Austerity, corporate tax evasion and human rights: why the anti-austerity movement needs some Lagarde lists of our own

Is corporate tax evasion an issue for the EU-ECB-IMF Troika? It seems not – they’re too busy dismantling public services to worry about public revenue, unless it takes the regressive form of increasing VAT.

Peter Rossman
27 December 2012

On October 28, Greek journalist Kostas Vaxevanis was jailed and threatened with criminal prosecution for publishing the names of some 2,000 wealthy Greeks with undeclared foreign bank accounts. That list, now known as “the Lagarde list” because two years ago it was handed to the Greek government by the then French finance minister Christine Lagarde (who now heads the IMF), is only a list of private Greek clients of one bank, HSBC. It is but a small piece of the wider universe of tax evasion, the core of which is corporate tax avoidance.

Now that UK protesters are picketing Starbuck’s, it’s time to excavate corporate taxes from under the austerity being forced on the Eurozone ‘periphery’. Is corporate tax evasion an issue for the EU-ECB-IMF Troika? It seems not – they’re too busy dismantling public services to worry about public revenue, unless it takes the regressive form of increasing VAT.

While the Troika struggles to determine precisely how many more Greek workers must lose their jobs and how much more public spending must be slashed in order to placate investors, some of Greece’s largest companies are reaping rewards for fleeing the country for tax havens abroad.

Shortly before Vaxevanis’ arrest, on October 11, Coca-Cola Hellenic Bottling Company (CCH), the country’s largest publicly listed corporation and the second-largest bottler in the global Coca-Cola system, announced that it would leave Greece for tax-friendly Switzerland and a listing on the London Stock Exchange. CEO Dimitris Lois told the Financial Times that, “In principle the Greek government will lose zero income.”

In fact that is untrue – basic corporate tax rates are lower in Switzerland than in Greece, and multiple other reductions are available to transnationals, including the possibility of exemption from non-Swiss earnings. It is nonsense to claim that this will have no impact on the company’s contribution to public revenue in Greece.

CCH, according to its annual shareholder report for 2011, booked €6.85 billion in revenue and paid a mere €102.7 million in taxes. CCH operates not only in Greece, but in 28 countries across Europe and Africa, making it a major European transnationaI. It can be assumed that the company already devotes considerable ingenuity to whittling down its global tax bill through transfer pricing and careful routing of invoices. Tax charges in Greece as a percentage of its profits have been declining over the crisis years, but this hasn’t stopped it from grumbling. So CCH finally traded its own shares for shares in a newly-created Swiss holding company. Company bosses will be celebrating the New Year in their newly established Swiss domicile while Greeks forage for firewood and get turned away from hospitals.

One day before the CCH announcement, one of Greece’s largest dairy companies, FAGE, announced that it was leaving Greece for Luxembourg, where it too had installed a holding company of its own. "This corporate restructuring builds on our Greek heritage while allowing us to compete more efficiently in international markets,” said the CEO. No question here of ‘sharing the burden’ of the country’s torment. For tax purposes, the famous Greek yoghurt is now made in Luxembourg.

So while police attack Greek workers demonstrating against savage attacks on living standards and massive cuts in public services, a journalist is jailed for exposing government collusion in tax evasion while hugely profitable companies are rewarded with a berth in the FTSE 100 and improved share prices for their contribution to reducing public revenue. This is corporate, not individual, tax evasion, and it is looting on a grand scale, with the complicity of the Troika.

Policy coherence

In Geneva, a huge United Nations Forum on Business and Human Rights was staged December 3-4. The event was a celebration of the Guiding Principles on Business and Human Rights (the “Ruggie Principles”) adopted by the UN Human Rights Council last year. Among the keynote speakers at the opening plenary was Stavros Lambrinidis, EU Special Representative for Human Rights. This Special Representative, like the other speakers, spoke at length about “policy coherence”.

Neither Lambrinidis nor any of the other speakers, alluded to the massive incoherence of transposing into EU law the UN Principles, whose first ‘pillar’ is, “The state duty to protect”, while insisting on fundamental violations of international human rights treaties as a condition for bailing out the banks.

The UN Guiding Principles specifically reference the International Bill of Human Rights, which comprises the Universal Declaration of Human Rights, the international covenants which give it effect, and the core Conventions of the United Nation’s ILO. All of these instruments, signed by the EU as well as by its member states, affirm as a fundamental human right the right of workers to form trade unions and to bargain collectively with employers, public and private.

The Troika has insisted on, and obtained, the shredding of collective bargaining agreements at both national and enterprise level as a condition for repeated injections of bailout money. Greek (and Spanish) employers can now unilaterally abrogate the agreements which give effect to these rights and which are their concrete embodiment (also one of the principle vehicles for the advancement of democracy in post-Junta/post-Franco Spain and Greece). The result, unsurprisingly, has been overnight impoverishment for millions of workers and their families).

European citizens contesting the Troika's austerity regime should be highlighting the massive hypocrisy and injustice of a regime which so rewards corporate economic crime and systematic human rights violations.

A proposal

We need some Lagarde lists of our own. The sum of current and future losses to public finances arising when a Greek (or Spanish, or Portuguese) company changes domicile to reduce its tax bill should be automatically deducted from that portion of sovereign debt being administered by the Troika. A continually updated list can then be presented to Christine Lagarde as well as the Commission and the European Central Bank. Journalists should be encouraged to publish it – will they too be arrested?

A second list urgently needs to be compiled, listing the specific violations of human rights built into the ‘peripheral’ austerity regime which will, if unchecked, spread from the periphery to the core, and which has already contaminated the EU as a whole.

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