CAPITALISM'S ACHILLES HEEL Dirty Money and How to

350 CAPITALISM’S ACHILLES HEEL
If we really want honesty in pricing and integrity in financial reporting,
CEOs and CFOs can be required to sign their annual reports containing
statements that there have been no violations of laws pertaining to
mail, wire, or customs fraud or making false statements. The declaration
can even include a qualifier—except in situations where specific actions by
a foreign government have made a temporary violation necessary. Not
many multinational corporation executives could honestly sign anything
approaching such statements today, which well illustrates a very serious
problem in global capitalism.
For developing and transitional economies, almost all of which experience
enormous cash drainage through false pricing, an instrument is available
to curb this outflow—the pricing declaration. It can effectively
curtail—not stop, but significantly decrease—mispricing and abusive transfer
pricing. Incorporated into a country’s required form of commercial invoice
for imports or exports, to be signed by both buyer and seller, it covers
the following points:
• Pricing conforms to world market pricing in arms-length transactions
for the same or similar goods or services and contains no commissions
or kickbacks payable into any external account.
• Pricing conforms to all tax, customs, and revenue laws of buying
and selling countries and includes no element of mispricing or
transfer pricing for purposes of manipulating taxes, customs, or
revenues.
With this standardized declaration, a significant portion of false pricing is
stopped in its tracks.
There is another approach that can be taken by governments of developing
and transitional countries. Specifically in relations with multinational
corporations, a contractual obligation can be required along the lines of the
above pricing declaration that makes tax-evading transfer pricing illegal. If
governments want to strengthen the contract, they can require that it be
backed up by a resolution of the board of directors of the parent corporation
affirming the policy.
There is a matching obligation that must be maintained by foreign governments.
Remittances have to be prompt and routine, both on invoices for