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Week 10: The big rip-off – and why you should be angry
In this issue: ▸ From criticism to tax break ▸ A trillion dollars hidden offshore ▸ The EU “strikes back” ▸ United Kingdom, the big tax evasion enabler ▸ And much more...
Are you confused? Well, I have a feeling that this newsletter will make you angry. Because we are witnessing a rip-off, and you are the one who is getting ripped off.
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Corporates around the word and particularly in US and EU have received an early Christmas tax present. The multibillion dollar “green” subsidies that you are paying, through your taxes, the politicians you have voted for are now giving away. All in the name of the green and sustainable transition. The battle of subsidies between EU and US, or rather, the wrecking of public tax money over the private sector, is a race to the bottom.
The same corporates in the US today and soon in the EU who are standing in line to harvest the subsidies, some of them for decades, to transform their business, have been evading corporate taxes for decades. The same companies that have been hitting enormous profits, like Exxon, are first in line to harvest the tax brake to develop CCS (Carbon Capture and Storage) technology and continue doing business. CCS technology is not commercially viable since it is too expensive, and not 100% safe, but when you take a bill, Exxon is there to do its outmost for “the climate”.
Instead of paying from its own pocket, US tax payers are there to give Exxon a tax break for next 10 years so they can pump more oil, increase their profits and shareholder return, and continue evading corporate taxes. Why? Because the people we have voted for in the EU and US , and are now in office, are not doing their job.
From criticism to tax break of the century
Last year, Oxfam filed shareholder resolutions against US oil giants Exxon, Chevron and ConocoPhillips, saying a lack of transparency over their global tax practices poses a material risk for long-term investors.
Then US President Joe Biden threatened to pursue higher taxes on oil company profits if the industry giants did not work to cut gas prices, accusing energy giants of “war profiteering.”
“Oil companies’ record profits today are not because they’re doing something new or innovative,” Biden said in October last year. “Their profits are a windfall of war – the windfall from the brutal conflict that’s ravaging Ukraine and hurting tens of millions of people around the globe.”
No shit. Serious words. And now the same president is giving Exxon and all other oil and gas majors in US the tax break of the century. Are you confused? You get the angle?
It’s called business as usual. The transition is for wimps. The same country where people don’t have universal healthcare and no federal electricity grid – and where tax evasion is endemic.
A trillion dollars hidden offshore 🤯
So just how big is the tax evasion problem? Is there reason to be angry?
Well, the 50 biggest US companies have more than a trillion dollars hidden offshore, according to a report published by Oxfam. This is more than the entire GDP of countries such as Spain, Mexico or Australia.
The companies, which include global brands such as Pfizer, Goldman Sachs, Dow Chemical, Chevron, Walmart, IBM, and Procter and Gamble, have more than 1,600 subsidiaries in tax havens. It’s estimated that tax dodging by multinational companies costs countries around the world up to $240 billion annually.
These 50 companies spent approximately $2.6 billion lobbying the US government to maintain favourable tax rules and other beneficial policies between 2008 and 2014. Companies also spend large amounts lobbying elsewhere – a conservative estimate of the amount spent on EU lobbying each year is $1.7 billion.
This lobbying generates an incredible rate of return. For every $1 spent on lobbying, the 50 big US companies collectively received $130 in tax breaks and more than $4000 in subsidies from the US government.
Are you still confused? You get the angle now?
The thing is, we do not change how business operate. We do not pose the criteria they need to fulfil, change corporate charters, incentive models, taxes, regulated personal responsibilities of CEO’s and boards.
No. We just hand over the money. “It creates jobs, and there’s also the trickle-down effect.” Blah-blah. Trickle-down economics do not work. We’ve known for decades, and research has proved it.
The EU “strikes back” 🤦🏻♂️
Now, the EU – or shall we call it Elusive Utopia – is of course “striking back”.
EU companies like VW (a tax evader too) and other major business, like Norvolth (which has been subsidised by Swedish tax payers from day one) is threatening to leave the EU for the US, to harvest the deals that they cannot get in the EU.
And what do our elusive politicians in utopia do? They throw billions of euros of our money into the fire.
That’s right, Brussels has cleared the way for a subsidy race with the US over crucial technologies, allowing EU member states to “match” multi-billion dollar incentives as they fight to keep projects in Europe. The overhaul published by the European Commission on Thursday will for the first time justify large-scale public funding for green projects if similar incentives are offered outside Europe, a radical departure in how state subsidies have been policed within the bloc.
The measures will allow states to pump billions of euros into the production of solar panels, batteries, wind turbines, electrolysers and heat pumps. “This is quick and dirty money to match the Americans,” said one person involved in the development of the plan.
The subsidy plan was unveiled as Ursula von der Leyen, the commission president, prepared to meet US president Joe Biden in Washington. The leaders are expected to discuss Europe’s requests for its companies to be granted benefits under the IRA, which will offer big subsidies to businesses investing in green technologies in the US.
“This is the subsidy race nobody wants,” said one veteran adviser on state aid applications. “In the short term companies will have the incentive to see who can give them better terms but it’s ultimately the taxpayer who will bear the burden.”
The new regime allowing matching subsidies, which can be either cash or tax breaks, will be open until 2025. But subsidies for approved projects can run for much longer time periods.
A second part of the reforms will ease rules for smaller projects, which will now be reviewed in a matter of weeks to match the speed at which money is handed out by the US, according to officials. These projects will be subject to an increased subsidy ceiling of up to €350mn for projects in less wealthy regions and those in wealthier areas will be eligible to receive subsidies of up to €150mn. You see the numbers?
Cash or tax-subsidy. Imagine the faces of CEOs and CFOs. Billions. Are there millions of people in the US and EU on the streets protesting that their own tax money is given away by politicians, fuelling corporate spending which the same corporates could have found on their own offshore bank accounts (if they really believed in the “transition”)? No. Why? People either do not understand what is going on, or they don’t care. Or both.
Citizens of the US and EU, it’s time to wake up!
United Kingdom, the big tax evasion enabler 🇬🇧
On the topic of tax evasion, here are some interesting facts.
Britain is officially the biggest tax evasion enabler on the planet. The UK and its overseas jurisdictions are collectively responsible for costing the rest of the world $87.9 billion in lost tax a year by enabling non-residents to hide their finances and evade tax. The UK itself loses $25 billion a year to offshore tax evasion by wealthy individuals enabled by other countries.
British Overseas Territories and Crown Dependencies are now responsible for 8.9 per cent of all financial secrecy in the world, down from 13 percent in 2020. The UK itself supplies 1.6 percent.
Collectively, the UK and its overseas jurisdictions supply over 10 percent of all financial secrecy in the world, which is almost double the amount of financial secrecy supplied by the US, the highest ranking jurisdiction on the Financial Secrecy Index 2022.
Great, Brexit has indeed solved this…
Coal to continue in China 🇨🇳
Remember coal? Of course you do. It’s a source of some very nasty CO2 emissions which the world has agreed to phase out as quickly as possible. Well. The world’s largest carbon emitter – China – delivered a blunt energy message at its National People’s Congress this week: coal would continue to be a key piece of the country’s energy mix.
Nikkei Asia’s analysis shows that Premier Li Keqiang used the term “energy” 14 times during his speech on the government work report – up 17 percent from last year’s version. The most frequent keyword, “stability”, was used 33 times, confirming Beijing’s priority is to bring balance and strength to its economy battered by the Covid-19 pandemic. “We leveraged the role of coal as a major source of energy,” the report said.
In his presentation, Premier Li reaffirmed to the world that China was still on the path of green transformation, despite its use of coal in power generation. “We must improve policies to support green development, develop a circular economy, promote resource conservation and efficient utilisation, push energy conservation and carbon reduction in key areas, and continue to fight the battle to protect our blue skies, clear water and pure land,” he said.
Sure and why not throw in some tax breaks too?!
And the offset scam continues 💸
Now on to… carbon credits!
The world’s leading carbon credit certifier – used by Disney, Shell, Gucci and other big corporations for climate claims – has said it will phase out and replace its rainforest offsets programme by mid-2025 after a Guardian investigation found it was flawed.
Verra, the main guarantee of credibility for the rapidly growing $2bn (£1.6bn) voluntary offsets market, has committed to scrapping its rainforest protection programme by July 2025 and introducing new rules, which it is developing. A senior Verra figure said this week it was time to move on from the current system.
In January, a nine-month investigation by the Guardian, the German weekly Die Zeit and SourceMaterial found widespread problems with the system. Analysis of a significant proportion of Verra projects indicated more than 90% of its rainforest offset credits do not represent genuine carbon reductions.
Also, human rights issues are a serious concern in at least one of the offsetting projects co-run by the NGO Conservation International and the Peruvian governments, with evidence people had been forced from their homes. This can make anyone pissed.
But be aware, because we have a new kid on the offsetting block! It’s called biodiversity offsetting.
Simply explained, biodiversity offsets are measurable conservation outcomes that result from actions designed to compensate for significant, residual biodiversity loss from development projects. They are intended to be implemented only after reasonable steps have been taken to avoid and minimise biodiversity loss at a development site.
Are you confused? The human race has already “conquered” nature once before. Now we are going to do it one more time and we are going to trade in its capacity to sustain life on this planet. So we can keep doing what is wrong. Very civilised indeed.
That will be all for this rip-off week, and if you now feel that you, together with millions of other EU and US citizens, are handing over your money to corporates so they can “transform” and evade taxes again and increase their profits with no strings or accountability attached… well, that’s pretty much how it is.
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