CAPITALISM'S ACHILLES HEEL Dirty Money and How to

28 CAPITALISM’S ACHILLES HEEL
affiliate as a conduit for “a little happiness,” especially when you’re dealing
in big money. At a minimum, channel your bribe payments through an
unregulated entity operating out of a tax haven.
For someone in a developing or transitional economy who wants to
generate deposits into his or her external bank account, the flip side of overpricing
imports is underpricing exports, as the Ukrainian art dealer did. In
the business of selling commodities or processed or manufactured goods,
agreements between buyers and sellers to accomplish this are common, so
don’t feel as though you are doing anything unusual.
Toys manufactured in China have produced several Chinese dollar millionaires
with their money safely stashed in foreign banks. The big toy companies
in the United States and Europe don’t necessarily have to pay the
kickbacks; these can be handled by wholesalers who buy, mark up, pay the
kickbacks into hard-currency accounts, and resell to the multibillion-dollar
brand-name companies and retail chains. The same mechanism has reportedly
produced a fair number of millionaire sneaker manufacturers. Oil has
been piped out of Russia at a fraction of its value and resold in Europe at
world-market prices, with the difference ending up in Cyprus bank accounts
of the owners or executives of Russian producing and marketing companies.
Now, oddly enough, if you’re fattening your foreign bank account by
overpricing imported raw materials and machinery and underpricing exported
commodities and manufactured items, you may be able to accomplish
the same ends by doing exactly the opposite. How can you consistently
underpay for your purchases and get anyone to continue selling to you? And
how can you consistently overcharge for your sales and get anyone to continue
buying from you? Believe me, it’s been done a few million times.
Take Argentina as an example of underpricing imports. Argentina dollarized
its economy in 1991 and introduced open convertibility between the
peso and the U.S. currency. Earlier, Argentina had broadened its regime of
value-added taxes (VAT) which meant that imports were taxed at an average
of about 18 percent of invoiced prices as they arrived, which later rose to 21
percent, plus additional tariffs and fees. Argentine businesspeople did not
take long to figure out how to use open convertibility and dollar bank accounts
abroad to minimize VAT. In cooperation with foreign suppliers, imports
were often and very significantly underinvoiced, so that the VAT tax
payable on goods arriving into the country was reduced in amount. Importers
then properly paid the indicated amounts on these fabricated com-