Tax evasion part of corporate culture

Image representing Steve Jobs as depicted in C...

Image via CrunchBase

Most people would think that countries like Spain, Greece and Portugal would rank among the very top of countries for tax evasion schemes. But even though the US has a relative low tax rate the country tops the list of places where tax evasion seems to be part of corporate culture.

So how big a problem is tax evasion? Take a look at the table below from Tax Justice Network, a London-based watchdog that fights against tax havens and for more transparency.

America’s “black” or “shadow economy,” represents 8.6% of GDP, while the percentage is by far the smallest of any of the countries on the list it does represent a significant monetary post and represent roughly the GDP of Denmark the 32 biggest economy in the world according to the IMF.

How does the companies in the US manage to avoid tax? Well, one suggestion is that companies like Google, Apple and Amazon manage to cut their tax bill by one third through a series of moves that involves countries in Europe and in the Carrabin, a system is also used by big European companies to transfer funds to tax havens. My friend Sarah Wenger has created the infograph titled “The master of Tax Evasion” that explains how the system works.

Masters of Tax Evasion
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Hunger in the US and Europe – the fuel for social unrest

Illustration of starvation in northern Sweden

Starvation in Sweden

The contradiction between between the have and the have-nots is becoming increasingly salient worldwide. The UN commitment to end poverty and the millennium goals have been in place for the last eleven years and with only four years to go it does not seem to be going in the right direction.

While we normally associate poverty and hunger with countries outside the western world we have a growing number of people who experience starvation. At the same time we se a similar increase in people who are obese and suffer from malnutrition.

The worldwide nearly doubled between 1980 and 2008. According to country estimates for 2008, over 50% of both men and women in the WHO European Region were overweight, and roughly 23% of women and 20% of men were obese.

The Estimated number of overweight infants and children in the WHO European Region rose steadily from 1990 to 2008. Over 60% of children who are overweight before puberty will be overweight in early adulthood.

While the numbers for starving people in Europe is hard come by there are a growing concern that real starvation will occur on a growing scale especially in relation to the weak economies in the euro and the countries that stand outside the EU.

If one looks at the capacity of a country to cope with these kind of stains one can just look at the US were. There has been a similar trend over the past 20 years, have been a dramatic increase in obesity. In 2010, not a single state had a prevalence of obesity less than 20%. Thirty-six states had a prevalence of 25% or more; 12 of these states (Alabama, Arkansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Oklahoma, South Carolina, Tennessee, Texas, and West Virginia) had a prevalence of 30% or more.

In contrast to these numbers there were in 2010, 85.5 percent of U.S. households that were food secure throughout the entire year meaning that they had a steady supply of food. The remaining 14.5 percent were food insecure at least some time during that year. This meant that around 45 million US citizens did not have a steady inflow of food over the year.

In 2010, 5.4 percent of households experienced food insecurity in the more severe range, described as very low food security.

There is no doubt that there are real issues to be handled but it does not seem like it is a matter of supply as we have seen elsewhere in the world. Rather it is a problem of distribution and nutrition, which from a societal point of view is much worse as it threatens the ability of a community to keep its structural integrity. As we see uprisings in London, Madrid, Athens and the central issue is the uneven distribution of resources and while the central theme seems to be around monetary funds it would seem that the availability of food might be the next big thing to fight over.

Wikileaks stops publishing an effective stop to whistleblowing

Some would properly cheer while other will cry but almost nobody will lack a opinion on Wikileaks. This week it was announced that wikileaks will cease to publish because the campaign that have been running against the organizations apparently have been successful. This has subsequently meant that the Assange and his peers have been standing without effective banking connections. In practice it means that Wikileaks cant do banking or credit card transactions through companies like Visa, MasterCard and PayPal.

“This financial blockade is an existential threat to WikiLeaks. If the blockade is not borne down by the end of the year the organisation cannot continue its work,” Assange told a news conference in central London.

And with the additional problems with hosting there seem to be no end to the troubles of Wikileaks.

The trouble started when wikileaks issued another huge batch of classified U.S. government documents through their website. This action stuck security experts like a guided missile. Previous WikiLeaks had mainly disclosed low-level field reports on the wars in Iraq and Afghanistan, which was bad enough. But this last bundle of information dealt with diplomatic rather than military issues, and at high level in US diplomacy. Some even said that it might be just two or three steps away from the US president. While the information was not really revolutionary or have a major impact on the ground it did show a major gap in US diplomatic security.

As a consequence the US with the help of some of it allies started a campaign that had the purpose to take Wikileaks out of business for good. And it is this campaign that seemingly has been successful.

It would seem to me that there are three lessons to be learned

  1. That nobody can keep secrets forever. No government, agency or company can trust that when information is put in writing, video or graphics it can be kept a secret. At some point it will be discoursed.
  2. There is a difference if you disclose information about people in the “west” e.g. the perceived good or if you rat on people from the “east” e.g. the perceived bad. If your information threaten the statues quo and the normative perception of good and bad one should be careful what you say.
  3. That whoever is named, as the whistleblower will be prosecuted through any means available to them. Either though legal or illegal means the exposed will stop a nothing in-order to see the whistleblower be destroyed.

While we like to think that there is freedom of speech is a universal right and that whistleblowers will be protected it apparently only goes this far.

So lessons learned from this case is that if you have information about the actions of a western government or other powerful “good” institutions you should keep it too yourself because the consequences of disclosure is that you and the people you care about will be destroyed.