Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Tuesday, December 06, 2011

Loopholes And Corporate Tax Dodging Costing Developing Countries Billions: Report

It's no secret that many multinationals have become particularly adept at exploiting tax loopholes. Nor is it a surprising that the U.S. federal deficit is widening as a result. What's not as publicized, however, is that developing nations are also feeling the heat.

Developing countries have lost hundreds of billions of dollars due multinational corporations' ability to both legally and illegally avoid taxes, and a lack of adequate monitoring by regulators, according to a recent report from the European Network On Debt and Development.

Between 2005 and 2007 in sub-Saharan African countries alone, nearly $27 billion was shifted illegally due to trade mispricing -- or when companies manipulate trade access borders for profit -- the report found. But multinational corporations are also using legal means to pay less in taxes, including setting up subsidiaries and administrative units in countries with near-zero tax rates and allocating the value of what the company creates to the most favorable region.

The report mirrors others indicating that many multinational corporations are getting increasingly skilled at avoiding taxes. Nearly 300 of America's most profitable corporations paid an average tax rate of 18.5 percent between 2008 and 2010, according to an October study from Citizens for Tax Justice. That's compared to the actual corporate tax rate of 35 percent, nearly double the rate actually paid.

The CTJ report also found that 30 highly-profitable companies paid a negative tax rate between 2008 and 2010, even though they took home a combined $160 billion in pre-tax profits.

Some corporations are pushing for more ways to make it easier for them to avoid taxes. Companies such as Apple and Google have hired more than 160 lobbyists to encourage Congress to reinstate a repatriation tax holiday, according to Bloomberg. The tax holiday on offshore profits would save the companies more than $1 trillion if passed.

But corporations already take advantage of a variety of tax loopholes. Some use the "active financing exception," which allows companies to avoid paying taxes on overseas profits if the company got those profits by "actively financing" a deal, according to The New York Times.

Companies also commonly take advantage of the "accelerated depreciation" rule, which allows them to write off investments faster than they wear off, according to The Washington Post. The companies then subtract the falling value of the investments from their taxable income.

Origin
Source: Huff 

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