CAPITALISM'S ACHILLES HEEL Dirty Money and How to

Dirty Money at Work 137
TABLE 3.12 HOW TO SUCCEED IN BUSINESS WITH FALSE PRICING AND
TAX HAVENS
Parent Co. Subsidiary Dummy Co. Subsidiary Sales Co.
Country A Tax Haven B Country C
Production costs $1,000
Selling price $1,000 → Buying price $1,000
Selling Price $2,000 → Buying price $2,000
Selling price $1,500
Profits $0 Profits $1,000 Profits (Loss) ($ 500)
Taxes $0 Taxes $0/negligible Taxes offset/loss C/F
fer pricing by multinationals is the same as smuggling by citizens,” in the
view of a Japanese economist. 162 Yet, this is the way international business is
done. It has become a central element in global strategies. And, before corporate
executives and their advisors leap to defend these actions as within
the law, consider the possibility that abusive transfer pricing is a felony offense,
as laid out in the next chapter. This is an area in which corporations
must begin to exercise extreme caution, in order to protect officers and employees
from any possibility of criminal actions, whether caught and charged
or not.
Referring primarily to the United States, Robert Kuttner could have
equally directed the following to the whole of the western world:
It’s one thing to believe that low tax rates are good for economic growth.
It’s quite another to collude in tax evasion. The former is the subject of a
fair debate between liberals and conservatives. The latter undermines
the rule of law and the transparency that we preach to the rest of the
world. Today, corporations can book the same income differently in different
countries. International tax planning is part of the same corporate
culture of creative accounting that led to the Enron Corp. scandal.
Conservatives and liberals alike ought to favor consistent tax enforcement.
For every dollar owed but not collected by the IRS, either
taxes must rise or budget deficits must widen, sending interest rates
higher and placing a heavy burden on our children to pay down the debt.