Things are getting warmed up for the G20 summit to be held in St. Petersberg in September. One major item on the agenda is a proposed revision to international tax treaties.
G20 report warns of global tax chaos
Governments risk "global tax chaos" as they chase dwindling revenues from multinational companies unless the international tax regime is radically overhauled, according to a report commissioned by the G20 group of nations.
Among the highlights are additional disclosures multinationals must make to all tax authorities, helping officials know where to look for the worst avoidance. There are proposals to require companies such as Amazon with extensive warehouse networks in a country to pay more local tax; multinationals posting high-value "intangible" assets, such as brands and intellectual property rights, to tax havens will also be targeted, as will tax breaks introduced by individual countries that are seen as predatory.
The issue is concerned with a numbers of things. Some of those have been in the news in recent months, such as Apple and Google parking their vast hoards of cash in tax havens such as Bermuda and Ireland. The US government is defending the ability of multi-national companies with headquarters in the US to be free booting tax pirates on the high seas.
Amazon told: time is up for tax avoidance
But even as the European trio of finance ministers congratulated one another on the unprecedented show of G20 unity, behind the scenes there were growing concerns that national self-interest could scupper some elements of the plan.
Notably absent from the launch event was the US treasury secretary, Jack Lew. Sources with knowledge of the extensive negotiations said the US was growing increasingly frustrated with sniping from European politicians targeted at some of the most successful US multinationals including Starbucks, Google and Amazon.
Lew used an article in the Financial Times to call on Europe and other economies to knuckle down and focus on fostering growth rather than squabbling over taxing rights. "When [finance ministers] … gather in Moscow, getting people back to work must be top of the agenda," he said. "In many parts of the world, such as Europe, growth is too weak to drive job creation, and it is critical to take steps to bolster private hiring."
The issue with Amazon is a bit more concrete than it is with some of the other companies. While they have branched out into digital media and cloud computing, their primary business is still online sales of tangible merchandise that must be physically delivered to the customer's location. They are of course in a position to afford the world's best tax lawyers. The resulting creativity has been almost boundless.
I am a fairly regular Amazon shopper who lives in Northern California. Logistically the logical place for a distribution center serving such a large market would probably be some where in the East Bay. However, when I order an item it is shipped from a warehouse in Sparks NV. Until just this year that had made it possible for Amazon to avoid collecting CA sales tax. I'm pretty sure that they weren't paying corporate income taxes in CA either. CA is a state that has been in desperate need of tax revenue for a number of years.
They have cleverly adapted this scheme to a European model.
Tax structures used by Amazon to route billions of pounds from sales to British customers through Luxembourg, paying negligible UK tax, are among a series of international loopholes earmarked for closure in a programme of reforms backed by G20 nations.
The "once-in-a-century" move to patch up holes in international tax rules was unveiled in Moscow by George Osborne and fellow finance ministers from France and Germany, who have together been the driving force behind calls for reform.
While I am sure that Luxembourg is a more tasteful place than Nevada, the outcome is similar.
Jack Lew who has just taken over at Treasury has had a long career in management positions in both the Clinton and Obama administrations. However here's a look from a Wiki article at how he passed the time during the Bush years.
After leaving public office in the Clinton administration, Lew served as the Executive Vice President for Operations at New York University and was a Clinical Professor of Public Administration at NYU's Wagner School of Public Service.[18] While at NYU, Lew aided the university in ending graduate students' collective bargaining rights. The Obama administration has maintained that Lew supports workers' union rights.[19] According to a 2004 report in NYU's student newspaper, the Washington Square News, Lew was paid $840,339 during the 2002-2003 academic year.[20]
In June 2006, Lew was named chief operating officer of Citigroup's Alternative Investments unit, a proprietary trading group. The unit he oversaw invested in a hedge fund "that bet on the housing market to collapse."[21] During his work at Citigroup, Lew had invested heavily in funds in Ugland House while he worked as an investment banker at Citigroup during the 2008 financial meltdown.[22] Lew also had oversight of Citigroup subsidiaries in countries including, Bermuda, the Cayman Islands, and Hong Kong; and during his time at Citigroup, Citigroup subsidiaries in the Cayman Islands increased to 113.[23]
Lew co-chaired the Advisory Board for City Year New York.[24] He is a member of the Council on Foreign Relations, the Brookings Institution Hamilton Project Advisory Board, and the National Academy of Social Insurance.[25] Lew is also a member of the bar in Massachusetts and the District of Columbia.[26]
This is a background that fits nicely with the profile of an anti-tax, anti-government regulation neoliberal.
Personally I am not happy to see my government pushing such a position.