Well, it’s been a while but I’m back. No, I wasn’t on holiday, although they do say that a change is as good as a rest (they lie!). The change for me was discovering the murky world of tax evasion. While some believe that money is everything, I have avoided economics mainly because you could have all the money in the world but you’d still be stumped if there wasn’t the energy to do the work (and also because it’s usually as stimulating as law, planning and all those other things I try to ignore!). But sometimes one has to look into things one would rather not – like checking that your dog hasn’t got worms. It’s obvious that the economy and energy are linked, as Chris Martenson’s Crash Course explains so well. So in I went.
Some readers may be familiar with the work of the activist comedian Mark Thomas. MT has amused the world with everything from hot air balloons over Menwith Hill to his latest foray into the economic crisis. Entitled “It’s the economy, stupid”, Mark interviewed a series of economists and academics about the meltdown of the economy. This was a nice, if somewhat biased, introduction to economics. One of the people he interviewed (fourth show, part 1) was John Christensen, a Jersey-born economist and director of Tax Justice Network (TJN). John used to work for Oxfam and couldn’t understand why so much aid money poured into developing countries yet the gap between rich and poor grew ever wider. So he returned home and worked his way up to being economic advisor to the Jersey Government. So this guy knows how it works!
As he explains in his interview, he saw tax evasion, market rigging, insider trading and political bribes on a massive scale and all under a UK flag – the Channel Islands are UK dependencies, after all. Not much goes down without London knowing about it. Thanks to excessive secrecy rules, banking information is protected from prying activists – well, most of them. First, it’s important to realise that tax ‘avoidance’ is actually a legitimate part of corporate behaviour – going ‘off-shore’, where your assets can be hidden in tax havens. Tax ‘evasion’, on the other hand, refers to illegal ways of avoiding the tax man. In my book, there’s no difference but then I’m all for a maximum wage. So how much potential tax income does the UK lose through tax evasion? The best figure John had for tax ‘avoidance’ by corporations is £18.5 billion per year. Doesn’t sound too bad, all things considered, but total tax evasion amounts to a staggering £95-110 billion per year. To put this into perspective, by the end of 2009-10 the UK’s annual deficit was £170.8 billion and the UK’s National Debt is over £900 billion. I think clawing this money back might come in handy – national debt wiped out in less than 10 years if everyone paid the taxes they owed. There must be plenty of wiggle room in there to raise the tax threshold too and just think of the insulation schemes and the efficient public transport system.
OK, I’m getting carried away but it is heartening to know that around the globe there are economists and accountants who think that the whole system is corrupt and should be changed. There have been too many lies about the global economic system being the only way possible – and we’ve swallowed them. It is galling that those businesses we think of as most profitable, such as oil extraction, are at it too. In their July 2010 paper for Citizens for Tax Justice, a US group doing similar work to TJN, Jeff Hooke and Steve Wamhoff examine ‘What Oil and Gas Companies Extract from the American Public’. In addition to trying to ban offshore drilling, President Obama’s most recent budget plan proposes to close or reduce a number of the most expensive tax loopholes for the oil and gas industry. Hooke and Wamhoff point out that the five most significant of these proposals would raise $44.8 billion over 10 years, which may not seem much in the face of US debt but is a step in the right direction to changing the rules of the game.
The Energy Policy Act of 2005 was signed into law by President George W. Bush on August 8, 2005. The act, described by proponents as an attempt to combat growing energy problems, changed US energy policy by providing tax incentives and loan guarantees for energy production of various types. Five years on and it seems the opposite is true. These subsidies have not spurred the exploration of new reserves nor stimulated alternative energy. Among the largest five oil companies, less than 10 percent of profit goes to exploration for new oil fields. In fact, in the top five oil companies, managers direct most of their excess cash to dividends and stock repurchases, both of which drive up the companies’ share prices and the executives’ stock option values. The percentage of net profits directed towards dividends and stock repurchases for the top five oil companies increased from 58 percent in 2005 to 89 percent in 2009 and there’s no evidence that the additional profits lead the companies to explore for more oil. It seems that financial jiggery pokery has kept the growth illusion in place more than actual oil supply, which globally has stagnated since 2005. Why invest in exploring for oil when you know that there’s not much ‘cheap’ oil left to be found? Much better to take the money and run – before we wake up to what’s really going on.