born.
In 2013, we had identified
the OECD was
setting up this project
which was supposed to reform
international corporate taxation.
So, the concern,
as I recall, was that
because it was being developed
in the OECD and the OECD
is effectively a club
of rich countries,
it would be heavily dominated by
the interests of richer countries.
So then a meeting was called
because we needed some kind of
process to shadow the OECD and
develop a critique of the OECD.
And it was a meeting in some of
the worst meeting rooms in the city,
and there were 15 people
in a tiny basement room,
15 sweaty activists in a basement
versus the entire
G20 and OECD.
It didn't seem very equal,
so we need to bring in
some people who have
a global profile
to help develop alternative ideas.
It would take two years to identify
and bring together warriors
who would be capable of taking on
the empire of the multinationals.
The ICRICT was launched in 2015.
Joseph Stiglitz and Jayati Ghosh
were to be its chairs.
My dream is that
multinational corporations
would not be in a position
to dictate to governments
about what they do, how they do it
and what damage
they can do to economies.
My dream is actually very simple:
that every corporation pay
its fair share of its taxes.
Some basic principles
of social justice.
Aside from its most famous members,
the ICRICT brings together
14 individuals
from very different geographical
and professional backgrounds.
They use their reputations
to promote their ideas
among governments and
international institutions.
They are part of
a much wider coalition,
comprising a variety of
non-governmental organisations
which speak out about
the effects of tax evasion.
Their aim is to put
pressure on governments
so that they take action.
The Commission is made up of
some of the world's leading experts.
These are established
voices in the fight
against inequality
and they have been responsible
for some of the most important
proposals and economic analysis.
As a result, the ICRIChas been able to gain access
to the finance ministries
in a number of countries.
Wayne Swan is
the former Australian Treasurer
and Deputy Prime Minister,
and has spent years tackling
the tax evasion of multinationals.
A member of
the Australian Labor Party,
he puts his political experience to
use within the commission.
I was treasurer
and a member of
the G20 finance ministers.
I joined ICRICT because
I saw in my country
the evidence of the tax termites
radically eating away
at the tax base
in Australia.
We thought there ought to be
a strong voice
explaining that there is
a need for a fairer
and, I think, more efficient
global tax regime.
So, this was a w*r that I have been
long engaged in,
I would say with
relatively little fruit,
but the time might be ripe.
The members of the commission
know only too well
just how powerful
their adversaries are,
a galaxy of multinationals
boasting practically
unlimited resources.
Everybody is afraid.
The multinationals have
done a really good job
of instilling fear.
"If you tax us, business
is going to run away,
it will create an
anti-business climate."
And unfortunately, some of
the developed countries
listen very carefully to
the multinational corporations.
Not a surprise.
They're very influential
in the politics
of the advanced countries.
Ideas are weapons,
and the ICRICT has plenty of them.
They see no point in reforming
a system that is on its last legs.
Instead, they want
to see it revolutionised.
Instead of vainly trying to tax
multinationals in each country,
why not tax all of the profits
they make worldwide?
This is what is known
as unitary taxation.
The idea is actually very simple,
the idea of unitary taxation.
Basically, a multinational behaves
like it's one company.
It doesn't say,
"Oh, I am Google India,
and I'm completely different
from Google Netherlands
or Google Ireland."
It behaves as Google,
so we should actually tax them
as one company.
We should consider multinational
companies as a whole,
look at the total profits they make,
then seek to apportion
those profits to the countries
in which those profits were made.
Facebook, for example.
It's getting, I think,
25% of revenues in India,
but 2% of profits.
You're getting this much revenue,
you're employing so many people,
we are going to charge you
this much of your global profits.
What is most surprising
is that this revolutionary
system already exists,
only on a national scale,
in the USA.
Companies are taxed
at a federal level,
but also by each individual state.
But the rate of tax
varies between states,
from 12% in Iowa
to 0% in South Dakota.
How then can you tax
the profits of a company
which operates across the USA?
Within the United States
we have a lot of trade.
What we did is move towards
a formulaic system a long time ago.
What a formulaic system
just says is that we will look
at where the workers are,
where the capital is,
where the sales are,
and we'll apportion
the profits that are generated
by the corporation as a whole
in line with
those aspects of the company.
Since its creation in 2015,
the commission has campaigned
for this unitary taxation system
to be rolled out worldwide.
To beat the multinationals,
they have to convince world leaders
of the need for tax reform.
And they can't do this without
the help of ordinary citizens.
This is the next stop on our voyage
through the tax evasion landscape.
India is particularly
popular with multinationals,
the country being home
to more than 1.4 billion consumers.
Tech giants such as Apple
make astronomical profits there.
But unsurprisingly,
they pay practically no tax.
Taxing multinationals
could help to fill gaping holes
in the budgets for infrastructure,
education and health.
Jayati Ghosh travels
the country speaking out
against tax evasion
and promoting
the commission's ideas.
Some of us definitely feel
it's very important
to bring economics
to ordinary people,
that economic policies
are too important
to be left just to policy makers or
those who are seen as technocrats.
We meet a very, very
wide variety of people.
I've been to farmers' associations,
I've been to
civil rights organisations,
I've been to NGOs that deal
with different kinds of
citizens' demands.
I find there's a lot of interest.
I think also people are starved
of knowledge about economic policy.
Thank you very much,
I'm very happy to be here.
We have to create a situation
where the government
cannot respond only to cronies
and to big corporations.
It has to respond to the people,
to the demands of the young,
to the demands of ordinary people,
to the demands of youth who insist
that they have
a right to employment.
But we need to create a much larger
public mobilisation for it
all over India.
These are things that can be done.
The government doesn't have the
political will. We have to force it
to have that political will.
Thank you.
Yeah, I'll make it in time.
Governments don't turn good
just because they
suddenly see the light
and decide to be nice.
Governments do good things when
they're forced to do good things,
when public pressure
makes them change.
Profit shifting,
it's obviously very strong
in many different sectors,
but it's really strong
in digital companies.
Digital companies
can provide services
without even having
a physical presence.
You don't even need
to have an office there.
You can provide a streaming service,
software, you can provide
other kinds of entertainment,
all digitally,
and so who is going to tax you?
To get past this impasse,
India, like many other countries,
decided to tax the turnover
of these multinationals,
introducing a 6% tax
on the advertising revenues in India
of the likes of Google and Facebook.
In response, the USA introduced
a sharp rise in customs duties
on various Indian goods.
How can we get out of this conflict?
How can we tax
multinationals properly?
There's a very, very
simple solution.
Amazon, Google,
any multinational,
they behave like one company.
Treat them like one company.
The USA actually does this.
They have unitary
taxation of companies
inside the US and it works.
So, this was such a wonderful
and simple and obvious solution.
I was amazed I hadn't thought of it.
Wow. This is something
that is so simple and easy,
it will make such a massive
and fundamental difference
to all the tax revenues
that get leaked out.
The Indian government spends
barely 2% of the country's GDP
on health. It is one of the
lowest budgets in the world.
People who can't
afford private healthcare
often have to queue for days
just to see a doctor.
This two-tier system
has serious consequences.
Life expectancy for 'untouchables'
is 15 years less than
for the highest castes.
Inequality is bad everywhere,
and inequality creates
unpleasant societies,
and injustice and
all of that everywhere.
But one of the problems that
developing countries face
is that the poor are really poor.
And that's terrible because
you have minimum things
that you need for survival,
and the slightest
increase in insecurity,
or the slightest change in
your employment conditions
is the difference
between living and dying.
It's a much more serious thing.
Inequality in the developing
world actually creates
crimes against humanity.
It actually means carnage.
It means that
large populations are actually
deprived of the minimum
required for basic subsistence.
I was very fortunate
because I grew up in a relatively
privileged family.
I happened to be upper caste,
I realise how much
that matters nowadays.
We were both daughters,
we never really felt
we were different from boys.
It is rare
still in India, so I was
always very fortunate.
It's much, much more
difficult for most women
to do the kinds of things
I've been able to do.
Many, many women have
very significant difficulties in
being in the public sphere at all.
Jayati Ghosh sees
the campaign for tax justice
as indissociable from
the campaign for social justice
and gender equality.
A new generation of young
female researchers in economics
is determined to highlight
the discrimination
that many women face
on the job market.
In the textile industry products
of contracting is increasing.
There are many more women
in these factories.
That's so large,
I can't believe this.
- Yes, it is quite large.
- It's very large.
It's a good little article
to have because
people suspect it but
we don't really have the numbers.
- Yes, now it's coming out.
- Yeah.
It's going to be
a very interesting thesis.
This country is going
through a terrible phase.
The only thing that keeps me
going are these young people.
I am so impressed
with our students. I'm full of
actually amazement at
their courage, their intelligence.
They're the only thing that
gives me hope, actually.
When the Commission for
Tax Justice was launched,
reforming the
international tax system
seemed like a distant prospect.
But repeated tax evasion scandals
during the 2010s
would change everything.
CHAPTER 3: TEN YEARS OF SCANDALS
The first scandal came
in 2012 in France,
a symbolic case which would
have global repercussions.
It concerned a Budget Minister
responsible for taxation
who was hiding money in Switzerland.
The minister Jerome Cahuzac
now has the floor.
I do not have and have never had
an overseas account.
I lied in my answer to you
because not long before that
I had lied to the prime minister
and the president.
In 2014, it was Luxembourg's
turn to feel the heat.
Apple, IKEA, Pepsi, Axa...
Through LuxLeaks,
journalists revealed that
more than 340 multinationals
had entered into secret agreements
in order to slash their taxes.
People were seeing that
their politicians and their rich
business friends were
making enormous profits
and not paying
their fair share on that.
And so the LuxLeaks
and the Panama Papers
created a public awareness
about what wasn't happening,
about who wasn't
paying their fair share.
The revelations didn't stop there:
after LuxLeaks came Offshore Leaks,
Swiss Leaks, the Pandora Papers,
and the Panama Papers.
All of these investigations
relied on enormous data leaks.
This was a turning point. These
leaks confirmed that tax evasion
had reached unprecedented levels,
backing up the ideas
which the commission promotes.
What we've seen across
the world in the last 30 years
has been a w*r on taxation.
But there's been a reaction and
there is a different environment
which can support the development
of a stronger tax culture,
not only nationally
but also internationally.
Inside the European Union, which
is home to a number of tax havens,
the resistance began
to organise itself.
In early 2019,
Eva Joly travelled to the
European Parliament in Brussels.
This is now my tenth year as an MEP.
Over the past five years,
I have focused almost exclusively
on showing how sick
the current system is,
how unfair it is,
and how urgently
we need to change it.
The MEP was there
to open an exhibition
on tax havens,
featuring Luxembourg, one of
Europe's tax evasion champions,
alongside the Republic of Ireland,
Malta, Cyprus and the Netherlands.
You will find three types
of clients in tax havens.
You have the wealthy,
you have multinationals
and you have criminals.
I have seen the opinion
of MEPs change.
To begin with,
conservatives thought -
no doubt sincerely
for the most part -
that tax competition
was intrinsic to competition.
But following our inquiries,
they too began to understand
just how harmful this system is.
In the spring of 2019,
the possible reform of
the tax system for multinationals
began to take shape
for the first time.
MEPs came together in Strasbourg
to vote on an ambitious
report on tax evasion.
This is a very good report,
which builds on what we learned
from LuxLeaks and the Panama Papers.
For the very first time,
we are criticising EU member states
who refuse to play ball
and who employ
aggressive tax
optimisation policies.
The directive would see
a unitary tax system introduced
for multinationals within the EU.
MEPs were showing
a willingness to put an end
to the laissez-faire approach.
Colleagues, we will now proceed
with the report on financial crimes,
tax evasion and tax avoidance.
Tax evasion and avoidance, it costs
about one trillion euro a year.
That means 2,000 euro per
European citizen per year.
And it is a slap in the face
for the people
who pay their taxes day in, day out
after they've gone to work.
The directive passed
with a huge majority.
The European Commission
announced it was in favour,
streamlining the passage
of the directive.
This was bad news for EU tax havens
such as Luxembourg and Ireland,
which EU Commissioner
for Competition Margrethe Vestager
had had her sights on for years.
Since being appointed
to the post in 2014,
she had gone after the schemes
employed in Ireland by Apple,
the world's richest multinational.
I'm really passionate
about tax justice.
And if some companies
can avoid paying taxes
while all the others will have to,
this is simply not fair.
In 2016, the commissioner ruled
that the huge tax privileges
which Apple enjoyed
constituted aid from
the Irish government,
and were therefore in contravention
of competition rules.
The European Commission
has today adopted a decision
that Apple's tax benefits
in Ireland are ill*gal.
They allocated the profit
between the Irish branch
and the company's
so-called 'head office'.
The head office
was subject to no tax in Ireland
or elsewhere
because this so-called 'head office'
only existed on paper.
This was possible under Irish law,
which until 2013
allowed for so-called
'stateless companies'.
A company with no tax domicile,
making profits across the world
but not paying tax anywhere:
Multinationals had dreamed of it,
Ireland has made it a reality.
Apple grasped the huge potential
of these ghost structures.
It created several subsidiaries
following this model.
ASI, AOE and AOI
were domiciled in both
Ireland and Bermuda.
Bermuda, a territory
in the Atlantic Ocean
which doesn't exist
and where you don't pay tax.
Apple moved most of the profits
it made outside of the USA to the
accounts of these ghost companies.
First to ASI and AOE,
which then transferred
almost all their global profits
to AOI.
This scheme allowed Apple
to pay essentially no taxes
outside of the US.
In 2011, only 0.05% of the profits
retained by AOI were taxed.
This almost total lack of
any contributions
caused an outcry
in Europe and the US alike.
Tim Cook, the CEO of Apple,
flanked by his lieutenants,
was summoned to appear
before a US Senate inquiry.
Can you please state
for the record where AOI,
ASI and AOE has a tax residence?
Yes, sir. My understanding is
there's not a tax
residence for either...
For any of the three
subsidiaries that you just named.
Can you understand there's a
perception of unfair advantage here?
Sir, I see this
as a very complex topic.
Honestly speaking, I don't
see it as being unfair.
I'm not an unfair person.
About 70% of
the profits worldwide now
end up with those three
Irish corporations, in these
companies that don't exist
anywhere except on the water.
And we've got to
understand what is going on.
And what is going on is that three
Apple employees have decided
where these profits are
going to be taxed or non-taxed.
Folks, it's not right.
In Europe, Margrethe Vestager asked
the American giant to pay
13 billion euros for
unfair competition.
The 13 billion euros
that we asked Apple
to pay back to the Irish state
was, in our view, the taxes
that they had not paid.
But Apple and Ireland took the
decision to the EU General Court,
which quashed
the conviction in 2020.
For Margrethe Vestager,
this was a disappointment.
We lost the first court case,
and I can tell you there's
a difference between knowing
that you can lose a case
and actually doing it.
It is not very nice.
This was also a rude
awakening for Eva Joly.
The report on tax evasion,
which was approved
by close to 90% of MEPs,
had led nowhere,
torpedoed by
the European Commission,
presided over by the former
prime minister of Luxembourg
Jean-Claude Juncker.
I was stunned to find out
that the Commission
was giving up.
I know for a fact that
there was resistance
within the Commission,
but I also know
that they never really tried,
and that is unforgivable.
In a few weeks' time,
I will leave my position as an MEP
after ten years spent
fighting against corruption
and for tax justice.
I'm happy to see that,
after ten years,
the demand for greater transparency
and tax cooperation
is shared by more and more
people within this parliament,
but the lack of political will
to turn ideas into action
has left me feeling bitter.
At the OECD, negotiations
on the reform
of the tax system for multinationals
were getting nowhere,
and some countries
decided to unilaterally tax
the tech giants.
France got the ball rolling
in 2019 when it passed
a 3% tax
on their turnover in France.
Many of the European countries said
the American digital giants
were robbing us of revenues.
We have to tax them.
America responded by saying,
"If you tax them,
we'll tax your wine",
and it became
an old style fight.
So, France put on...
a tax
on our companies. You know that.
Wrong. Wrong thing to do.
And I told him, I said, "Don't do it
because if you do it,
I'm going to tax your wine."
I've always liked American wines
better than French wines.
Even though I don't drink wine.
I just like the way they look.
Whatever happens, we will
start taxing the tech giants
in 2020 because
this is a matter of justice.
And I want to tell our American
friends that we won't be alone.
Countries in Europe,
along with India, South Africa
and a number of others,
decided that if there were
to be no global agreement,
then they would start unilaterally
taxing these digital services.
And these big companies,
particularly the American ones,
realised that these
unilateral measures
would cost them much more
than a multilateral agreement,
and so they came together
to support a multilateral agreement.
As the 2010s drew to a close,
tensions around the taxation of
multinationals ratcheted up a notch.
Even the multinationals
began hoping for a reform.
The time had come to reinvent
the global tax system.
CHAPTER 4: VICTORY FOR IDEAS
Negotiations on
the taxation of multinationals
picked up speed in 2020.
The ICRICT saw this as a chance
to push forward on their proposals.
Following on from unitary taxation
they had another idea
that was as simple
as it was effective:
the introduction of
a global minimum tax rate.
This is revolutionary.
It's a significant change in how
globalisation is regulated.
It will no longer be possible
for companies
to pay zero tax on billions
in profits registered in Bermuda.
Not all tax rates are acceptable.
0% for profits in Bermuda?
No, that's too low.
You need to have rules of the game.
And the minimum tax
is a rule. It says
tax competition
actually doesn't work.
Irene Ovonji-Odida is one of
the Commission's African voices.
Originally from Uganda, this lawyer
and human rights activist
has spent years
speaking out against tax evasion
and the plundering of
resources in Africa.
In late 2019, she represented
the Commission for Tax Justice
at the OECD's HQ in Paris.
From a minimum rate
to unitary taxation,
the aim was to promote
the commission's ideas
in response to lobbying
from multinationals.
I look at this issue of tax justice
as the civil rights issue
for our generation.
That's how I see it
because I see how
the rights of society,
of citizens, are so
tied up with this economic issue.
Probably what we need
to do is to recognise
that this is a marathon
and there will be steps,
but I am an optimist and I like to
believe there always is progress,
and some of those steps
are beginning to happen.
The OECD's member states
now supported the creation
of a minimum global tax on
the profits of multinationals.
But they still had
to agree on a rate
that would receive
the widest possible support.
Reaching out to the reluctant,
France put forward
a particularly modest rate.
Our proposal with regard to the rate
is 12.5%.
That will be
the minimum rate of tax
on corporations.
We feel that a minimum rate
of tax on corporations of 12.5%
is a good starting point
and a good benchmark.
The minimum tax that was proposed
was very low, similar to the rate
that you have
in tax havens like Ireland,
which are 12.5%,
so not a good number at all,
and we propose that the tax
should be at least 25%.
That was looking at an average
between the minimum tax
on corporations
of advanced economies
and the developing countries.
The ICRICT could not accept
a rate of 12.5%.
But how could they get governments
to agree to a higher rate?
First, they had
to hone the arguments
they would put to the OECD.
We're going to provide
a tool for them to negotiate.
And if we're going to do that
we have to go high because they
are going to adopt a lower standard.
We believe that a minimum rate
of around 25% is a reasonable rate.
It's a bargaining position.
If you say 15, you'll get 12.
And it means that multinationals
are getting away
with lower rates than domestic firms
who are actually paying
a much higher effective tax rate.
This is not our job to say
Ireland is the new norm.
- Yeah, exactly.
- This is crazy.
So, say 25.
It's a bargaining position.
In 2020, just as we were preparing
to finalise the negotiations,
COVID came along and made
things a lot more complicated.
Politicians - finance ministers,
government leaders -
had an emergency on their hands
and we had to put an end
to face-to-face talks.
The pandemic k*lled more than
seven million people worldwide.
Crematoriums in India
burned day and night.
With beds, oxygen
and healthcare staff
in short supply, healthcare systems
across the world
collapsed under
the weight of the epidemic.
COVID was a great tragedy
for many countries,
with massive rises in poverty.
At the same time,
it made many families,
in many countries across the world,
understand the need
for public services,
and to have access to healthcare
irrespective of
your capacity to pay.
The pandemic brought whole
sections of the economy to a halt,
forcing states to provide
large-scale support for citizens,
countries and healthcare systems.
According to the
International Monetary Fund,
the G20 countries spent more
than 11 billion dollars
to tackle the pandemic.
Meanwhile, the profits
of multinationals
continued to break
record after record,
and to evade taxation.
There was now a pressing need
to overhaul the tax system.
Joe Biden's election as US president
in the middle of the pandemic
would prove to be a gamechanger.
For the first time,
in March-April 2021,
we heard from the very highest level
of the US executive, Janet Yellen,
Secretary of the Treasury,
"Look, we can no longer
accept tax competition.
It's time for change."
We're working with G20 nations
to agree to a global
minimum corporate tax rate
that can stop
the race to the bottom.
Janet Yellen's proposal
is for a tax of 21%.
25 would be better,
but 21 isn't far off.
The idea is that if a US company
records profits
in Ireland, for instance,
which are taxed at 5% there,
the USA will charge the remaining
16% to make it up to 21%.
Tentative discussions
had begun at the OECD
on the issue of a minimum rate
of tax, but the rate mentioned
was around 12%.
Then the US came along and said they
want 21%. Which is very different.
The proposal from the White House
really helped
to speed up negotiations.
In the clash between
governments and multinationals,
victory finally seemed within reach.
Who would have thought in one year
you would have had
such a difference,
even in terms of the openness
of the OECD to certain ideas
which earlier were just rejected.
Yes, and the fact
that these issues are
on the table is really important.
After nine years of negotiations,
a historic agreement was
ratified by 36 countries.
The world's leading economic powers
presented it at the G20 in Rome
in 2021. It had taken a century
to overhaul
the system introduced in the 1920s.
Some developing countries had hoped
for a more ambitious agreement,
but the promise of
a fairer world was there.
The international tax system
has been reformed
to make sure that every company
pays their fair share.
8 October 2021 was a historic date.
It marks a turning point
away from an outdated
international tax system
and towards a world
with greater tax justice.
It was the culmination of 15 years
of extremely hard, stressful work.
We weren't sure
we'd get an agreement.
Ireland decided the night before,
Saudi Arabia decided at noon,
with only a few hours to go.
Vast progress had been made
since the start of negotiations.
Signed by 36 countries,
the agreement
is centred around two pillars.
The first concerns the unitary
taxation of multinationals,
while the second concerns
a minimum global tax rate.
For the ICRICT and its allies,
this was a resounding
victory for their ideas.
Even as recently as 2016 or 2017
this sort of view
would have been seen
as absurd.
No one thought there was any chance
of Ireland, Bermuda,
the USA, China and India
agreeing to a minimum rate.
It was seen as pie in the sky.
Even just five years ago,
there were a few of us
at our meetings
who supported the idea,
saying we need reports,
we need to tell journalists, but
hardly anyone else believed in it.
In 2015, nobody thought
that a minimum tax rate
would be imposed.
So, it is a crack in the system,
and I think that we have to feel
very proud that the crack is there
and it has opened.
So, issues that
before were looked at
as fringe issues,
a bunch of crazy lefties,
dreamers, are now
mainstream issues.
For example, the idea that
you can tax corporations
as unitary entities.
Unitary taxation is the first
component of the agreement.
This measure involves
eradicating borders
in that all of the profits generated
by all the affiliates
of multinationals will be taxed.
Unfortunately, right now it only
covers around 100 companies,
the biggest and most profitable.
Another setback for the ICRICis that only a fraction
of their profits,
the tip of the iceberg effectively,
will be taxed.
Still, once ratified
it should generate
30 billion dollars a year,
which will largely be redistributed
based on the sales of the
multinationals in each country.
The second component concerns
the global minimum tax rate.
The EU has decided this will
come into force in 2024.
From now on, the profits
of multinationals in the EU
will be taxed at
a minimum rate of 15%,
no matter what country
the profits are declared in.
A French multinational whose profits
are declared in Bermuda
and taxed at 0% will need to pay
the remaining 15%
to the French treasury.
This way, there will no longer be
any real benefit for multinationals
in artificially moving their
profits into tax havens.
This is a significant
conceptual, philosophical change
that will have
significant ramifications
on budgets and taxes.
The OECD has estimated that
this minimum rate of tax will
generate an additional
200 billion dollars
in tax worldwide.
This figure of 200 billion dollars
is based on
a global minimum tax rate
of 15%.
Far from the 21%
supported by Joe Biden
or the 20% supported by the ICRICT.
We advocated that it should be 25%.
They chose 15%
and we worry that this
minimum will become the maximum.
In reality, this agreement
is bad news for the most aggressive
tax havens, those which tax 0%.
This will effectively eliminate
these super tax havens
where you essentially pay nothing.
But the rate has only been raised
to 15%,
which is roughly the same rate
as places like Ireland,
Singapore or Switzerland.
Whilst 15% is better
than the race to zero,
it must only be the first step.
When a nurse or a doctor
working a night shift
in a hospital, risking their
life on a COVID ward,
is getting taxed for that work
at 20 and 30 and,
in some countries, 40%,
yet the largest corporations
on the planet
are only now being asked to pay 15%,
and with a series of loopholes,
it's completely unjustifiable.
To circumvent the new rules,
multinationals will continue to turn
to their armies of tax lawyers
who, for decades, have helped
them to avoid paying taxes.
Paid millions to steal billions
from governments,
these experts in tax optimisation
have their own special
place in the City of London.
These big glass buildings behind us,
The Shard and so on,
we find office after office
full of accountants
and lawyers and other sorts
of tax advisors and bankers,
all of the people who put in place
the schemes and the laws
to make them work
in jurisdictions
all around the world
so that a group of people
who've already got
more money than the rest of us
can rip everyone off.
The enablers are at
the heart of this problem,
and they're at the heart
of the City of London.
The tax optimisation
industry is made up
of the audit firms
and consulting firms.
The Big Four are the most famous.
They help multinational corporations
to manipulate their accounts
in order to maximise the profits
that are recorded in Luxembourg,
Ireland or Bermuda while minimising
the profits recorded in the USA,
Brazil or Germany.
This industry employs
tens of thousands of people,
perhaps more than 100,000,
worldwide.
That explains the current situation
where 40% of multinationals' profits
are recorded in tax havens.
Our estimate, which is
deliberately conservative,
is that that costs the world
483 billion dollars a year
in lost revenues.
Call it half a trillion.
And that translates directly into
losses in terms of child mortality,
maternal mortality and the inability
to respond to the pandemic.
So, death and taxes, people say,
are both certain.
Actually, it's the tax abuse
that makes death -
unnecessary death - certain.
Tax evasion kills.
In developed countries,
but particularly
in developing countries
which were largely
forgotten about in the reform
that was adopted in 2021.
The ICRICT sees this
as an unacceptable situation.
CHAPTER 5: A NEW FRONThis is a process that
was started by the OECD,
by the club of developed countries.
Developing countries have basically
been allowed into the room,
not really sitting at the table
writing, just present in the room.
And so we are stuck with this, where
the only real international process
was one that is driven
by the OECD countries,
who persist in making
themselves the high table
with their own
little secret dealings,
and everybody else gets
the crumbs that fall off that table.
The OECD prides itself on having
invited developing countries
to take part in negotiations,
seeking to promote inclusivity.
'Inclusivity' is a bit of
a buzzword these days,
but 158 member states
on an even footing,
with proper respect between them,
this is something that has altered
the dynamic of tax cooperation.
The process was managed really badly
by the OECD secretariat
in a way that was very unfair.
And sometimes the discussions
would produce huge papers.
The documents would
come out with very little notice.
At very short time, you could have
something like an 800-page document
and maybe just
a couple of days or a day
to read it: not enough time.
So, that kind of process was
really not a good process at all,
which is why I cannot call it
an inclusive process,
regardless of the name.
Many governments of
developed countries
place a great deal of importance
on what multinationals
and the very richest want.
Jose Antonio Ocampo
is from Colombia.
An economist, he is one of
the founding members of ICRICT,
and once served as its president.
He is the former minister
of finance in Colombia.
All of the studies carried out
show that the majority of profits,
something like 85 or 90%,
goes to developed countries.
While developing countries
like ourselves get very little.
The dark side of the agreement
is that it does nothing to prevent
the plundering of natural resources
by multinationals
in developing countries.
In the global south,
the resistance is fighting back.
In the past 15 years or so
there's a lot more recognition
of how tax and taxing rights
are really central to development.
So, tax and taxing rights
seems to be the divider
between countries that can develop
and those that cannot.
The last stop on our voyage through
the galaxy of tax evasion
is in Zambia.
It is one of the world's
most resource rich countries,
bursting with gold even more copper.
But as yet, the people of Zambia
have benefited
very little from this.
Zambia is one of the poorest
countries in the world.
One of the issues for developing
countries in Africa and elsewhere
is that they have major resources,
natural resources -
that could be minerals, agricultural
products and many others -
but then lack capital
and lack the technology
to exploit those resources.
On the other side
you have multinational corporations
which are looking for resources
for their operations, for profit.
This area, which was part
of the Luba Kingdom,
was one of the oldest
mining communities
in Africa, apparently.
So, the ancestors of these people
in Solwezi were involved
in copper mining
long before colonialism.
The Kansanshi copper mine
is the country's second largest.
The complex spans an area
of more than 200 square kilometres.
The site is operated by
the Canadian multinational
First Quantum Minerals.
It produces more than 250,000 tonnes
of copper each year.
The profits generated are enormous,
but the local population
essentially doesn't benefit
from this at all.
The community has moved,
I think a couple of times,
some of them more than once.
Some have been
shifted a distance away,
maybe 45 to 100 kilometres
to other communities,
and in some cases the new areas
where they are settled
do not have the same land
area as they had before.
There's a disruption
around water access
because some of
the previous water sources
like streams are now within
the compound of the mine.
According to an operations manager
for the Kansanshi mine,
copper extraction and refining
can use up as much
as 1,500 tonnes of acid each day.
The water we used to drink before
the mine came was good water.
Now, after being displaced
by the mine to come here
to the Kabwela area,
the water we have is not good.
The water we drink has
a lot of acid in it.
What we are seeing is that when
we draw water up in our buckets,
the next morning
it looks like coffee.
This water has brought with it
a lot of diseases.
We have stomach pains all the time.
Diseases are rife.
The water is very bad.
The low taxation rights
that a country may have
in developing countries
like in Africa
has a broad impact
on the majority of citizens
but has an impact more
on the women because,
traditionally, it will be
the women who provide food.
And so they do certain things
like maybe clean the house,
wash the clothes, which needs water.
So, if there isn't water they have
to walk a long distance
to go and collect water.
The only source of clean water
is a two-hour walk from the village.
Zambia is now the world's seventh
largest copper producer.
But mining companies,
both here and elsewhere,
take advantage of
complex tax regulations
to avoid having to pay tax.
At the Kansanshi mine,
what is known is that
the Canadians own 80%
of the shareholding,
and the government owns the rest.
But because the company
has repeatedly
reported losses, this has
resulted in the government
being forced to sell its shares
to the company
in an effort to get
some royalties out of it.
So, this is an explicit case of
the extent to which companies
continue to report losses.
According to the NGO Oxfam,
the tax evasion of mining companies
costs Zambia an estimated
half a billion dollars a year.
This is equivalent to 15%
of its tax income.
In the capital city of Lusaka,
one tax department
is trying to untangle
the schemes mining companies use
to minimise the amount
of tax that they pay.
In Zambia principally
mining industries
are big contributors to
the government treasury.
So, they take advantage of that.
Because here they know
we depend on them.
They're our biggest
payers in some taxes.
As a result, we...
In some way, someone will think
they are treated with
this kindness and then
they take advantage of
that kindness and do wrong things
because they know they are big
and they think they run the economy.
Faced with the sophisticated schemes
employed by big mining companies,
investigators are often forced
to turn on smaller companies
whose trickery is easier to detect.
Any case that relates to
the mines we're working on?
Both cases relating to the mine.
One, we had the interview with
the owners of the mine, so,
they were getting revenues
and externalising them
out of the country through
their personal accounts
domiciled elsewhere.
We've got so many cases,
more than a thousand cases,
so we don't have
sufficient numbers to
conduct our
investigations efficiently.
We have 15 officers.
It does not make
sense when companies
open a mine and pay tax elsewhere,
leaving the poor Zambian
suffering in the streets.
It's really not supposed
to be like that.
With the rise in electric vehicles
and wind farms,
the demand for copper is set
to explode in the coming years.
This is an opportunity
for Zambia,
which could be a major winner
of the energy transition
if a new international agreement
is reached to force
multinationals to pay
their fair share.
Faced with the plundering
of their resources
and marginalised
in the OECD agreement,
a number of African countries
decided to open up a new front
in negotiations.
I think now more than ever
with this energy transition
and the demand
it will cause on Africa's resources
we need to see more
coordination amongst African States
when it comes to tax policy
and regional integration.
The more coordinated
and integrated and united
we are as a continent,
we can then stand up
to the global north.
The development of norms
for global taxation
has been done by OECD
for 70 years,
and in the course of that
it has privileged
or prioritised the interests
of its members and especially
its bigger members.
So, countries that are not
part of that have
lost out in terms of taxing rights.
And so there's been a call for
the UN to be the forum
where rules for global taxation
and also global finance
should be set.
There was a resolution presented
by the African Group in New York,
led by Nigeria, calling on
the UN to negotiate
a UN tax convention.
Nigeria is happy to be taking
this historic first step.
International tax cooperation
- should be universal.
- South Africa supports
the resolution tabled by Nigeria.
The resolution aims
to ensure cooperation
among all member states to establish
one coherent global system designed
to work for all countries
and not just a few.
The OECD was quite involved
in trying to mobilise
OECD members to oppose it.
There was a lot of pressure
from big countries, the USA
and also other countries,
Switzerland, countries like that.
We disagree with the notion
implied by this resolution.
Despite opposition from
a number of OECD countries,
the resolution was
eventually passed.
Draft resolution
L11 rev 1 is adopted.
This meant the UN would be
the forum for future discussions
on the taxation of multinationals,
a significant victory
for developing countries.
But it will remain symbolic
if the UN does not arm itself
with the resources needed
to enter into negotiations that
will lead to a new agreement.
This was also
a victory for the ICRICT,
which intends to continue to fight
for tax justice.
But they have a new priority:
to ensure that the very richest
also pay their fair share.
The super-rich in Chile have also
gotten significantly richer.
Now is the time to say
we need progressive taxation.
Now we have got unbelievable
levels of inequality.
The richest 1% of our population
has tripled its income.
In practical terms,
we need to do what we did
with multinationals to the
richest people on the planet,
who manage to avoid
paying any income tax.
A few years ago Jeff Bezos
was paying
no income tax. He once
even got a cheque
from the US Treasury
for family benefits
which are normally for poorer people
because he had no taxable income.
I have a very good feeling
about the awareness
within the general public,
and I'm very optimistic that
this awareness will
get translated into action.
I remain optimistic.
Not only can this battle be won,
but it has been won before.
We have been moving towards equality
since the late 18th century,
throughout the 19th and 20th
centuries, and into the 21st.
This often happens
at times of crisis,
when lots of people take action.
That's what's happened
over the past 200 years,
and there's every reason to think
that's how things will continue.
The dilemma we have for this century
really is this:
either we can keep being afraid
and keep refusing to defend
progressive taxation as a way
to make our societies better,
and in doing so,
pretty much condemn ourselves
to k*ll the planet that we live on,
as well as each of
the societies that we live in,
or we can find some politicians
and some public demand
to say, "You don't like paying
taxes? I don't like paying taxes.
But do you know what?
We all live better lives
when we have better taxes."
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Tax Wars (2024)
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