A new Canadian documentary draws attention to the profit-shifting tactics used by multinationals to avoid billions of dollars of taxes.
Directed by Montrealer Harold Crooks, the film The Price We Pay opens this Friday in Toronto and Montreal, before moving on to other Canadian cities next week.
- HSBC documents show bank helped clients hide billions from tax man
- Bombardier among companies exposed for controversial Luxembourg tax plan
It comes at a time when European legislators are struggling with how to get corporations to pay tax in their jurisdictions, when profits can easily be shifted to low-tax countries such as Ireland and Luxembourg or tax havens such as Grand Caymans.
The G20 and Organization for Economic Co-operation and Development are also moving to put pan-international tax laws in place to close loopholes, while the U.S. has begun a review of companies that keep their earnings in offshore accounts.
Crooks, a co-writer of the narration on the 2003 documentary The Corporation, is hoping to spark a public debate about corporate tax-shifting practices.
"Beginning in the late 1970s and the early 1980s, [there was] off-shoring of the world’s wealth and the taking of so much wealth out of democratic control, whether privately held wealth or the undistributed profits of multinational corporations and lodging them in shell companies in the tax-havens we are familiar with," Crooks said in an interview with CBC's The Exchange with Amanda Lang.
He describes the kind of shell companies that hold wealth in Grand Caymans as "accounting fictions" and estimates up to 10-15 per cent of global wealth is hidden offshore.
Crooks argues these corporate tax-shifting policies undermine the modern welfare state by depriving governments of money and leaving the burden of paying for services to the middle-class and the poor.
"If you begin with the idea that the two major social innovations of the 20th century are the middle class and the social welfare state – they were dependent on two things – strong national governments..and progressive taxation," he said.
"It really has undermined national governments and their ability to function, their ability to provide the kinds of services that were the basis of a strong thriving middle class."
His documentary highlights the difficulties of tracking where money is earned when multinational companies can simply move cash to another unit with the aid and sometimes the advice of global banks.
OECD tax chief Pascal Saint-Amans, Thomas Piketty, the French economist and author of Capital in the Twenty-First Century are interviewed, alongside crusading journalists and insiders from some of the companies that are the most egregious offenders.
Amazon, Starbucks, Google, Apple and other corporate giants have found their practices scrutinized by EU and U.S. legislators after shifting their profits off-shore.
Crooks said small and medium-sized industries, which provide the most jobs in modern economies are at a disadvantage to larger competitors because they can't do the kind of international accounting shifts that would allow them to avoid taxation.
Everything that most corporations do to avoid taxation is legal, but Crooks argues it should not be acceptable.