transfer pricing

60 results back to index


pages: 121 words: 34,193

The Hidden Wealth of Nations: The Scourge of Tax Havens by Gabriel Zucman, Teresa Lavender Fagan, Thomas Piketty

Berlin Wall, Bretton Woods, British Empire, Capital in the Twenty-First Century by Thomas Piketty, dematerialisation, Fall of the Berlin Wall, financial innovation, financial intermediation, high net worth, income inequality, means of production, new economy, offshore financial centre, transfer pricing

The first, that of intragroup loans, consists of loading with debt branches located in countries that tax profits heavily, such as France and the United States. The goal is to reduce the profits where they are taxed and have them appear in Luxembourg or in Bermuda, where they are taxed very little or not at all. This popular manipulation nevertheless comes up against a sizable problem: it is rather easy to detect. The second optimization technique, the manipulation of transfer prices, plays a more important role. Transfer prices are the prices at which branches of a given group buy their own products from one another. Within a single company, the branches in Bermuda sell services at a high price to entities located in the United States. Profits thus appear again in the tax havens and losses in the United States, in the large economies of continental Europe, and in Japan. In principle, intragroup transactions should be conducted using as a reference the market price of the goods and services traded, as if the subsidiaries were unrelated, what is known as “arm’s-length pricing.”

In 2003, less than a year before its initial public offering in August 2004, Google US transferred its search and advertisement technologies to “Google Holdings,” a subsidiary incorporated in Ireland, but which for Irish tax purposes is a resident of Bermuda.31 What was the fair-market value of Google’s technologies at the time of transfer, before the Mountain View firm was even listed as a public company? Google US had an incentive to charge as little as possible for this transfer. We do not know whether it was able to do so: the transfer price is not public information. But journalistic leaks in the fall of 2014, “LuxLeaks,” revealed that in many similar cases, the transfer prices that IT companies are able to charge when they send their intangibles to Bermuda is negligible, sometimes zero. Once that capital has arrived in Bermuda, all the profits that it generates are taxable there, where the corporate income tax rate is a modest 0%. The issue is growing, as a rising number of international transactions within international divisions of a single company—such as the sale of proprietary trademarks, logos, and algorithms—are not replicated between third parties, hence have no reference price.

This surplus has nothing to do with any sort of competitive advantage; it doesn’t benefit the Irish population at all: it is entirely paid back to the foreign owners of the firms that operate in Ireland, so that Irish national income is only 80% of Irish GDP. Manipulations of transfer prices then massively distort the share of each factor of production (capital and labor) in corporate value added: the artificially elevated profits booked by foreign-owned firms make the capital share rise to more than 50% in sectors where immaterial capital is large, as in the pharmaceutical industry. A Twenty-First-Century Tax on Companies What is to be done? The current approach of the OECD and G20 countries consists of trying to reform the existing system by strengthening transfer-pricing regulations.34 The first efforts began in the second half of the 1990s, and yet the trend toward more widespread use of tax havens by US multinational companies has shown no particular sign of slowing down since then.


pages: 301 words: 88,082

The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business by Richard Brooks

accounting loophole / creative accounting, bank run, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, carried interest, Celtic Tiger, collateralized debt obligation, commoditize, Corn Laws, corporate social responsibility, crony capitalism, Double Irish / Dutch Sandwich, financial deregulation, haute couture, intangible asset, interest rate swap, Jarndyce and Jarndyce, mega-rich, Northern Rock, offshore financial centre, race to the bottom, shareholder value, short selling, supply-chain management, The Chicago School, The Wealth of Nations by Adam Smith, transfer pricing

If, for example a company made a batch of ball bearings in country A at a cost of $5 and sold it through an affiliated company in country B for $10, the transfer price between the companies might be $8, in which case the profit would be $3 in country A, $2 in country B. But if country A had a much higher tax rate, the multinational could adjust the price to $6, diverting an extra $1 of profit out of country A into country B and thus pocketing a significant tax saving. So how should the ‘transfer price’ be fixed? The League’s answer, in 1935, was the ‘arm’s length principle’, which following the Second World War, would be enshrined in an expanding network of bilateral taxation treaties agreed between the major trading nations. The UK’s first such agreement, with the United States, was signed in 1945.‌2 In fixing transfer prices, the world’s taxmen were to imagine that the affiliated companies were independent from each other, dealing on ‘arm’s length’ terms.

But by 2011, just £680m worth of tax covering several years’ business was at stake on this ‘transfer pricing’ question and the related issue of multinationals stripping out profits from British operations in financing costs (see chapter 5).‌24 Since £680m tax equates to less than £3bn worth of cross-border payments – roughly the level of business that one big multinational might have with overseas affiliates in a single year – the evidence that the British tax authorities had surrendered the tax border was clear. The amount of tax recovered from these enquiries from the 770 companies dealt with by HMRC’s Large Business Service dropped to £273m by 2010/11 from a high of £1.6bn two years before.‌25 At the same time, designing financing schemes to funnel interest into tax havens and ‘tax-efficient supply chain management’ – i.e. transfer pricing schemes – for the biggest companies to siphon profits out of the UK into lower tax areas remain among the major accountancy firms most profitable lines of tax work.

But ‘tax-efficient supply chain management’ strips out a further layer of local autonomy, entrepreneurship and innovation. ‘Aggregation of entrepreneurial risks at a hub entity’ – located in a faraway tax haven – is exactly what Ernst & Young recommends. The same accountants conscientiously advise companies to ensure that their ‘transfer pricing’ arrangements faithfully follow real business operations so as not to fall foul of any future tax investigation. Tax haven companies must be paid for what they really do and what they really own, not just what the paperwork says. ‘Ensure alignment of transfer pricing and legal documentation with business substance’ insists E&Y responsibly, standing by to advise on the practicalities – for an appropriate fee – should any assistance be required. International tax planning thus becomes more than just a tax matter; it determines exactly how a multinational operates in a developing country.


pages: 241 words: 63,981

Dirty Secrets How Tax Havens Destroy the Economy by Richard Murphy

banking crisis, barriers to entry, Bernie Sanders, centre right, corporate governance, Donald Trump, Double Irish / Dutch Sandwich, en.wikipedia.org, high net worth, income inequality, intangible asset, light touch regulation, moral hazard, Occupy movement, offshore financial centre, race to the bottom, Social Responsibility of Business Is to Increase Its Profits, The Wealth of Nations by Adam Smith, transfer pricing, Washington Consensus

The ways in which profit shifting takes place are numerous, and can only be explained here in outline. Perhaps the most common is what is called transfer mispricing. Transfer pricing necessarily takes place in all groups of companies. A transfer price is what is charged when one company that is a member of a group sells goods or services to another company within the same group. It is called a transfer price simply to differentiate it from a market price, which is that which would be set between independent people trading in a marketplace. Transfer prices can be charged on anything, from manufactured components to internal accounting services, interest charges, and the sums due for the use of intellectual property in the form of royalty and copyright fees. Much of the world’s trade is subject to transfer pricing. It was estimated by the OECD in 2002 that around 60 per cent of world trade was undertaken on an intragroup basis, where transfer prices were charged.17 It is very likely, and openly speculated, that the proportion has risen since then.

This is just another aspect of the extraordinary series of circumstances (which includes tax haven secrecy) that provide massive opportunity for multinational groups of companies to exploit transfer pricing as a means of shifting profits to low-tax jurisdictions, in a process best described as transfer mispricing. The attraction of this activity is increased by the fact that the odds of being found to have participated in it are low. As the UK’s House of Commons Public Accounts Committee said of the big four accounting firms (PricewaterhouseCoopers, Deloitte, EY and KPMG) operating in the country in 2013: ‘They employ nearly 9,000 people just to provide tax advice to companies and wealthy individuals, much of which is aimed at minimising the tax paid. Between them they boast 250 transfer pricing specialists whereas HMRC has only 65 people working in this area.’18 It has been reported that the number of transfer-pricing specialists employed by HMRC has increased since then, but the odds remain stacked in favour of the companies undertaking such trades.

Switzerland could have reacted to French demands to stop this practice and provide it with the names of those who had partaken in it. Instead it chose to adopt banking secrecy laws to facilitate the trade.3 Deliberate intent can also be found in the design of the modern Irish corporate tax system which, until recently, combined low tax rates, lax residence rules and an equally relaxed approach to tax enforcement on issues such as transfer pricing. All this was done with the intention of making the country a popular location for companies looking to locate sales operations and inward investment activities in the European Union. By legislating in a way that undermined the tax laws of other countries, Ireland found a competitive advantage of which its location on the periphery of Europe had otherwise deprived it. The spread of tax haven activity throughout the UK’s Overseas Territories also did not happen by chance.


pages: 293 words: 78,439

Dual Transformation: How to Reposition Today's Business While Creating the Future by Scott D. Anthony, Mark W. Johnson

activist fund / activist shareholder / activist investor, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Amazon Web Services, autonomous vehicles, barriers to entry, Ben Horowitz, blockchain, business process, business process outsourcing, call centre, Clayton Christensen, cloud computing, commoditize, corporate governance, creative destruction, crowdsourcing, death of newspapers, disintermediation, disruptive innovation, distributed ledger, diversified portfolio, Internet of things, invention of hypertext, inventory management, Jeff Bezos, job automation, job satisfaction, Joseph Schumpeter, Kickstarter, late fees, Lean Startup, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, Minecraft, obamacare, Parag Khanna, Paul Graham, peer-to-peer lending, pez dispenser, recommendation engine, self-driving car, shareholder value, side project, Silicon Valley, Skype, software as a service, software is eating the world, Steve Jobs, the market place, the scientific method, Thomas Kuhn: the structure of scientific revolutions, transfer pricing, uber lyft, Watson beat the top human players on Jeopardy!, Y Combinator, Zipcar

Step 2: Determine Your Link Management Approach For each capability, use the next table to determine the approach you will follow to manage the link between the core and your new growth effort. Managing your capability links Enabling capability Link management approach Responsible leaders ❏ Transfer pricing ❏ Exchange team ❏ Formal rules ❏ _______________ ❏ Transfer pricing ❏ Exchange team ❏ Formal rules ❏ _______________ ❏ Transfer pricing ❏ Exchange team ❏ Formal rules ❏ _______________ ❏ Transfer pricing ❏ Exchange team ❏ Formal rules ❏ _______________ ❏ Transfer pricing ❏ Exchange team ❏ Formal rules ❏ _______________ Step 3: Identify How to Fill Capability Gaps Odds are that you don’t have all the capabilities you need to succeed with Transformation B. Ask the following questions to determine how to plug critical gaps.

In fact, when campus faculty got too involved in online course design and online pedagogy without proper training, the student experience frequently suffered. In summary, the deferential but firm exchange team leader validates what is uniquely strong in A, while not compromising the principles that led to a separate organization for B in the first place. Institute Transfer Pricing Basic economics holds that dropping prices raises demand, and raising prices lowers it. One reason companies, in our view, overborrow capabilities is that it appears to be costless. A simple answer to this challenge, then, is to institute what’s known as transfer pricing, wherein you essentially make a market in capabilities. The transformation B team wants to tap in to the HR team to create employee agreements? Then the borrower team pays for a fraction of the lender team’s time. The new growth group wants IT to modify a core system?

Systems—such as how you budget, how you allocate people between project teams, how you gather customer feedback, how you create products, and how you measure and reward people—are optimized to achieve specific outcomes. By definition, that means they’re not optimized to achieve different outcomes. Thus, a key to successfully managing the capabilities link is to develop distinct systems, create formal exchange teams, and institute transfer pricing to handle the challenge of the interface between A and B. Develop A and B Systems with Different Rules A portfolio management system is a popular way to manage an interface. A robust portfolio management system clearly outlines that projects that look like this get evaluated using one set of criteria and funded from one bucket, and ones that look like that get evaluated using a different set of criteria and are funded from a different bucket.


pages: 232 words: 70,361

The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay by Emmanuel Saez, Gabriel Zucman

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Berlin Wall, business cycle, Cass Sunstein, collective bargaining, corporate governance, Donald Trump, financial deregulation, income inequality, income per capita, informal economy, intangible asset, Jeff Bezos, labor-force participation, Lyft, Mark Zuckerberg, market fundamentalism, Mont Pelerin Society, mortgage debt, mortgage tax deduction, new economy, offshore financial centre, oil shock, patent troll, profit maximization, purchasing power parity, race to the bottom, rent-seeking, ride hailing / ride sharing, Ronald Reagan, shareholder value, Silicon Valley, single-payer health, Skype, Steve Jobs, The Wealth of Nations by Adam Smith, transfer pricing, trickle-down economics, uber lyft, very high income, We are the 99%

What’s the price of Google’s search and advertisement technology? Since these logos and trademarks and patents are never traded externally, firms can pick whatever price suits them. The product peddled by the tax-dodging industry is all-in: a creative intragroup transaction, and a certified “correct” transfer price to be charged for that transaction. In practice, the transfer prices used are typically those that maximize tax savings for the multinational group. The accountants that propose and certify these transfer prices are paid by the multinationals themselves. The outcome of all of this? Thanks to the proliferation of intragroup transactions conducted at doctored prices, high profits end up being recorded in subsidiaries where tax rates are low, and low profits in places where they are high. To see how this works in practice, it’s worth considering a few examples.

No enhanced data sources or special wisdom are needed to realize the dramatic decline in corporate tax rates. Beyond simply not knowing, there are less benign explanations for the choices that were made. First among these is successful lobbying by the tax-dodging complex. The transfer pricing industry lives by the system of corporate taxation created in the 1920s; it has a vital stake in preserving it. For example, if companies, instead of being taxed subsidiary by subsidiary, were taxed as consolidated entities, there would be no point in computing the prices of transactions between subsidiaries. The transfer pricing industry would become obsolete overnight. The stakes are huge: today, 250,000 people work as transfer pricing professionals in private firms, either in the Big Four or as direct employees of multinationals.3 It would be naïve to think that they are passive bystanders when it comes to the policies that condition the existence of their livelihoods.

They’ve sold multinationals the right to decide for themselves their rate of taxation, regulatory constraints, and legal obligations. Everything is negotiable. Apple asks for a low tax rate to locate some of its companies in Ireland? Dublin obliges. Skype is worried that the taxman might one day contest the price at which it sold its intellectual property to its Irish subsidiary? Not to worry, the Grand Duchy sells insurance, in the form of what are known as advanced pricing agreements—contracts that rubber-stamp the transfer prices used by multinationals ahead of time. No profit shifting would be possible without the complicity of tax havens’ governments, many of which boast high statutory tax rates, but in practice grant lower rates to the companies they court and provide them with an array of schemes to duck laws and regulations imposed elsewhere. Why do they do this? Because the commercialization of state sovereignty is, itself, quite profitable.


pages: 429 words: 120,332

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson

Asian financial crisis, asset-backed security, bank run, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, collapse of Lehman Brothers, computerized trading, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, Double Irish / Dutch Sandwich, failed state, financial deregulation, financial innovation, Fractional reserve banking, full employment, high net worth, income inequality, Kenneth Rogoff, laissez-faire capitalism, land reform, land value tax, light touch regulation, Long Term Capital Management, Martin Wolf, money market fund, New Journalism, Northern Rock, offshore financial centre, oil shock, old-boy network, out of africa, passive income, plutocrats, Plutocrats, Ponzi scheme, race to the bottom, regulatory arbitrage, reserve currency, Ronald Reagan, shareholder value, The Spirit Level, too big to fail, transfer pricing, Washington Consensus

And it is poor countries in particular, with their underpaid tax officials, that always lose out to multinationals’ aggressive, highly paid accountants. What Big Banana has done here is transfer pricing (or mispricing), a common offshore trick that U.S. Senator Carl Levin calls “the corporate equivalent of the secret offshore accounts of individual tax dodgers.” The general idea is that by adjusting its internal prices a multinational can shift profits offshore, where they pay little or no tax, and shift the costs onshore, where they are deducted against tax. In the banana example, tax revenue has been drained out of a poor country and into a tax haven and funneled through to the wealthy owners of a multinational corporation. In October 2010 a Bloomberg reporter explained how Google Inc. cut its taxes by $3.1 billion in the previous three years through transfer pricing games known by names such as the “Double Irish” and “Dutch Sandwich,” ending up with an overseas tax rate of 2.4 percent.7 The problem is getting worse.

The providers of offshore secrecy were clearly a central part of all these dramas—but the racket was very hard to penetrate, and nobody seemed very interested in trying. It was only in 2005 that the threads properly started to come together for me. I was sitting with David Spencer, a New York attorney previously with Citicorp, talking about transparency in the public finances of West African oil-producing nations. Spencer was getting agitated about matters that were not at all on my agenda: accounting rules, U.S. tax exemptions on interest income, and transfer pricing. I was wondering when he was going to start talking about West African corruption when I finally began to make a serious connection. The United States, by offering tax incentives and secrecy to lure money from overseas, had been turning itself into a tax haven. Tides of financial capital flow around the world in response to small changes in these kinds of tax and secrecy incentives. The U.S. government needs foreign funds to flow in, and it attracts them by offering tax-free treatment and secrecy.

In October 2010 a Bloomberg reporter explained how Google Inc. cut its taxes by $3.1 billion in the previous three years through transfer pricing games known by names such as the “Double Irish” and “Dutch Sandwich,” ending up with an overseas tax rate of 2.4 percent.7 The problem is getting worse. Microsoft’s tax bill has been falling sharply, for similar reasons. Cisco is at it.8 They are all at it. Transfer pricing alone cost the United States an estimated $60 billion a year9—and that is just one form of the offshore tax game. Worldly readers may still shrug and tell themselves that this is just part of the ugly flipside of living in a rich nation. If they do, in their reluctantly cynical way, they are suckers—for they are victims, too. The tax bill is cut not only in Honduras but in Britain and America too. The annual report of a real banana company listed in New York notes: “The company currently does not generate U.S. federal taxable income. The company’s taxable earnings are substantially from foreign operations being taxed in jurisdictions at a net effective rate lower than the U.S. statutory rate.”10 (Rough translation: We don’t currently pay U.S. taxes because we use tax havens.)


pages: 332 words: 106,197

The Divide: A Brief Guide to Global Inequality and Its Solutions by Jason Hickel

Andrei Shleifer, Asian financial crisis, Atahualpa, Bartolomé de las Casas, Bernie Sanders, Bob Geldof, Bretton Woods, British Empire, Cape to Cairo, capital controls, carbon footprint, clean water, collective bargaining, colonial rule, David Attenborough, David Graeber, David Ricardo: comparative advantage, declining real wages, dematerialisation, Doha Development Round, Elon Musk, European colonialism, falling living standards, financial deregulation, Fractional reserve banking, Francisco Pizarro, full employment, Hans Rosling, happiness index / gross national happiness, Howard Zinn, income inequality, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Watt: steam engine, laissez-faire capitalism, land reform, land value tax, liberal capitalism, Live Aid, Mahatma Gandhi, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, Nelson Mandela, offshore financial centre, oil shale / tar sands, out of africa, plutocrats, Plutocrats, purchasing power parity, race to the bottom, rent control, road to serfdom, Ronald Reagan, Scramble for Africa, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, structural adjustment programs, The Chicago School, The Spirit Level, trade route, transatlantic slave trade, transfer pricing, trickle-down economics, Washington Consensus, WikiLeaks, women in the workforce, Works Progress Administration

To understand how transfer mispricing works, we first have to understand normal transfer pricing. Transfer pricing happens when companies sell goods within their own corporate structure, for example if a subsidiary in China sells goods to another subsidiary in Britain. Because of the rapid expansion of corporate monopolies over the past few decades, today at least 60 per cent of world trade takes place within multinational corporations, rather than between them.17 So transfer pricing is not an exceptional practice – it is the norm. And under normal circumstances it is completely legal, as long as subsidiaries report the correct market prices of the goods in question as if they were conducting trade with an outside entity, ‘at arm’s length’. But quite often companies artificially distort transfer prices in order to evade taxes or dodge capital controls; this is when transfer pricing becomes transfer mispricing.

But quite often companies artificially distort transfer prices in order to evade taxes or dodge capital controls; this is when transfer pricing becomes transfer mispricing. Transfer mispricing is remarkably easy. All a company has to do is write out an invoice that falsely reports the cost of an item, and then get their trade partner to write out a similarly false invoice on the other side – in other words, ‘same-invoice faking’. Analysts have recorded some flagrant examples of this: a kilogram of toilet paper from China priced at $4,121, a litre of apple juice from Israel priced at $2,052, ball-point pens from Trinidad priced at $8,500 each.18 By inflating transfer prices, a company can magically move its money from subsidiaries in high-tax countries to subsidiaries in low-tax countries – often in tax havens. Because this practice is so difficult to detect, no one knows the full scale of the problem.

The GFI study cites $2.97 trillion in net outflows between 1980 and 2012 through recorded transfers (mostly driven by countries with large current account surpluses, like China), $6.6 trillion through capital flight through leakages in the balance of payments, and $6.8 trillion through trade misinvoicing in goods. They estimate that another $6.8 trillion was lost through ‘same-invoice faking’ or ‘abusive transfer pricing’ in goods. Including trade in services, trade misinvoicing and abusive transfer pricing rise to $8.5 trillion each. This makes for a total of about $26.5 trillion in net outflows since 1980. For more on GFI’s methodology, see Chapter 7 and accompanying notes. Note that GFI’s calculations of net resource transfers do not include inward capital flight. GFI holds that because capital flight into developing countries does not contribute to development, it cannot be compared with outward capital flight, which actively undermines development.


Financing Basic Income: Addressing the Cost Objection by Richard Pereira

banks create money, basic income, income inequality, job automation, Lyft, new economy, offshore financial centre, Paul Buchheit, quantitative easing, sovereign wealth fund, Tobin tax, transfer pricing, uber lyft, universal basic income, unpaid internship, Wall-E

A recent Statistics Canada report showed that a quarter of all Canadian direct investment abroad was going to countries that have been identified as tax havens. Barbados was the destination for $53 billion in 2011. (CPJ – Citizens for Public Justice 2012; Canadians for Tax Fairness n.d.) As concerns developing countries, tax havens facilitate transfer pricing, capital flight and corruption worth 10 times the value of aid received by these countries (CPJ 2012). In the UK one of numerous high-profile stories recently involved the American multinational company Starbucks repeatedly claiming annual financial losses despite making billions of pounds in profits. Transfer pricing allows such corporations to use offshore tax havens and other mechanisms to misprice transactions between companies in a group (Clinch 2012). The issue affects all countries and their ability to provide public goods, including UBI. If we take the $342 billion in total savings available from UBI implementation identified thus far ($132 billion in savings from Young and Mulvale’s net costing plus additional savings of $210 billion detailed in Subsection “First Response: Savings from Replacement of Existing Income Security Programmes”) and add the $80 billion in tax leakage from Canada to offshore tax havens each year, a large surplus is further built up by implementing the NIT version of UBI, as well as surpluses achieved by implementing the demogrant version of UBI as costed by multiple proposals in the cost objection.

The most significant item in this regard is offshore tax havens and the tax evasion and avoidance that occurs through them. Vast wealth is channelled away from public goods through these shady and secretive offshore jurisdictions, placing additional burdens on those in lower income brackets. Addressing this as a priority, before referring to any personal income tax increases, is a necessity as the existing system is not being honoured or enforced. Related issues of transfer pricing used as a mechanism to artificially lower profit figures, and therefore taxable income, by major corporations also needs to be addressed on the tax side before objecting to programme costs, even if the costs for UBI are THE COST OF UNIVERSAL BASIC INCOME: PUBLIC SAVINGS . . . 27 overestimated. Such issues deal directly with the existing tax system as it stands, and the priority is to ensure fair and progressive rates of taxation are actually collected under current rules before raising the scare of personal income tax increases.

Basically unaffordable, say most Canadians”, 11 August, 2016. See section “Stronger support for higher basic income thresholds”. Also, ARI found “Most Canadians (63%) believe . . . that new technology will reduce the availability of jobs, rather than increase it”. APPENDIX 2 TAX MARGINAL PERSONAL INCOME RATES: AMERICAN PRECEDENTS, VEILS OF IGNORANCE The UBI cost objection does not deal sufficiently with tax leakage (tax havens, transfer pricing, etc.) in the existing system at prevailing income tax rates, as discussed earlier in this book. The cost objection argument states that income tax increases on labour are required to fund basic income, and that they would be too onerous and politically unacceptable. Yet historical precedent does exist for higher personal (and corporate) income tax rates, including at over 90% for the top income bracket in the US in the 1950s – under a Republican political administration.


pages: 408 words: 108,985

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

Airbnb, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, hiring and firing, housing crisis, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, patent troll, pension reform, price mechanism, price stability, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, zero-sum game

Importantly, the Ireland-Apple case highlighted a broader reality of the global economy: multinational corporations operate within many countries, which raises the questions of how their profits should be apportioned among those countries. The traditional method of such allocation is called transfer pricing, a process in which companies are supposed to value the inputs they obtain from international parts of the company and the goods and services they deliver to other parts of the company at fair market prices (what are called arms-length prices, what prices would be if they were set by competitive, unrelated entities). The problem is that there is no way to ascertain the fair market value of most inputs. For example, what is the value of an unfinished car without an engine or wheels, or a shirt without buttons, sleeves, and a collar? Moreover, how do we value the contribution of intellectual property? Companies have found that the transfer price system gives them an almost entirely free hand to shift their profits to low-taxed jurisdictions.

Companies have found that the transfer price system gives them an almost entirely free hand to shift their profits to low-taxed jurisdictions. Occasionally, tax authorities dispute the transfer prices, but this process is long and expensive. Within the United States, where goods in the process of production move frequently across state borders, the transfer price system has long been abandoned. Instead, US states use what is called a formulaic system, in which the total profits of the firm are allocated based on the proportion of the capital, sales, and employment within the state. Europe has been moving toward change since the beginning of the 1990s.17 Without an adequate resolution, the location of production will be distorted, and the race to the bottom, in one form or another, will continue. The self-serving argument put forward by corporations, that low corporate tax rates result in higher growth that benefits all, is disputed in theory as well as in empirical research.18 Indeed, we have already explained why the corporate tax should not be expected to have any significant effect on investment.

See also competitive markets critical components summarized, 139 managerial incentive systems, 140–43 the right mix of decision-makers, 139–40 rules for decision-making, 139 compulsory licenses, 148 Consumer Prices, Harmonised Index of (HICP), 64 convergence criteria, 33–35 cooperative ownership, 270 cooperatives and local banking institutions, 184–86 core inflation metrics, 82 corporate governance central problem of, 127–28 CEOs and executives, 137–38, 140–43 long- vs. short-term gains, 136 stakeholder capitalism and, 136–37 corporate taxation investment and, 194–95 lower tax rates and, 191–92 moving toward resolution, 198–99 tax avoidance and evasion, 195–97 tax competition, 192–94, 195 transfer pricing and, 198 corporations and businesses. See also corporate governance; corporate taxation; small- and medium-sized enterprises CEO and executives of, 137–38, 1400–143 globalization benefitting, 288–89, 304 intellectual property rights benefitting, 325–26 markets of (see market economies; market power) organizational forms of, 141–43 tax reformation of, 318–20 trade regulations impacting, 317–18 trade talk privileges of, 314 credit card companies, 133 credit issues credit availability (see loans and lending) credit rating agencies, 171 German practices causing, 46 internal devaluation impacting, 42 macro-prudential regulations and, 92–93 crisis countries analysis of, 68 austerity impacting, 37 divergent issues of, 48–49 ineffective EU policies in, 60–61 internal devaluation and, 41–44 single currency system impacting, 39, 54 cross-border externalities, 307–8 deadly sovereign-bank embrace, 176 debt Debt Doctrine, 17–18 debt-to-GDP ratio, 78–79 limiting (see Stability and Growth Pact) mutualization of, 55–57 restructuring of, 57–58 2008 crisis impacting, 35 Debt Doctrine, 17–18 decentralized bargaining, 263 deficits.


pages: 497 words: 123,718

A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption by Steven Hiatt; John Perkins

addicted to oil, airline deregulation, Andrei Shleifer, Asian financial crisis, Berlin Wall, big-box store, Bob Geldof, Bretton Woods, British Empire, capital controls, centre right, clean water, colonial rule, corporate governance, corporate personhood, deglobalization, deindustrialization, Doha Development Round, energy security, European colonialism, financial deregulation, financial independence, full employment, global village, high net worth, land reform, large denomination, liberal capitalism, Long Term Capital Management, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, Naomi Klein, new economy, North Sea oil, offshore financial centre, oil shock, Ponzi scheme, race to the bottom, reserve currency, Ronald Reagan, Scramble for Africa, statistical model, structural adjustment programs, too big to fail, trade liberalization, transatlantic slave trade, transfer pricing, union organizing, Washington Consensus, working-age population, Yom Kippur War

Oiling the Wheels of Globalized Business: The Mechanisms of Tax Evasion Much of the tax evasion by corporations involved trade mispricing. Many of our clients were multinational businesses, which use tax havens to move profits away from higher-tax jurisdictions through what’s called transfer pricing: the process through which two or more businesses owned by the same people trade with each other. Technically speaking, transfer pricing is legal and necessary because the majority of world trade occurs between subsidiaries of the same company. In practice, however, the international conventions relating to transfer pricing are largely ineffective because there is no market price for goods traded between units of a multinational company. Businesses thus use their tax haven subsidiaries to overprice their imports and underprice their exports, thereby massively reducing their tax bill.

This research estimated the tax losses to the U.S. government between 1998 and 2001 at $175 billion from transfer mispricing alone.11 The consequences are proportionately greater for developing countries, because they lack sufficient resources to pursue lengthy investigations of secret offshore centers. Many African economies, for example, are dominated by multinational businesses operating in strategic sectors such as oil and gas, mining, commodities trading, and pharmaceuticals. Because their tax administrations are unable to investigate transfer pricing schemes, developing countries are unable to raise the money they need to fund their public services. One expert on African tax issues notes that no African country has ever successfully challenged a transfer pricing arrangement, even though such abuses are endemic across the continent. Some economists actually endorse this type of aggressive tax avoidance. Company directors, they argue, have a duty to minimize costs, including taxes. And by acting in this way they restrain high-tax/high-spend governments, forcing them to comply with the rigors of the market economy.

To lead the project, Witt hired Brian O’Connor, a former economist at BP and later an energy adviser to Britain’s Department for International Development. O’Connor had been petroleum tax adviser to ITIC since 2000, when he led a European Union project to reform Russia’s tax system. Although the EU project was publicly funded, ITIC had enthused in its newsletter, “The legislative areas to be addressed in this project will include many of the priorities identified by ITIC sponsors, including: transfer pricing, oil and gas taxation, VAT, and environmental taxation, and profits tax…. As the project moves forward, we will be regularly seeking input and guidance from our sponsors.”19 O’Connor and Witt formed an “expert group” of nine other economists to work on the Iraq project. Only one, Muhammad Ali Zainy, was Iraqi. He now works at the Centre for Global Energy Studies (CGES), a London-based think tank founded by former Saudi Oil Minister Sheikh Ahmad Zaki Yamani.


pages: 425 words: 122,223

Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein

"Robert Solow", Albert Einstein, asset allocation, backtesting, Benoit Mandelbrot, Black-Scholes formula, Bonfire of the Vanities, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, corporate raider, debt deflation, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, fixed income, full employment, implied volatility, index arbitrage, index fund, interest rate swap, invisible hand, John von Neumann, Joseph Schumpeter, Kenneth Arrow, law of one price, linear programming, Louis Bachelier, mandelbrot fractal, martingale, means of production, money market fund, Myron Scholes, new economy, New Journalism, Paul Samuelson, profit maximization, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, stochastic process, Thales and the olive presses, the market place, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, transfer pricing, zero-coupon bond, zero-sum game

Fred Weston, a distinguished professor on the UCLA faculty, had Sharpe taking one of his seminar courses and simultaneously teaching part of another of Weston’s courses on the basis of what had he had learned in the first. The work Sharpe was doing at RAND in 1960 was in an area known as transfer prices, the prices that one division of a corporation charges another division. When General Motors buys radios from its wholly owned subsidiary Delco to install in its automobiles, the price charged by Delco is a transfer price. And when Exxon moves crude oil from the well to the refinery, the refinery pays the drilling organization an appropriate transfer price. Without transfer prices, integrated corporations would never be able to arrive at a rational appraisal of the profitability of the assets they devote to their individual segments. Sharpe has happy memories of his days at RAND: “We operated under very loose instructions there—basically, we played around with ideas until we found one that could save the Air Force some money.

His next effort, “Aircraft Compartment Design Criteria for the Army Deployment Mission,” appeared in the Naval Research Logistics Quarterly, the same journal that had carried Markowitz’s “The Optimization of a Quadratic Function Subject to Linear Constraints” three years earlier. The article on the simplified model in Management Science was only the third time Sharpe had appeared in print. For reasons that he now finds difficult to reconstruct, Sharpe became fascinated by the subject of transfer pricing in 1960, so much so that he decided to write his Ph.D. thesis about it. After writing some 60 pages of what he thought was “earth-shattering stuff,” he showed his work to Jack Hirshleifer, a newly arrived economist to whom Sharpe had just been assigned.6 Hirshleifer came back to him a week later and declared flatly that there was absolutely no thesis there. Although Sharpe now admits that Hirshleifer’s rejection had a profound effect on the course of his career, he was shattered by the bad news.

See also Capital Asset Pricing Model; Random price fluctuations; specific types of securities arbitrage Black/Scholes formula of: see Black/Scholes formula earnings ratio efficient markets and future of growth stocks information and interest rates and intrinsic value and manipulation risk and security analysis and shadow transfer trends value differentiation zero downside limit on “Price Movements in Speculative Markets: Trends or Random Walks” (Alexander) “Pricing of Options and Corporate Liabilities, The” (Black/Scholes) Probability theory Procter & Gamble Profit maximization Program trading Prospective yield “Proposal for a Smog Tax, A” (Sharpe) Puts: see Options Railroads RAND Random Character of Stock Prices, The (Cootner) “Random Difference Series for Use in the Analysis of Time Series, A” (Working) Random price fluctuations/random walks selection of securities and “Random Walks in Stock Market Prices” (Fama) Rational Expectations Hypothesis “Rational Theory of Warrant Pricing” (Samuelson) Regulation of markets Return analysis: see Risk/return ratios Review of Economics and Statistics Review of Economic Studies, The “RHM Warrant and Low-Price Stock Survey, The” Risk arbitrage calculations diversification and dominant expected return and minimalization portfolio premium return ratios Rosenberg’s model stock prices and of stocks vs. bonds systematic (beta) trade-offs valuation of assets and “Risk and the Evaluation of Pension Fund Performance” (Fama) Risk-free assets Rosenberg Institutional Equity Management (RIEM) “Safety First and the Holding of Assets” (Roy) Samsonite Savings rates Scott Paper Securities analysis Securities and Exchange Commission Security Analysis (Graham/Dodd) Security selection Separation Theorem Shadow prices “Simplified Model for Portfolio Analysis, A” (Sharpe) Singer Manufacturing Company Single-index model Sloan School of Management Standard & Poor’s 500 index “State of the Art in Our Profession, The” (Vertin) Stock(s) cash ratios common expected return on growth income international legal restrictions on market value variance volatility Stock market (general discussion) Black Monday (October, 1987, crash) “Stock Market ‘Patterns’ and Financial Analysis” (Roberts) Supply and demand theory Swaps Tactical asset allocation theory Tampax Taxes. See also Capital gains tax Texas Instruments “Theoretical Valuation Formula for Options, Warrants, and Other Securities, A” (Black/Scholes) Theory of Interest, The (I. Fisher) Theory of Investment Value, The (Williams) Ticker tape Time analysis Tokyo Stock Exchange “Toward a Theory of Market Value of Risky Assets” (Treynor) Transaction costs. See also Brokerage commissions Transfer pricing Transportation Average Treasury bills/bonds Trends in stock movements, predictive model “Trouble With Earnings, The” (Treynor) Trust management Trusts, personal UCLA Union Carbide United Air Lines (UAL) University of Chicago. See also Center for Research in Security Prices (CRSP) U.S. Steel Utilities Average Utility function Valuation. See also Price/value differentiation bond vs. stock corporate intrinsic market option risk and “Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets” (Lintner) Value Line Investment Survey Variance/variability Volatility of assets Wall Street Journal, The Warrants expected return on pricing/valuation of Warsaw Stock Exchange Wealth of Nations, The (Smith) Wells Fargo Bank client reports investment strategy Management Sciences Group pension fund Stagecoach Fund trust activities Wells Fargo Investment Advisors (WFIA) Wells Fargo-Nikko investment Advisors Xerox Corporation Yak University “Yes, Virginia, There Is Hope” (Black) Zero downside limit on stock prices


pages: 334 words: 98,950

Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang

affirmative action, Albert Einstein, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, business cycle, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, land reform, liberal world order, liberation theology, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, mega-rich, moral hazard, Nelson Mandela, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

, Finance and Development, vol.. 28, no. 2. 22 In addition, with the increasing importance of collective investment funds that I discussed previously (note 5), there is also shortening of time horizons for FDI, which makes such ‘liquidizing’ of FDI more likely. 23 These include local content requirements (where TNCs are required to buy more than a certain share of inputs from local producers), export requirements (where they are forced to export more than a certain proportion of their output) and foreign exchange balancing requirements (where they are required to export at least as much as they import). 24 Christian Aid (2005), ‘The Shirts off Their Backs – How Tax Policies Fleece the Poor’, September 2005. 25 Kose et al. (2006), pp. 29. 26 Moreover, brownfield investment can magnify the negative impact of transfer pricing. If a TNC that has bought up, rather than newly created, a company is practising transfer pricing, the firm that has now become a TNC subsidiary could be paying less tax than it used to when it was a domestic firm. 27 The data are from UNCTAD (United Nations Conference on Trade and Development). 28 Especially when it comes to FDI by collective investment funds (see notes 5 and 22), this may be the sensible strategy, as they do not have the industry-specific knowhow to improve the productive capabilities of the firms they buy up. 29 R.

Of course, it can (but may not) also generate additional foreign currency through exporting, but whether it will earn more foreign exchange than it uses is not a foregone conclusion. This is why many countries have imposed controls on the foreign exchange earnings and spending by the foreign companies making the investment (e.g., how much they should export, how much inputs they have to buy locally).23 Another drawback with foreign direct investment is that it creates the opportunity for ‘transfer pricing’ by transnational corporations (TNCs) with operations in more than one country. This refers to the practice where the subsidiaries of a TNC are overcharging or undercharging each other so that profits are highest in those subsidiaries operating in countries with the lowest corporate tax rates. And when I say overcharging or undercharging, I really mean it. A Christian Aid report documents cases of underpriced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528, and overpriced imports such as German hacksaw blades at $5, 485 each, Japanese tweezers at $4, 896, and French wrenches at $1, 089.24 This is a classic problem with TNCs, but today the problem has become more severe because of the proliferation of tax havens that have no or minimal corporate income taxes.Companies can vastly reduce their tax obligations by shifting most of their profits to a paper company registered in a tax haven.

A Christian Aid report documents cases of underpriced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528, and overpriced imports such as German hacksaw blades at $5, 485 each, Japanese tweezers at $4, 896, and French wrenches at $1, 089.24 This is a classic problem with TNCs, but today the problem has become more severe because of the proliferation of tax havens that have no or minimal corporate income taxes.Companies can vastly reduce their tax obligations by shifting most of their profits to a paper company registered in a tax haven. It may be argued that the host country should not complain about transfer pricing, because, without the foreign direct investment in question, the taxable income would not have been generated in the first place. But this is a disingenuous argument. All firms need to use productive resources provided by government with taxpayers’ money (e.g., roads, the telecommunications network, workers who have received publicly funded education and training). So, if the TNC subsidiary is not paying its ‘fair share’ of tax, it is effectively free-riding on the host country.


pages: 347 words: 99,317

Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity by Ha-Joon Chang

affirmative action, Albert Einstein, banking crisis, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, business cycle, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, land reform, liberal world order, liberation theology, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, mega-rich, moral hazard, Nelson Mandela, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

, Finance and Development, vol.. 28, no. 2. 22 In addition, with the increasing importance of collective investment funds that I discussed previously (note 5), there is also shortening of time horizons for FDI, which makes such ‘liquidizing’ of FDI more likely. 23 These include local content requirements (where TNCs are required to buy more than a certain share of inputs from local producers), export requirements (where they are forced to export more than a certain proportion of their output) and foreign exchange balancing requirements (where they are required to export at least as much as they import). 24 Christian Aid (2005), ‘The Shirts off Their Backs – How Tax Policies Fleece the Poor’, September 2005. 25 Kose et al. (2006), pp. 29. 26 Moreover, brownfield investment can magnify the negative impact of transfer pricing. If a TNC that has bought up, rather than newly created, a company is practising transfer pricing, the firm that has now become a TNC subsidiary could be paying less tax than it used to when it was a domestic firm. 27 The data are from UNCTAD (United Nations Conference on Trade and Development). 28 Especially when it comes to FDI by collective investment funds (see notes 5 and 22), this may be the sensible strategy, as they do not have the industry-specific knowhow to improve the productive capabilities of the firms they buy up. 29 R.

Of course, it can (but may not) also generate additional foreign currency through exporting, but whether it will earn more foreign exchange than it uses is not a foregone conclusion. This is why many countries have imposed controls on the foreign exchange earnings and spending by the foreign companies making the investment (e.g., how much they should export, how much inputs they have to buy locally).23 Another drawback with foreign direct investment is that it creates the opportunity for ‘transfer pricing’ by transnational corporations (TNCs) with operations in more than one country. This refers to the practice where the subsidiaries of a TNC are overcharging or undercharging each other so that profits are highest in those subsidiaries operating in countries with the lowest corporate tax rates. And when I say overcharging or undercharging, I really mean it. A Christian Aid report documents cases of underpriced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528, and overpriced imports such as German hacksaw blades at $5,485 each, Japanese tweezers at $4,896, and French wrenches at $1,089.24 This is a classic problem with TNCs, but today the problem has become more severe because of the proliferation of tax havens that have no or minimal corporate income taxes.

A Christian Aid report documents cases of underpriced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528, and overpriced imports such as German hacksaw blades at $5,485 each, Japanese tweezers at $4,896, and French wrenches at $1,089.24 This is a classic problem with TNCs, but today the problem has become more severe because of the proliferation of tax havens that have no or minimal corporate income taxes. Companies can vastly reduce their tax obligations by shifting most of their profits to a paper company registered in a tax haven. It may be argued that the host country should not complain about transfer pricing, because, without the foreign direct investment in question, the taxable income would not have been generated in the first place. But this is a disingenuous argument. All firms need to use productive resources provided by government with taxpayers’ money (e.g., roads, the telecommunications network, workers who have received publicly funded education and training). So, if the TNC subsidiary is not paying its ‘fair share’ of tax, it is effectively free-riding on the host country.


pages: 354 words: 105,322

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis by James Rickards

"Robert Solow", Affordable Care Act / Obamacare, Albert Einstein, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bayesian statistics, Ben Bernanke: helicopter money, Benoit Mandelbrot, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Black Swan, blockchain, Bonfire of the Vanities, Bretton Woods, British Empire, business cycle, butterfly effect, buy and hold, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, cellular automata, cognitive bias, cognitive dissonance, complexity theory, Corn Laws, corporate governance, creative destruction, Credit Default Swap, cuban missile crisis, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, disintermediation, distributed ledger, diversification, diversified portfolio, Edward Lorenz: Chaos theory, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, fiat currency, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, Fractional reserve banking, G4S, George Akerlof, global reserve currency, high net worth, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Isaac Newton, jitney, John Meriwether, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, mutually assured destruction, Myron Scholes, Naomi Klein, nuclear winter, obamacare, offshore financial centre, Paul Samuelson, Peace of Westphalia, Pierre-Simon Laplace, plutocrats, Plutocrats, prediction markets, price anchoring, price stability, quantitative easing, RAND corporation, random walk, reserve currency, RFID, risk-adjusted returns, Ronald Reagan, Silicon Valley, sovereign wealth fund, special drawing rights, stocks for the long run, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transfer pricing, value at risk, Washington Consensus, Westphalian system

Still, corporate capacity to corrupt a country through lobbying is sufficient in the short run to fend off state power. In a decentralized system of high-tax developed countries and low-tax haven countries, global corporations easily find ways to avoid taxation. Standard techniques include the transfer of intellectual property like patents and software to tax havens. Once there, intellectual property earns royalties without paying tax to the new host nation. Another technique is transfer pricing. Corporations in high-tax nations pay inflated costs to their affiliates in low-tax nations. This shifts income to the low-tax nation and creates tax deductions in the high-tax nation. Other more sophisticated techniques include netting centers in high-tax countries where global purchases and sales are booked. Profit and loss from these activities nets out close to zero, which means no tax is due to the host country.

Tax deferral is as powerful as low rates because the real value of money declines in inflation. Deferring a tax liability for ten years reduces the real cost radically by the time the tax is paid. Derivatives, not clearly addressed in tax treaties, are added to the mix to blow smoke in the eyes of tax authorities. Lobbyists are employed in the main developed countries to ensure that the rules remain unchanged. Weighing all of the above—property shifting, transfer pricing, netting, tax treaties, leasing, conversion, deferral, and derivatives—it is no surprise that corporate tax collection by individual nations is a sieve. Corporate cash flows through the sieve to the bottom line. Countries are left empty-handed. Policy elites in the United States, Germany, the United Kingdom, and Japan are well aware of these techniques. These elites attended the same law schools and finance programs as the corporate advisers.

The shark may look fearsome after release, yet authorities always know where to find it. The world tax database will be available to all participants in the system including the G20 nations. The database would be housed on high-capacity computers using sophisticated algorithms and predictive analytics. Like the shark, companies could run, but no longer hide. Once the computers have identified tax games, the G20 will get to work with legal assaults. Transfer prices, asset moves, leases, and tax treaty structures will be challenged using broad antiavoidance statutes. A tax haven that stands in the way will find its international banking connections shut down. This happened to Belize in 2015. International banks were forced by the U.S. Treasury to cut off correspondent relations with Belizean banks. This G20 garrote choked Belizean financial oxygen; its economy crumbled.


pages: 413 words: 119,379

The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth by Tom Burgis

Airbus A320, Berlin Wall, blood diamonds, BRICs, British Empire, central bank independence, clean water, colonial rule, corporate social responsibility, crony capitalism, Deng Xiaoping, Donald Trump, F. W. de Klerk, Gini coefficient, Livingstone, I presume, McMansion, megacity, Nelson Mandela, offshore financial centre, oil shock, open economy, purchasing power parity, rolodex, Ronald Reagan, Silicon Valley, South China Sea, sovereign wealth fund, structural adjustment programs, trade route, transfer pricing, upwardly mobile, urban planning, Washington Consensus, WikiLeaks, zero-sum game

All this happens within one company and bears scant relation to the actual costs involved. The result is that the group’s overall effective tax rate is much lower than it would have been had it apportioned profits fairly. Many such tax manoeuvres are perfectly legal. When it is done ethically ‘transfer pricing’, as the technique in this example is known, uses the same prices when selling goods and services within one company as when selling between companies at market rates. But the ruses to fiddle transfer pricing are legion. A mining company might tweak the value of machinery it ships in from abroad, or an oil company might charge a subsidiary a fortune to use the parent’s corporate logo. Suppose Fowl Play gets even cannier. It creates another subsidiary, this time in the British Virgin Islands, one of the tax havens where the rate of corporation tax is zero.

(The BVI company is only a piece of paper and doesn’t employ anyone, but then there is no need to threaten the British Virgin Islands – its tax rate could not be lower.) Numerous studies have concluded that, although such tax dodging is a problem, no one knows the scale of it, particularly in poor countries, where reliable data are scarce.30 The Organisation for Economic Co-operation and Development, the club of the world’s richest nations, acknowledged in 2013 that ‘multinationals have been able to use and/or misapply’ the rules that govern transfer pricing ‘to separate income from the economic activities that produce that income and to shift it into low-tax environments’.31 Noting that ‘tax policy is at the core of countries’ sovereignty’, the OECD called for ‘fundamental changes’ to the ways in which multinationals are taxed. If multinational companies were genuinely declaring profits where they were made, one might expect a broad correlation between the size of the profit and the size of the economy.

., 233 Steinmetz, Beny Guinea minerals and, 108, 110, 113, 123, 124, 125, 126–127, 128, 143, 228, 244 wealth/minerals (overview), 105–106, 228 See also BSGR Stiglitz, Joseph, 4 Sudan, 136, 147, 154 Sule, Yusuf Maitama, 179–181 Sunmonu, Mutiu, 193–194, 195–196, 207–208 Survival of the fattest, 74, 190 Susa, Anna Rebecca/family, 46–47 Sussman, Robert, 33, 34 Sylva, Timipre, 189–190 Takatoshi Kato, 173 Tandja, Mamadou coup against, 133, 137–138, 141–142 Ousmane (son), 141 as president/corruption, 131–133, 135, 137–138, 139–140, 141–142 Tantalum, 29–30, 34, 42, 45 Tantalus (Greek mythology), 29–30, 34 Tanzania, 31, 165 Taxation and representation relationship, 73 Taylor, Charles, 225 Tegera, Aloys, 59 Thiam, Mahmoud Guinea and, 112–115, 117, 118–120, 121–122, 124, 125, 128, 190, 243–244 Queensway Group individuals/tactics and, 83, 90, 146–147, 190 Tompolo, 177 Total, 2, 11, 94, 136, 139, 142–143, 145 Toumba. See Diakité, Aboubacar Touré, Mamadie with Cilins in Florida, 103–105, 109, 125–126, 127 Guinea’s minerals and, 103–105, 109, 110, 124, 125–126, 127 Transfer pricing, 166 Transparency International, 17 Trendfield company, 140–141, 144 Trump, Donald, 246 Tsvangirai, Morgan, 219, 223, 237 Turner, Bill, 39–40 Tutsi/Hutu conflict and aftermath, 30–31, 32, 40–41, 43–44, 45–46, 55, 56 Tutu, Desmond, Archbishop, 66 Uba, Andy, 77, 193 Ukraine, 147, 242 Umunna, Hillary, 64–65 Vale mining and Guinea, 104, 108, 123–124, 128, 129–130 Varma, Somit, 163–164 Vicente, Manuel background, 10–11, 19 business empire, 23, 99 China Sonangol/Queensway Group and, 26, 94, 95, 96–97, 98, 100, 114, 119 Futungo and, 10–11, 12, 97, 111 oil and, 11, 12, 14, 16, 17, 18–19, 25, 26, 94, 95, 96–97, 98, 100, 114, 119 poverty in Angola and, 20, 208 Vines, Alex, 100 ‘VIP’ (‘Vagabond in Power’/Nneka), 246–247 Voser, Peter, 194 ‘Vultures’ (Achebe), 208 Wang Xiangfei, 90–91, 92–93 Wase, Abdullahi, 182 Washington Consensus, 163, 171 Wolfensohn, James, 157, 171 Wolfowitz, Paul, 170 World Bank Africa/African countries and, 57–58, 65, 136, 151–152, 163–164 BRICS nations vs., 218 China credit vs., 137, 170, 171 criticism of, 3, 151–152, 157–159, 160, 161, 164, 170, 171 description/staff, 169–170 ‘extreme poverty’/poor countries, 4 IFC and, 153, 154, 156 Miga and, 158–161 reputation/influence, 169–170 role/methods, 144, 151, 153, 154, 157, 165, 170 Salim’s criticism/recommendations, 157–159, 160, 161, 164, 170, 171 structural adjustment programmes, 162–163, 171 See also International Finance Corporation (IFC) World Trade Organization (WTO), 81, 157, 239 Wu Yang, 93, 98, 101–102, 145, 193 Xi Jinping, 23 Xia Huang, 134–135, 148, 149 Xueming Li (pseudonym), 91 Yar’Adua, Umaru health problems/death, 72, 73, 77, 78, 79, 183–184, 189, 201, 202, 203 as Katsina governor, 68 presidential campaign/as president, 69, 72, 77–78, 179, 202 Zambia, 4, 34, 56, 163, 165, 225 Zeng Peiyan, 86–87, 94, 99 Zibi, Songezo, 217 Zimbabwe diamonds/effects, 220–223, 226, 235–236 ‘indigenization’ of mining industry/corruption, 230–232 Marange massacre/Operation No Return, 220–221, 222, 226, 235, 236 minerals (overview), 231 Mugabe’s security forces/CIO, 223, 226, 234–236, 237, 243 Pa/Queensway Group and, 223, 230, 234, 235–236, 237–238, 243 See also specific companies/organizations; specific individuals Ziv, Israel, 117 Zuks, Nik, 143–144 Zuma, Jacob, 217–218 About the Publisher Australia HarperCollins Publishers (Australia) Pty.


pages: 482 words: 149,351

The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson

activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, anti-communist, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, failed state, falling living standards, family office, financial deregulation, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global supply chain, high net worth, income inequality, index fund, invisible hand, Jeff Bezos, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, price mechanism, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, The Chicago School, Thorstein Veblen, too big to fail, transfer pricing, wealth creators, white picket fence, women in the workforce, zero-sum game

You take your money or your business elsewhere – offshore – to escape the rules and laws at home that you don’t like. These laws may involve taxes, disclosure, financial or labour regulations, shipping requirements or whatever, so ‘tax haven’ is a misnomer; these places are about so much more than tax. But let’s take tax, and a classic tax haven trick which began to emerge in Veblen’s day called transfer pricing. Imagine it costs a multinational $1000 to produce a container of bananas in Ecuador, and a supermarket in Wales will buy that container for $3000. Somewhere in this system lies $2000 profit. The question is: who gets to tax that profit? The multinational now sets up three subsidiaries: EcuadorCo, which produces the bananas, WalesCo, which sells the bananas to the supermarket, and a third shell company with no employees, PanamaCo, in a tax haven.

But they have become blanket licences to profiteer and now often stifle innovation. The song ‘Happy Birthday’, originally created by a US kindergarten teacher in 1893, was under copyright until a judge overturned it in 2016 after a long legal battle. Until then you were supposed to pay the copyright holders royalties every time you sang it in public.24 And patents are often combined with other wealth-extraction techniques. Remember those transfer pricing games I described in Chapter 1, where the banana company shifted all its profits from Ecuador and Wales into a tax haven? Multinationals also shovel bucketloads of patents into shell companies in tax havens, not just slashing their tax bills, but also turbocharging the incentives to keep prices high. American biopharmaceutical company Gilead’s hepatitis-C drug Sovaldi, for instance, which is priced at $84,000 in the US and £35,000 in the UK for a twelve-week treatment versus a manufacturing cost as low as $68, has been parked in the corporate tax haven of Ireland.

See ‘Offshore profit shifting and the U.S. tax code – Part 2 (Apple Inc.)’, US Senate Permanent Subcommittee on Investigations, 21 May 2013. The loopholes ensure that only a tiny portion of a company’s profits get taxed at that 12.5 per cent rate; the rest is kept outside the tax system completely. The tax loopholes were to a large degree a question of historical omission: Ireland did not adopt significant transfer pricing legislation to combat such abuses until 2010, long after other Western countries had enacted them. 17. As Peter Sutherland put it, ‘The Italians, the French – a lot of the European countries – used every conceivable barrier to stop goods being exported into their dometic markets, even from other EU countries. It was the 1992 project that really changed this.’ See Peter Sutherland interview in Paul Sweeney, Ireland’s Economic Success: Reasons and Lessons, New Island, 2008, pp.17 and 19. 18.


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Nelson Mandela, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

A 2005 report by Christian Aid, the development charity, documents cases of under-priced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528 and over-priced imports such as German hacksaw blades at $5,485 each, Japanese tweezers at $4,896 and French wrenches at $1,089.17 The Starbucks and Google cases were different from those examples only in that they mainly involved ‘intangible assets’, such as brand licensing fees, patent royalties, interest charges on loans and in-house consultancy (e.g., coffee quality testing, store design), but the principle involved was the same. When TNCs evade taxes through transfer pricing, they use but do not pay for the collective productive inputs financed by tax revenue, such as infrastructure, education and R&D. This means that the host economy is effectively subsidizing TNCs. There are also other potentially negative effects of FDI for the host economy Transfer pricing is only one of the possible negative effects of FDI, especially when it comes to FDI into developing countries. Another one is that TNC subsidiaries may ‘crowd out’ local firms (in their own industry and in other industries) in the credit market.

* These companies minimized their tax obligations in countries like Britain by inflating the costs for their British subsidiaries by having their subsidiaries in third countries ‘over-charge’ (that is, charge more than what they would have in open markets) the British subsidiaries for their services. These third countries were countries with a corporate tax rate that is lower than the UK rate (e.g., Ireland, Switzerland or the Netherlands) or even tax havens, namely, countries that attract foreign companies to set up ‘paper companies’ by charging very low, or even no, corporate taxes (e.g., Bermuda, the Bahamas).16 The age-old trick of transfer pricing Taking advantage of the fact that they operate in countries with different tax rates, TNCs have their subsidiaries over-charge or under-charge each other – sometimes grossly – so that profits are highest in those subsidiaries operating in countries with the lowest corporate tax rates. In this way, their global post-tax profit is maximized. A 2005 report by Christian Aid, the development charity, documents cases of under-priced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528 and over-priced imports such as German hacksaw blades at $5,485 each, Japanese tweezers at $4,896 and French wrenches at $1,089.17 The Starbucks and Google cases were different from those examples only in that they mainly involved ‘intangible assets’, such as brand licensing fees, patent royalties, interest charges on loans and in-house consultancy (e.g., coffee quality testing, store design), but the principle involved was the same.


pages: 272 words: 64,626

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs by Andy Kessler

23andMe, Andy Kessler, bank run, barriers to entry, Berlin Wall, Bob Noyce, British Empire, business cycle, business process, California gold rush, carbon footprint, Cass Sunstein, cloud computing, collateralized debt obligation, collective bargaining, commoditize, computer age, creative destruction, disintermediation, Douglas Engelbart, Eugene Fama: efficient market hypothesis, fiat currency, Firefox, Fractional reserve banking, George Gilder, Gordon Gekko, greed is good, income inequality, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, Joseph Schumpeter, Kickstarter, knowledge economy, knowledge worker, libertarian paternalism, low skilled workers, Mark Zuckerberg, McMansion, Netflix Prize, packet switching, personalized medicine, pets.com, prediction markets, pre–internet, profit motive, race to the bottom, Richard Thaler, risk tolerance, risk-adjusted returns, Silicon Valley, six sigma, Skype, social graph, Steve Jobs, The Wealth of Nations by Adam Smith, transcontinental railway, transfer pricing, wealth creators, Yogi Berra

The British Empire colonized much of the world to lock up the supply of raw materials (to feed their factories, and keep them out of French and German hands). But the reason a horizontal structure is the most efficient is twofold: price and pace. Prices are set by the marketplace. IBM was segmented in divisions that were supposedly independent, but one group would “sell” their output to the next at some phony transfer price, showing a “profit.” Every division might show a profit, but the company itself would still lose money because, in the real world, someone else sold the product more cheaply, which meant that competitors could get the same thing done for a lot less (and pass the savings along in the form of lower prices). I saw this when I worked at AT&T. We used to design and sell modem chips to Western Electric for $30, about three times what it cost us to make—a tidy “profit.”

Have enough information, some definition of profit, so that everything can trade. Your little minimarkets will allocate resources better than any other method. It could be internal prices or external prices with your customers. The price will be set by more than one person, the masses out at the edge, and therefore will be more reflective of actual profits—however profits are actually defined—than one person sitting in a room making up the “price.” It could be a transfer price between divisions, the price to use a conference room during peak hours, whatever. eBay made an entire business out of price discovery and then closing the financial part of the transaction. Not always an efficient market, but it was better than going to garage sales and estate markets trying to figure out the right price. Sadly, eBay didn’t create a market for their own fees—raising them instead of lowering them—and stopped growing.


pages: 233 words: 71,775

The Joy of Tax by Richard Murphy

banking crisis, banks create money, carried interest, correlation does not imply causation, en.wikipedia.org, failed state, full employment, Gini coefficient, high net worth, land value tax, means of production, offshore financial centre, quantitative easing, race to the bottom, savings glut, seigniorage, The Spirit Level, The Wealth of Nations by Adam Smith, transfer pricing

App. 100, per Lord Cairns at page 122 8 http://www.hmrc.gov.uk/avoidance/gaar.htm 9 https://www.gov.uk/government/organisations/hm-revenue-customs/groups/hmrc-board 10 http://www.internationaltaxreview.com/Article/3201047/KPMG-Treasury-secondee-behind-UK-patent-box-hits-back-at-PAC-criticisms.html 11 http://www.publications.parliament.uk/pa/ld201415/ldhansrd/text/140716-0002.htm#1407172000119 12 http://www.standard.co.uk/comment/simon-jenkins-if-the-scots-can-get-taxraising-powers-so-should-london-9720747.html 13 http://www.thebureauinvestigates.com/2012/07/10/how-big-four-get-inside-track-by-loaning-staff-to-government 14 http://visar.csustan.edu/aaba/ProposedAccstd.pdf. I first created country-by-country reporting in 2003. 15 http://www.oecd-ilibrary.org/taxation/guidance-on-transfer-pricing-documentation-and-country-by-country-reporting_9789264219236-en 16 http://www.taxresearch.org.uk/Documents/CRDivCBCR2015.pdf 17 http://uncounted.org/2015/06/15/the-politics-of-country-by-country-reporting Chapter 6: The underpinnings of a good tax system 1 Adam Smith, The Wealth of Nations, 1776, Book V, Chapter II, Part II. Extract downloaded from http://www.bibliomania.com/2/1/65/112/frameset.html 4 December 2006 2 It should be noted that these four terms are also the titles of what are called the Quaker Testimonies.

Ruane, ‘The UK Tax Burden: Can Labour be called the “party of fairness”?’, 2008, Compass Thinkpiece. 10 https://www.atkearney.com/financial-institutions/featured-article/-/asset_publisher/j8IucAqMqEhB/content/the-shadow-economy-in-europe-2013/10192 11 http://www.americansfortaxfairness.org/files/TheWalmartWeb-June-2015-FINAL.pdf 12 http://visar.csustan.edu/aaba/ProposedAccstd.pdf 13 http://www.oecd.org/tax/guidance-on-transfer-pricing-documentation-and-country-by-country-reporting-9789264219236-en.htm 14 http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/history/taxhis1.htm accessed 26 November 2014 15 http://services.parliament.uk/bills/2012-13/generalantitaxavoidanceprinciple.html accessed 27 November 2014 Chapter 7: The policy decisions tax must impact 1 Male life expectancy at birth in 1945 was just 62.7 years, with women expecting 67.9 years of life. http://www.ons.gov.uk/ons/rel/social-trends-rd/social-trends/social-trends-41/health-data.xls.


pages: 476 words: 125,219

Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy by Robert W. McChesney

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, Albert Einstein, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, Automated Insights, barriers to entry, Berlin Wall, business cycle, Cass Sunstein, citizen journalism, cloud computing, collaborative consumption, collective bargaining, creative destruction, crony capitalism, David Brooks, death of newspapers, declining real wages, Double Irish / Dutch Sandwich, Erik Brynjolfsson, failed state, Filter Bubble, full employment, future of journalism, George Gilder, Gini coefficient, Google Earth, income inequality, informal economy, intangible asset, invention of agriculture, invisible hand, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Julian Assange, Kickstarter, Mark Zuckerberg, Marshall McLuhan, means of production, Metcalfe’s law, mutually assured destruction, national security letter, Nelson Mandela, Network effects, new economy, New Journalism, Nicholas Carr, Occupy movement, offshore financial centre, patent troll, Peter Thiel, plutocrats, Plutocrats, post scarcity, price mechanism, profit maximization, profit motive, QWERTY keyboard, Ralph Nader, Richard Stallman, road to serfdom, Robert Metcalfe, Saturday Night Live, sentiment analysis, Silicon Valley, single-payer health, Skype, spectrum auction, Steve Jobs, Steve Wozniak, Steven Levy, Steven Pinker, Stewart Brand, Telecommunications Act of 1996, the medium is the message, The Spirit Level, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, Upton Sinclair, WikiLeaks, winner-take-all economy, yellow journalism

There is a reason most people no longer accept that sort of sovereignty.”93 One test for how effective the U.S. government can be in regulating the digital giants will be the matter of taxation.94 Because of the fluid nature of the digital economy, Internet firms have been able to take advantage of the federal income tax code, devised for brick-and-mortar businesses, to move a disproportionate amount of their profits earned in the United States to accounts in foreign low-tax nations and dramatically reduce what they pay in taxes overall, in particular to the U.S. government. Nicholas Shaxson describes aspects of the process in his 2011 book, Treasure Islands: In October 2010 a Bloomberg reporter explained how Google Inc. cut its taxes by $3.1 billion in the previous three years through transfer pricing games known by names such as the “Double Irish” and the “Dutch Sandwich,” ending up with an overseas tax rate of 2.4 percent. The problem is getting worse. Microsoft’s tax bill has been falling sharply, for similar reasons. Cisco is at it. They are all at it. Transfer pricing alone costs the United States an estimated $60 billion a year—and that is just one form of the offshore tax game.95 Apple, for example, has pioneered sophisticated accounting techniques that—although probably technically legal—are extraordinarily damaging to U.S. tax revenues.

See wiretapping television, 69, 110, 120, 128–29, 139, 140 television commercials, 43, 123, 128, 148 television news, 173, 176, 181, 183 terrorism, “war on.” See antiterrorism Texas, 110 Thiel, Peter, 29, 141, 142, 143 thinking, 11–12, 70 third-party Internet advertising, 156 This American Life, 192 Time Warner, 120, 123–24 Timpone, Brian, 192 Tobaccowala, Rishad, 155 Tocqueville, Alexis de: Democracy in America, 205 Torvalds, Linus, 103 transfer pricing, 145 Trans-Pacific Partnership treaty, 125 Treasure Islands (Shaxson), 144–45 Tribune Company, 192 Trilateral Commission, 59 Tunis, 163 Turkle, Sherry, 11 Turner, Derek, 106 Turner, Ted, 28 Turner Broadcasting v. FCC, 205 Turow, Joseph, 128, 146–47, 149, 152, 158, 188 Twitter, 137, 153, 165, 167, 179, 188 two-party system, 60 underemployment and unemployment, 47, 221, 225 unethical practices.


pages: 555 words: 80,635

Open: The Progressive Case for Free Trade, Immigration, and Global Capital by Kimberly Clausing

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, active measures, Affordable Care Act / Obamacare, agricultural Revolution, battle of ideas, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, corporate social responsibility, creative destruction, currency manipulation / currency intervention, David Ricardo: comparative advantage, Donald Trump, floating exchange rates, full employment, gig economy, global supply chain, global value chain, guest worker program, illegal immigration, immigration reform, income inequality, index fund, investor state dispute settlement, knowledge worker, labor-force participation, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, meta analysis, meta-analysis, offshore financial centre, open economy, Paul Samuelson, profit motive, purchasing power parity, race to the bottom, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transfer pricing, uber lyft, winner-take-all economy, working-age population, zero-sum game

In 2014, Bermudan GDP was $5.9 billion, implying an implausibly high GDP per capita of about $91,500. 26. While law requires companies to price such transactions as if they were occurring at “arm’s length” with unrelated entities, in practice these laws are difficult to enforce, as there is often substantial ambiguity regarding the true arm’s-length price. Evidence of tax-motivated transfer pricing is substantial; see Kimberly Clausing, “Tax-Motivated Transfer Pricing and US Intrafirm Trade Prices,” Journal of Public Economics 87:9 (2003), 2207–2223; Kimberly Clausing, “International Tax Avoidance US International Trade,” National Tax Journal 59:2 (2006), 269–287. 27. For examples of press coverage, see articles on tax avoidance by Jesse Drucker, including “Google 2.4% Rate Shows How $60 Billion Is Lost to Tax Loopholes,” Bloomberg, October 21, 2010, https://www.bloomberg.com/news/articles/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.


pages: 460 words: 130,053

Red Notice: A True Story of High Finance, Murder, and One Man's Fight for Justice by Bill Browder

Berlin Wall, British Empire, corporate governance, El Camino Real, Gordon Gekko, half of the world's population has never made a phone call, index card, rolodex, Ronald Reagan, transfer pricing, union organizing

With no more incentive to behave, and with all these profits piling up after the devaluation, there was no longer any incentive not to steal. Why share the profits with minority investors? What had they done to help? Nothing. With the brakes off, the oligarchs embarked on an orgy of stealing. The tools they used were many and with no law enforcement to stop them, their imaginations ran wild. They engaged in asset stripping, dilutions, transfer pricing, and embezzlement, to name but a few of their tricks. This was a huge problem that every business person in Russia was obsessed with, and because I’d developed a reputation after my fight with Sidanco, in early January 2000 I was invited by the American Chamber of Commerce in Moscow to give a presentation to the local business community about corporate-governance abuse. It seemed as though I was the only person in Moscow crazy enough to speak publicly about the misdeeds of the Russian oligarchs.

It seemed as though I was the only person in Moscow crazy enough to speak publicly about the misdeeds of the Russian oligarchs. I decided to use the Yukos oil company as my case study. I could have picked any Russian company, but Yukos was attractive because it had had so many minority-shareholder scandals. I called my presentation “The Armed Forces of Corporate Governance Abuse” to describe the many ways that the oligarchs went about ripping off their minority shareholders. The “Army” was transfer pricing; the “Navy,” asset stripping; and the “Marines,” shareholder dilutions. The presentation was scheduled for 8:00 on a snowy morning in January. As my alarm went off at 6:30, I could barely pull myself out of bed. The temperature outside was minus-twenty degrees Celsius, the streets were covered with a fresh coat of snow, and the sun had not yet risen. Because the Moscow stock exchange didn’t open until 11:00 a.m., I didn’t normally get to the office until 10:30.

., 12, 14 Rostelecom, 69 Rozhetskin, Leonid, 118–20, 124 Russia (post-Soviet), 1–11, 156–57 adoption ban law, 357–62 Audit Chamber, 161 bond market, 132–38 Border Service, 194, 195, 242, 312 Browder banned from, 11–13, 169, 170–89, 193 Browder’s trial in abstentia, 364–70 bureaucracy, 158, 232 business culture, 125 conspiracy theories, 166 corporate-governance abuse, 144–49, 165–69 dachas, 104, 156, 249 economy, 60, 87 fall of communism, 2–3, 59–60, 112, 158, 291 fatalism, 298 food, 67, 87 Foreign Ministry, 172–73 Gazprom theft and investigation, 154–62, 192–93 gulags, 96–97, 274 human rights atrocities, 279–80, 301, 328, 373, 376 IMF bailout, 133–34 independent thinkers penalized in, 6, 96–97, 163–65 Interior Ministry, see Interior Ministry literature, 96, 298 Mafia, 150, 241, 289 May holidays, 151 National Police Day, 327–28 1993 attempted coup, 197 1996 presidential elections, 87–93, 94–103 1998 financial crisis and aftermath, 131–46 oil and gas, 60, 69, 98–101, 104–30, 143–44, 167–69 oligarchs, see oligarchs, Russian orphans, 357–62 Parliament, 161, 340–44, 356, 357 and n, 358–60 persecuted journalists in, 303 police raids on Hermitage offices, 196–200, 203, 208–10, 216, 218, 230 Politburo, 156 press, 91, 182, 214, 236, 252, 264, 288, 301, 359, 365 privatizations in, 54–63, 64–76, 87, 91–93, 98–101 raider attacks, 213–27 Red Notice for Browder, 367–70, 374 response to Magnitsky Act, 356–62 roads, 243 Salomon operations in, 54–63, 64–76 shipping, 55–59 stocks, 3, 54–63, 64–76, 98–130, 133–38, 144–45, 183–85, 198 tax law, 201–4 tax-rebate fraud, 231–37, 252–53, 257, 264, 271–72, 288, 301, 316–26, 328 theft of government money, 231–37, 236–53, 257, 264, 271–72, 288, 296, 301, 311, 316–26, 328 transition to capitalism, 59–60, 87 Ukraine invaded by, 373 visa sanctions and asset freezes on corrupt officials, 291, 293–94, 297, 298, 299–309, 327–29, 368, 373, 377 voucher privatization, 59–60, 67–70, 105 wealth gap, 156–57 women, 147, 254 as WTO member, 333–34 Yeltsin’s economic reforms, 87, 91 Russian Central Bank, 233, 234 Russian General Prosecutor’s Office, 262, 285, 287, 314 Russian raider attack, 213–27 Russian State Investigative Committee, 220–26, 232–33, 252 russian-untouchables.com, 313 Russian Untouchables videos, 310–15, 321–26, 343 Safra, Edmond, 72–76, 131, 138–39, 365 death of, 142 Hermitage Fund and, 72–76, 77–88, 93, 94, 98, 100–102, 112, 119–32, 138–39, 142 Sagiryan, Igor, 219–23, 317 Saint Petersburg, 56, 186, 212, 213, 217, 223, 229 Salomon Brothers, 52–76, 79, 106, 225 Browder at, 52–76, 77 “five times” formula, 53, 54 London trading floor, 64–70 Treasury bond scandal, 52, 65 Samolov, Boris, 254 San Francisco, 70, 272 Sanok, 30–39 Saudi Arabia, 220 Sberbank, 165 Scandinavian Airlines, 367 Schmidt, Wolfgang, 27–31, 35, 38, 40 Scott, Kyle, 290–95, 329, 333 Securities and Exchange Commission (SEC), 52, 176 Senate, US, 302, 305, 307, 330–39, 346, 354–55 Finance Committee, 336, 340, 344 Foreign Relations Committee, 290, 330–39 Magnitsky Act and, 327–39, 340 Seoul, 210–13, 250, 251 Severov, Dmitry, 106–7 Shanghai, 2 Shao, Jude, 2, 3, 5, 6, 9 Sheremetyevo Airport, 2–10, 95, 169, 243–44 Shuvalov, Igor, 174, 176, 178 Siberia, 69, 104 oil, 69, 104, 110, 159 Sibneftegaz, 159 Sidanco, 104–30, 134–35, 219, 363 dilutive share issue, 115–30 FSEC investigation of, 127–29 Siemens, 92 Sikorsi, Leschek, 32–38 Silchenko, Oleg, 258–60, 265, 267, 275–76, 277, 283, 327–28 Siluyanov, Anton, 358 Smith, Simon, 170–72, 181, 182, 186–87, 256 Snob, 359 Sochi, 242 Sokolova, Ksenia, 359 Solent, David, 51 Soros, George, 70 and n, 92, 122 South Africa, 71, 114–15, 117 apartheid, 114 South Korea, 131, 210–13 Soviet Union, 12, 24, 157, 253 fall of, 2–3, 59, 112, 158, 280, 334 Jews, 334 Katyn massacre, 279–80 World War II, 13, 228, 279–80 See also Russia (post-Soviet) Spain, 312 Stalin, Joseph, 6, 364 Stanford University, 2, 20–21, 106, 272, 376 Stashina, Yelena, 267, 275–76 State Department, US, 289 Magnitsky case and, 289–97, 302, 304, 329, 341 Proclamation 7750, 291, 293–94, 297, 298, 299–309, 327–39 stealing analysis, 155–60 steel, 60 Steinmetz, Beny, 71–76, 83–84, 138 Stepanov, Vladlen, 316, 319, 321–26 Swiss bank accounts, 316–26, 343 YouTube video on, 321–23, 325–36, 343 Stepanova, Olga, 316, 319, 321–26 Swiss bank accounts, 316–26, 343 as Tax Princess, 326 YouTube video on, 321–23, 325–26, 343 Stern, Carl, 24 stocks Chinese wall and, 64 front-running, 183–84 Gazprom theft and investigation, 154–62 liquidity, 132 MNPZ, 98–100 1998 financial crisis and aftermath, 131–46 preferred shares, 98–101 Russian, 3, 54–63, 64–76, 98–130, 133–38, 144–45, 183–85, 198 share dilution, 115–30, 144–45 Sidanco, 104–30 tourist, 99 Stoppard, Tom, 350 Summer Olympics (1980), 3 Summers, Larry, 133, 134 Sunday Express, 314 Sunday Observer, 187 Sunday Telegraph, 2 Surgutneftegaz, 69 surveillance, 221–23, 241–42, 317–18 Switzerland, 88, 89 bank accounts and Magnitsky case, 316–26, 343 Syria, 357 Tarkosaleneftegaz, 156 Tatar Republic, 111 Tatarstan, 214, 229, 238 Tatneft, 111 Tatum, Paul, 126–27 tax-rebate fraud, 231–37, 252–53, 257, 264, 271–72, 288, 301, 316–26, 328 Swiss bank accounts and, 316–26, 343 telephone, 69, 191 television, 91, 365 Templeton, Sir John, 70 and n Templeton Asset Management, 70n “ten bagger,” 39 tennis, 163 Thailand, 131, 191, 210 Tiger Management Corp., 70n Time magazine, 12, 131 Tokyo, 28, 55, 211 Tom Lantos Human Rights Commission, 302 Toronto, 70 Trammell Crow, 21 transfer pricing, 144 Truman, Harry, 13 Tuesdays with Morrie, 149–50 Turkey, 162, 191, 312 Turner, Fred, 338 Tverskoi District Court, 365 UK Law Society, 262 Ukraine, 30, 242 Russian invasion of, 373 Unified Energy System (UES), 69, 165 United Arab Emirates, 191 United States, 256, 312 beef, 334, 336 communism in, 12–14, 26, 27 Depression, 12 IMF bailout of Russian bond market and, 133–34 Magnitsky case and, 262–63, 269, 289–97, 298–309, 327–39, 340–55, 356 Russian adoption ban and, 357–62 Treasury bond market, 52, 65 Wall Street, 119, 144, 376 World War II, 13 United Steelworkers, 23 Universal Savings Bank, 233–34 University of Chicago, 14, 15, 19 University of Colorado, Boulder, 18 Ural Mountains, 274 Vasiliev, Dmitry, 127–29 Vedomosti, 182, 214, 236 Velvet Revolution, 27 Vienna, 14 Vietnam War, 2, 306 visa sanctions and asset freezes, 291, 293–94, 297, 298, 299–309, 327–39, 368, 373, 377 Vladivostok, 287 Volgograd, 225–26 von Pierer, Heinrich, 92 Voronezh, 246 Voronin, Victor, 257 voucher auctions, 68–69 voucher privatization, 59–60, 67–70, 105 Vyakhirev, Andrey, 159 Vyakhirev, Gennady, 159 Vyakhirev, Rem, 159, 162 Vyugin, Oleg, 176, 178 Wall Street (film), 119 Wall Street Journal, 2, 48, 49, 126, 148, 160, 182 Warsaw, 31, 35 Washington, D.C., 263, 269, 289–97, 298–309, 327–39, 340–50 Washington Post, 160, 180, 263–64, 330 Welch, Jack, 92 Weyerhaeuser pension fund, 122 Whiteman School, Steamboat Springs, Colorado, 15–17 Wicker, Roger, 327, 335 and n, 341 Winer, Jonathan, 289–91, 293, 295, 297 Wolosky, Lee, 147 World Bank, 27–31, 38, 134 World Economic Forum, Davos in 1996, 88–93 in 2007, 191–95 in 2013, 363 World Trade Organization (WTO), 333 World War II, 13, 228, 279–80, 369 Yale University, 14, 20 Year of Living Dangerously, The (film), 24 Yeltsin, Boris, 87 economic reforms, 87, 91 1996 presidential elections, 87–94, 97–98, 101–3 YouTube, 264, 310–15, 321–26, 327 Hermitage video, 264–65, 271–72, 310 Karpov video, 313, 314–15, 322–23, 343 Kuznetsov video, 313–15, 322–23, 343 Russian Untouchables videos, 310–15, 321–26, 343 Stepanova video, 321–23, 325–26, 343 Yucaipa, 81 and n Yuganskneftegaz, 111 Yukos, 144, 145, 167, 183, 257 oligarch corruption, 167–69 Zurich, 70, 89 Zyuganov, Gennady, 87, 89, 91–93, 100, 102–3 Simon & Schuster 1230 Avenue of the Americas New York, NY 10020 www.SimonandSchuster.com Copyright © 2015 by Hermitage Media Limited Certain names and identifying characteristics have been changed.


pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

accounting loophole / creative accounting, Albert Einstein, anti-globalists, asset-backed security, banking crisis, banks create money, basic income, Boris Johnson, Bretton Woods, British Empire, business cycle, call centre, capital controls, carbon footprint, collective bargaining, corporate raider, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, G4S, Goldman Sachs: Vampire Squid, high net worth, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, Kickstarter, labour market flexibility, laissez-faire capitalism, land value tax, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, plutocrats, Plutocrats, popular capitalism, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, wealth creators, WikiLeaks, Winter of Discontent, working poor, Yom Kippur War, zero-sum game

These strategies, known to lawyers as the double Irish and the Dutch sandwich, helped Google to reduce its overseas tax rate to 2.4%.65 Margaret Hodge, who chairs the UK parliament’s Public Accounts Committee, took Google’s UK Vice-President, Matt Brittin, to task over this: ‘You are a company that says you “do no evil”. And I think that you do do evil.’ Hodge, who has repeatedly challenged rich and irresponsible business leaders, was condemned by the Treasury for ‘grandstanding’ and scaring off foreign investment.66 Transfer pricing is a business in itself: in 2009, accountancy firm Ernst & Young employed 900 staff just on working out transfer pricing packages to sell to companies.67 Many major multinationals each employ hundreds of lawyers and accountants to work out ever more ingenious ways of avoiding tax. Yet at the time, the UK’s tax authority, Her Majesty’s Revenue and Customs (HMRC), employed only 600 workers to check the affairs of 700 companies, and only about 100 of those deal with tax avoidance.

It operates as a hugely powerful lobbying agency for financial interests.58 Uniquely, it has an official, known as the ‘remembrancer’, with an annual budget of £6 million, who is allowed to sit in the House of Commons and vet legislation to protect the interests of the City.59 The Corporation has been immensely successful in its mission, though it got a helping hand in 1996 from Tony Blair, who reversed the Labour Party’s long-standing opposition to it and endorsed and extended its power.60 The position of the City at the centre of the UK’s tax haven network is reflected in the webpage of Mark Boleat, the Corporation’s current Policy and Resources Committee chair and chief lobbyist: it tells us that he was born in Jersey, was formerly a member of the Gibraltar Financial Services Commission and currently has non-executive positions that include the States of Jersey Development Company and Chair of the Channel Islands Competition and Regulatory Authorities.61 ‘Transfer pricing’ – or ‘mis-pricing’ – is another key to the havens’ existence. Multinational companies can play off countries against each other to minimise tax by rigging their accounts. They can shift profits across borders to where taxes are lowest, minimising their declared profits where taxes are relatively high – even if those places are also where they do most business. Let’s say a company does much of its business in country A, where profits are relatively highly taxed.


The King of Oil by Daniel Ammann

accounting loophole / creative accounting, anti-communist, Ayatollah Khomeini, banking crisis, Berlin Wall, Boycotts of Israel, business intelligence, buy low sell high, energy security, family office, Johann Wolfgang von Goethe, Mikhail Gorbachev, Nelson Mandela, oil shock, peak oil, purchasing power parity, Ronald Reagan, trade liberalization, transaction costs, transfer pricing, Upton Sinclair, Yom Kippur War

Rich does not attempt to outmaneuver or avoid my questions. On the contrary—and rather surprisingly for someone who for the last twenty-five years has been labeled one of the greatest tax fraudsters—Rich maintains his innocence. Of course he tried to minimize his taxes, he admits. Of course he funneled his profits to Switzerland, where the tax burden is substantially lower than in the United States. Of course his companies practiced “transfer pricing.” Every international company does. Rich makes an effort not to sound too apologetic when stressing his innocence. “I never crossed the border of legality. Everything I did was perfectly in order. I never broke the law. I did nothing wrong.” R “A Scapegoat Was Needed” For the first time ever, Marc Rich is willing to discuss his international trading activities. “The trading with the enemy charge was clearly the most inflammatory part of the indictment.

Moritz), 7–8 Sweet Pain of Love, 218 Swissair Flight 111, 113–14 Swiss Federal Act on International Mutual Assistance in Criminal Matters (IMAC), 126–27, 284n Swiss Office for Police Matters, 128–29 Swiss Penal Code, 115, 152–53 Swiss tax treaty, 120–21, 125–27 Switzerland, 76–78, 125–34 extradition of Marc Rich, 128–34, 149–50 flight of Marc Rich to, 109–11, 113–16, 125–26, 201–2 “Sympathy for the Devil” (song), 7 Syria, 54, 72, 202 Taba Summit, 259 Tachkemoni School, 28 Tanker trade, 84–85, 189–90 Tapies, Antony, 10 Tax evasion and fraud, 8–9, 116–17, 125–28, 136–37, 145–47, 167–71 Texaco, 55–57 Thomajan, Bob, 110 Time (magazine), 137 Tin, 41, 44, 227 Torre de Madrid, 49 Trade liberalization, 267 Trader principle, 180–81 Trafford, John, 75–76, 80, 83, 115 Transaction costs, 85, 176 Trans-Asiatic Oil Ltd., 65–66 “Transfer pricing,” 145 Trau, René, 34, 217 Trillin, Calvin, 33–34 Troland, John, 107, 119 Trust, 40, 78, 86–88 Trust (Fukuyama), 86–87 Tucholsky, Kurt, 25 Tunisia, 14, 53, 63 Turkey, 82 20th Century Fox, 108, 111, 122, 123 20/20 (TV program), 254 UNITA (National Union for the Total Independence of Angola), 183–85 United Nations Human Rights Commission, 199 United Nations Oil-for-Food Programme, 231–32 United Nations Security Council, 191 United States of America v.


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

accounting loophole / creative accounting, asset-backed security, banking crisis, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, forensic accounting, Frederick Winslow Taylor, G4S, intangible asset, Internet of things, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

Just how far would become clear in 2004, when former SEC chairman Richard Breedon reported on the looting of publishing group Hollinger – then owner of the Telegraph newspapers in the UK and the Chicago Sun-Times – by its later-jailed proprietor Lord (Conrad) Black. Under arrangements sanctioned by KPMG, around $400m of the public company’s profits were stripped out between 1997 and 2003 into tax haven companies controlled by Black and his associates. These companies, claimed the Canadian press baron, owned his uniquely valuable management expertise and deserved the hundreds of millions of dollars they received. So-called ‘transfer pricing’ rules dictate that payments for goods or services by related companies should be at levels that would be agreed between independent parties operating at ‘arm’s length’ from each other. This is to prevent profits being artificially shifted into lower tax areas by, for example, overpaying fees to a tax haven company. Yet KPMG, doubling up as Hollinger’s tax adviser as well as auditor, chose to compare Hollinger’s fees ‘with the venture capital business because it was the one industry against which [its] fee structure would favorably compare’.

Paul Gillis, visiting professor of accounting at Peking University’s Guanghua School of Management, quoted in Dinny McMahon and Michael Rapoport, ‘Challenges Auditing Chinese Firms’, Wall Street Journal, 12 July 2011. 35. Luxembourg Leaks: Global Companies’ Secrets Exposed, https://www.icij.org/project/luxembourg-leaks. 36. Lawrie Holmes and Alex Hawkes, ‘Big Four Auditors “Embedded in Offshore World”’, Financial Mail, 29 January 2011. 37. Tax Efficient Supply Chain Management and Transfer Pricing, presentation by Srinivasa Rao, partner, Ernst & Young, International Fiscal Association conference, 13 December 2008. 38. Proposal to work with Heineken on the design and implementation of a new group purchasing company, September 2010, PriceWaterhouse Coopers LLP, https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0B-YK4zVc_KuCODFjZjk2NDAtM2IzNy00NGE4LThmOGUtNGIzMjRmNzM1NmFj&hl=en; accessed 23 October 2011. 39.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, plutocrats, Plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

That firm asserts that ownership rights and patents to technologies developed by its US engineers in fact are held by a subsidiary at a tiny law firm in tax-free Bermuda. Google funneled $5.4 billion in royalties during 2009 through that tax haven, a practice that cut its US tax bill by $3.1 billion during 2007–2009.41 Another tax-sheltering tactic involves juggling the price of production inputs to cut taxes. This practice of intentionally mispricing intermediate goods is so widespread that it has its own category; “transfer pricing” enabled Chevron and Texaco to save $3.25 billion in taxes between 1970 and 2000 by overpricing oil bought from a subsidiary in low-tax Indonesia for sale in the United States. Inflated prices on inputs from abroad result in low taxable profits on US sales, with profits recorded in low-tax nations. By shifting profits on American sales to tax havens abroad, blue-chip firms such as Apple, Chevron, Cisco Systems, GE, Google, Microsoft, Oracle, and Pfizer perforce end up with sizeable portions of their corporate cash resting in havens like the Cayman Islands or Luxembourg.

Since opening its first store in 2002, the Starbucks chain of over 200 stores in France and Germany has never reported a taxable profit. In 2011, Starbucks reported a loss of €5.3 million on sales of €117 million. Those outlets are profitable, but manipulate cash flows to report no profit to tax authorities there. The coffee chain paid no tax because its European corporate headquarters in Netherlands imposes a hefty franchising fee, 6 percent of sales in the case of Starbucks, roughly comparable to profits. Moreover, in a transfer-pricing stratagem, Starbucks adds an extravagant 20 percent cost margin on all coffee sold in bulk to its European stores, imposed internally by offices in the tax haven of Switzerland.47 Thus, European profits end up being recorded in Switzerland and Dutch tax havens in the Caribbean.48 Google dodges taxes on its European sales in a similar fashion, shuttling billions in profits between subsidiaries in Ireland and Netherlands that end up in tax-free Bermuda.

Domestically that means Congress should require that corporations report how much tax they paid. Internationally, that means adopting something resembling a global tax information system patterned on the Common Consolidated Corporate Tax Base concept, credentialed editorially by the Financial Times.72 In 2012, the European Parliament also endorsed that concept which would resolve uncertainty around complex issues such as digitized sales and transfer pricing exploited by firms such as Apple.73 The EU’s first step was to require country-by-country reporting of income and taxes in 2014. This applies just to banks, however, and uniformity in tax rates will be facilitated by widespread adoption of a comprehensive international database of corporate sales and expenses from all economic sectors, greatly aiding those officials hoping to stem the race to the bottom in corporate tax rates.* Fairness and ending tax dodging are important, but there are also important economic reasons for the United States to support international tax conformity.


pages: 388 words: 125,472

The Establishment: And How They Get Away With It by Owen Jones

anti-communist, Asian financial crisis, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, Bretton Woods, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, G4S, glass ceiling, hiring and firing, housing crisis, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Dyson, laissez-faire capitalism, light touch regulation, market fundamentalism, mass immigration, Monroe Doctrine, Mont Pelerin Society, moral hazard, Neil Kinnock, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, old-boy network, open borders, plutocrats, Plutocrats, popular capitalism, profit motive, quantitative easing, race to the bottom, rent control, road to serfdom, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, stakhanovite, statistical model, The Wealth of Nations by Adam Smith, transfer pricing, union organizing, unpaid internship, Washington Consensus, wealth creators, Winter of Discontent

Senior MPs have concluded that accountants were not simply offering governments their expertise: they were advising governments on tax law, and then telling their clients how to get around the laws they had themselves helped to draw up. It was a lucrative business for the Big Four, worth £2 billion in Britain alone. As the Public Accounts Committee pointed out, HMRC could not even hope to compete with the resources of the accountancy firms, meaning they had to depend on their expertise. The firms could boast four times as many workers as HMRC in the field of ‘transfer pricing’ – a euphemistic accountancy term that refers to the shifting of taxable profits to places with lower tax. As well as staffing tax-advisory panels, the Big Four second members of their team to the Treasury. The civil service proudly champions secondment, claiming that ‘it allows people from different organizations to learn from each other and share good practice’, as well as giving ‘organizations outside the civil service a useful insight into the workings of central government’.2 Secondment, though, has everything to do with the Establishment mentality of blurring the lines between the private and public sectors, and pushing for the ever-greater influence of business in the state machinery.

Starbucks’ defence was that, despite having 735 British outlets, it was reporting losses year after year, and thus was not eligible for corporation tax: it paid no corporation tax whatsoever between 2009 and 2013. Privately, Starbucks was telling its investors and analysts that it was profitable in Britain, and even suggested it as an example to emulate back in the United States. In reality, the company was routing profits to the Netherlands and Switzerland using offshore licensing and transfer pricing. Its thirty Swiss stores were reporting a 20 per cent profit margin. The company charged its British subsidiary a royalty fee worth 6 per cent of total sales for using ‘intellectual property’ such as the Starbucks brand. The company had a secretive, profitable tax arrangement with the Dutch government, and paid just a 12 per cent tax rate in Switzerland. This is ingenious: a company levying a tax on itself, and redirecting profits to countries with more favourable tax regimes.


pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

The Troika could and should have focused its attention on this. 29 Thus Apple, the largest firm by capitalization in the world, has claimed that a very large part of its profits originated in a subsidiary in Ireland. Multinationals can easily claim that their profits are earned in a low-tax jurisdiction. The mechanics by which this is done need not detain us here. In today’s globalized world, production of a final good entails multiple steps, and firms have considerable discretion in determining where, along the production line, true value added occurs. The system is called the “transfer price system,” because companies pretend that they buy and sell partially completed goods from one country to another. The prices are supposed to be arm’s-length prices; the problem is that in the case of most of these partially completed goods, there does not exist a true market to determine the value. 30 An international commission of which I was a member, the Independent Commission for the Reform of International Corporate Taxation, proposed an alternative, and at a major UN conference on Finance for Development meeting in Addis Abba in July 2015, the developing and emerging markets, led by India, virtually unanimously supported beginning a UN process to look at these alternatives.

., 393 in US, 35, 36, 88, 89–92 see also euro single-market principle, 125–26, 231 skilled workers, 134–35 skills, 77 Slovakia, 331 Slovenia, 331 small and medium-sized enterprises (SMEs), 127, 138, 171, 229 small and medium-size lending facility, 246–47, 300, 301, 382 Small Business Administration, 246 small businesses, 153 Smith, Adam, xviii, 24, 39–40, 41 social cohesion, 22 Social Democratic Party, Portugal, 392 social program, 196 Social Security, 90, 91 social solidarity, xix societal capital, 77–78 solar energy, 193, 229 solidarity fund, 373 solidarity fund for stabilization, 244, 254, 264, 301 Soros, George, 390 South Dakota, 90, 346 South Korea, 55 bailout of, 113 sovereign risk, 14, 353 sovereign spreads, 200 sovereign wealth funds, 258 Soviet Union, 10 Spain, 14, 16, 114, 177, 178, 278, 331, 335, 343 austerity opposed by, 59, 207–8, 315 bank bailout of, 179, 199–200, 206 banks in, 23, 186, 199, 200, 242, 270, 354 debt of, 196 debt-to-GDP ratio of, 231 deficits of, 109 economic growth in, 215, 231, 247 gold supply in, 277 independence movement in, xi inequality in, 72, 212, 225–26 inherited debt in, 134 labor reforms proposed for, 155 loans in, 127 low debt in, 87 poverty in, 261 real estate bubble in, 25, 108, 109, 114–15, 126, 198, 301, 302 regional independence demanded in, 307 renewable energy in, 229 sovereign spread of, 200 spread in, 332 structural reform in, 70 surplus in, 17, 88 threat of breakup of, 270 trade deficits in, 81, 119 unemployment in, 63, 161, 231, 235, 332, 338 Spanish bonds, 114, 199, 200 spending, cutting, 196–98 spread, 332 stability, 147, 172, 261, 301, 364 automatic, 244 bubble and, 264 central banks and, 8 as collective action problem, 246 solidarity fund for, 54, 244, 264 Stability and Growth Pact, 245 standard models, 211–13 state development banks, 138 steel companies, 55 stock market, 151 stock market bubble, 200–201 stock market crash (1929), 18, 95 stock options, 259, 359 structural deficit, 245 Structural Funds, 243 structural impediments, 215 structural realignment, 252–56 structural reforms, 9, 18, 19–20, 26–27, 214–36, 239–71, 307 from austerity to growth, 263–65 banking union, 241–44 and climate change, 229–30 common framework for stability, 244–52 counterproductive, 222–23 debt restructuring and, 265–67 of finance, 228–29 full employment and growth, 256–57 in Greece, 20, 70, 188, 191, 214–36 growth and, 232–35 shared prosperity and, 260–61 and structural realignment, 252–56 of trade deficits, 216–17 trauma of, 224 as trivial, 214–15, 217–20, 233 subsidiarity, 8, 41–42, 263 subsidies: agricultural, 45, 197 energy, 197 sudden stops, 111 Suharto, 314 suicide, 82, 344 Supplemental Nutrition Assistance Program (SNAP), 91 supply-side effects: in Greece, 191, 215–16 of investments, 367 surpluses, fiscal, 17, 96, 312, 379 primary, 187–88 surpluses, trade, see trade surpluses “Swabian housewife,” 186, 245 Sweden, 12, 46, 307, 313, 331, 335, 339 euro referendum of, 58 refugees into, 320 Switzerland, 44, 307 Syria, 321, 342 Syriza party, 309, 311, 312–13, 315, 377 Taiwan, 55 tariffs, 40 tax avoiders, 74, 142–43, 227–28, 261 taxes, 142, 290, 315 in Canada, 191 on capital, 356 on carbon, 230, 260, 265, 368 consumption, 193–94 corporate, 189–90, 227, 251 cross-border, 319, 384 and distortions, 191 in EU, 8, 261 and fiat currency, 284 and free mobility of goods and capital, 260–61 in Greece, 16, 142, 192, 193–94, 227, 367–68 ideal system for, 191 IMF’s warning about high, 190 income, 45 increase in, 190–94 inequality and, 191 inheritance, 368 land, 191 on luxury cars, 265 progressive, 248 property, 192–93, 227 Reagan cuts to, 168, 210 shipping, 227, 228 as stimulative, 368 on trade surpluses, 254 value-added, 190, 192 tax evasion, in Greece, 190–91 tax laws, 75 tax revenue, 190–96 Taylor, John, 169 Taylor rule, 169 tech bubble, 250 technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 and new financial system, 274–76, 283–84 telecoms, 55 Telmex, 369 terrorism, 319 Thailand, 113 theory of the second best, 27–28, 48 “there is no alternative” (TINA), 306, 311–12 Tocqueville, Alexis de, xiii too-big-to-fail banks, 360 tourism, 192, 286 trade: and contractionary expansion, 209 US push for, 323 trade agreements, xiv–xvi, 357 trade balance, 81, 93, 100, 109 as allegedly self-correcting, 98–99, 101–3 and wage flexibility, 104–5 trade barriers, 40 trade deficits, 89, 139 aggregate demand weakened by, 111 chit solution to, 287–88, 290, 299–300, 387, 388–89 control of, 109–10, 122 with currency pegs, 110 and fixed exchange rates, 107–8, 118 and government spending, 107–8, 108 of Greece, 81, 194, 215–16, 222, 285–86 structural reform of, 216–17 traded goods, 102, 103, 216 trade integration, 393 trade surpluses, 88, 118–21, 139–40, 350–52 discouragement of, 282–84, 299–300 of Germany, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 tax on, 254, 351, 381–82 Transatlantic Trade and Investment Partnership, xv, 323 transfer price system, 376 Trans-Pacific Partnership, xv, 323 Treasury bills, US, 204 Trichet, Jean-Claude, 100–101, 155, 156, 164–65, 251 trickle-down economics, 362 Troika, 19, 20, 26, 55, 56, 58, 60, 69, 99, 101–3, 117, 119, 135, 140–42, 178, 179, 184, 195, 274, 294, 317, 362, 370–71, 373, 376, 377, 386 banks weakened by, 229 conditions of, 201 discretion of, 262 failure to learn, 312 Greek incomes lowered by, 80 Greek loan set up by, 202 inequality created by, 225–26 poor forecasting of, 307 predictions by, 249 primary surpluses and, 187–88 privatization avoided by, 194 programs of, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 197–98, 202, 204, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 348, 366, 379, 392 social contract torn up by, 78 structural reforms imposed by, 214–16, 217, 218–23, 225–38 tax demand of, 192 and tax evasion, 367 see also European Central Bank (ECB); European Commission; International Monetary Fund (IMF) trust, xix, 280 Tsipras, Alexis, 61–62, 221, 273, 314 Turkey, 321 UBS, 355 Ukraine, 36 unemployment, 3, 64, 68, 71–72, 110, 111, 122, 323, 336, 342 as allegedly self-correcting, 98–101 in Argentina, 267 austerity and, 209 central banks and, 8, 94, 97, 106, 147 ECB and, 163 in eurozone, 71, 135, 163, 177–78, 181, 331 and financing investments, 186 in Finland, 296 and future income, 77 in Greece, xi, 71, 236, 267, 331, 338, 342 increased by capital, 264 interest rates and, 43–44 and internal devaluation, 98–101, 104–6 migration and, 69, 90, 135, 140 natural rate of, 172–73 present-day, in Europe, 210 and rise of Hitler, 338, 358 and single currency, 88 in Spain, 63, 161, 231, 235, 332, 338 and structural reforms, 19 and trade deficits, 108 in US, 3 youth, 3, 64, 71 unemployment insurance, 91, 186, 246, 247–48 UNICEF, 72–73 unions, 101, 254, 335 United Kingdom, 14, 44, 46, 131, 307, 331, 332, 340 colonies of, 36 debt of, 202 inflation target set in, 157 in Iraq War, 37 light regulations in, 131 proposed exit from EU by, 4, 270 United Nations, 337, 350, 384–85 creation of, 38 and lower rates of war, 196 United States: banking system in, 91 budget of, 8, 45 and Canada’s 1990 expansion, 209 Canada’s free trade with, 45–46, 47 central bank governance in, 161 debt-to-GDP of, 202, 210–11 financial crisis originating in, 65, 68, 79–80, 128, 296, 302 financial system in, 228 founding of, 319 GDP of, xiii Germany’s borrowing from, 187 growing working-age population of, 70 growth in, 68 housing bubble in, 108 immigration into, 320 migration in, 90, 136, 346 monetary policy in financial crisis of, 151 in NAFTA, xiv 1980–1981 recessions in, 76 predatory lending in, 310 productivity in, 71 recovery of, xiii, 12 rising inequality in, xvii, 333 shareholder capitalism of, 21 Small Business Administration in, 246 structural reforms needed in, 20 surpluses in, 96, 187 trade agenda of, 323 unemployment in, 3, 178 united currency in, 35, 36, 88, 89–92 United States bonds, 350 unskilled workers, 134–35 value-added tax, 190, 192 values, 57–58 Varoufakis, Yanis, 61, 221, 309 velocity of circulation, 167 Venezuela, 371 Versaille, Treaty of, 187 victim blaming, 9, 15–17, 177–78, 309–11 volatility: and capital market integration, 28 in exchange rates, 48–49 Volcker, Paul, 157, 168 wage adjustments, 100–101, 103, 104–5, 155, 216–17, 220–22, 338, 361 wages, 19, 348 expansionary policies on, 284–85 Germany’s constraining of, 41, 42–43 lowered in Germany, 105, 333 wage stagnation, in Germany, 13 war, change in attitude to, 38, 196 Washington Consensus, xvi Washington Mutual, 91 wealth, divergence in, 139–40 Weil, Jonathan, 360 welfare, 196 West Germany, 6 Whitney, Meredith, 360 wind energy, 193, 229 Wolf, Martin, 385 worker protection, 56 workers’ bargaining rights, 19, 221, 255 World Bank, xv, xvii, 10, 61, 337, 357, 371 World Trade Organization, xiv youth: future of, xx–xxi unemployment of, 3, 64, 71 Zapatero, José Luis Rodríguez, xiv, 155, 362 zero lower bound, 106 ALSO BY JOSEPH E.


pages: 170 words: 51,205

Information Doesn't Want to Be Free: Laws for the Internet Age by Cory Doctorow, Amanda Palmer, Neil Gaiman

Airbnb, barriers to entry, Brewster Kahle, cloud computing, Dean Kamen, Edward Snowden, game design, Internet Archive, John von Neumann, Kickstarter, MITM: man-in-the-middle, optical character recognition, plutocrats, Plutocrats, pre–internet, profit maximization, recommendation engine, rent-seeking, Saturday Night Live, Skype, Steve Jobs, Steve Wozniak, Stewart Brand, transfer pricing, Whole Earth Catalog, winner-take-all economy

And that means that the existing YouTube-like services will stabilize, consolidate, and settle on the least competitive terms they can all live with. The fewer channels there are, the worse the deal for creators will be. Any choke point between the creator and the audience will turn into a tollbooth, where someone will charge whatever the market will bear for the privilege of facilitating the buying and selling of creative work. Economists call this “transfer pricing”—all of a sudden, profits are captured at this choke point, rather than at any previous or successive stage. Right now, there are a lot of distribution channels that creators can use to reach audiences—if you don’t like YouTube, there’s Hulu, Vimeo, Vodo, and a hundred others. If you don’t like Amazon, there’s BN.com, Lulu, Smashwords, BookBaby, and many other platforms. If you don’t want to sell your video games through Walmart, there’s Steam, the Humble Indie Bundle, and many other venues.


Global Financial Crisis by Noah Berlatsky

accounting loophole / creative accounting, asset-backed security, banking crisis, Bretton Woods, capital controls, Celtic Tiger, centre right, circulation of elites, collapse of Lehman Brothers, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, God and Mammon, Gordon Gekko, housing crisis, illegal immigration, income inequality, market bubble, market fundamentalism, mass immigration, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South China Sea, structural adjustment programs, too big to fail, trade liberalization, transfer pricing, working poor

African countries should have the right to take unilateral actions to stop debt payments because they violate the basic human and social rights of their citizens. Likewise, Africa should launch another major struggle for the repatriation of the wealth stolen from the African people and illegally kept abroad with the complicity of Western states and financial institutions. Tax evasions, capital flight and transfer pricing have deprived African countries of billions of dollars that should be returned to serve the continent’s development. Therefore, Africa, through its regional and continental institutions, should launch a campaign for the repatriation of that wealth and seek the help of the United Nations institutions, the solidarity of the global South and the support of progressive public opinion in the North.


pages: 222 words: 70,132

Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy by Jonathan Taplin

1960s counterculture, affirmative action, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, American Legislative Exchange Council, Apple's 1984 Super Bowl advert, back-to-the-land, barriers to entry, basic income, battle of ideas, big data - Walmart - Pop Tarts, bitcoin, Brewster Kahle, Buckminster Fuller, Burning Man, Clayton Christensen, commoditize, creative destruction, crony capitalism, crowdsourcing, data is the new oil, David Brooks, David Graeber, don't be evil, Donald Trump, Douglas Engelbart, Douglas Engelbart, Dynabook, Edward Snowden, Elon Musk, equal pay for equal work, Erik Brynjolfsson, future of journalism, future of work, George Akerlof, George Gilder, Google bus, Hacker Ethic, Howard Rheingold, income inequality, informal economy, information asymmetry, information retrieval, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Joseph Schumpeter, Kevin Kelly, Kickstarter, labor-force participation, life extension, Marc Andreessen, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Mother of all demos, move fast and break things, move fast and break things, natural language processing, Network effects, new economy, Norbert Wiener, offshore financial centre, packet switching, Paul Graham, paypal mafia, Peter Thiel, plutocrats, Plutocrats, pre–internet, Ray Kurzweil, recommendation engine, rent-seeking, revision control, Robert Bork, Robert Gordon, Robert Metcalfe, Ronald Reagan, Ross Ulbricht, Sam Altman, Sand Hill Road, secular stagnation, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, smart grid, Snapchat, software is eating the world, Steve Jobs, Stewart Brand, technoutopianism, The Chicago School, The Market for Lemons, The Rise and Fall of American Growth, Tim Cook: Apple, trade route, transfer pricing, Travis Kalanick, trickle-down economics, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, We wanted flying cars, instead we got 140 characters, web application, Whole Earth Catalog, winner-take-all economy, women in the workforce, Y Combinator

The cultural critic Leon Wieseltier angrily noted, “The streets of American cities are haunted by the ghosts of bookstores and record stores, which have been destroyed by the greatest thugs in the history of the culture industry.” The bitter irony is that Amazon noticed that a few independent bookstores in big cities were still thriving, so it decided to go into the bookstore business itself. But Amazon is not alone in its avoidance of taxes. Bloomberg Businessweek reports, “The tactics of Google and Facebook depend on ‘transfer pricing,’ paper transactions among corporate subsidiaries that allow for allocating income to tax havens while attributing expenses to higher-tax countries. Such income shifting costs the U.S. government as much as $60 billion in annual revenue, according to Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.” At a time when both local and federal governments are putting off needed infrastructure improvements because of tax revenue shortfalls, the tax avoidance schemes of our richest technology companies are partially to blame.


Bulletproof Problem Solving by Charles Conn, Robert McLean

active transport: walking or cycling, Airbnb, Amazon Mechanical Turk, asset allocation, availability heuristic, Bayesian statistics, Black Swan, blockchain, business process, call centre, carbon footprint, cloud computing, correlation does not imply causation, Credit Default Swap, crowdsourcing, David Brooks, Donald Trump, Elon Musk, endowment effect, future of work, Hyperloop, Innovator's Dilemma, inventory management, iterative process, loss aversion, meta analysis, meta-analysis, Nate Silver, nudge unit, Occam's razor, pattern recognition, pets.com, prediction markets, principal–agent problem, RAND corporation, randomized controlled trial, risk tolerance, Silicon Valley, smart contracts, stem cell, the rule of 72, the scientific method, The Signal and the Noise by Nate Silver, time value of money, transfer pricing, Vilfredo Pareto, walkable city, WikiLeaks

It's a story that played out over more than decade in a series of passive and then increasingly aggressive moves by the parties. This strategy resulted in $400m of payments to CSIRO, which was used to fund additional research in the Australian national interest. CSIRO believed that its wifi technology was valuable, that its patent was being infringed, and that it was entitled to receive a reasonable fee for use. The giant tech companies who were using this technology, on the other hand, believed the right transfer price was zero for many reasons, including that CSIRO was a publicly funded research agency. In a CSIRO briefing to the US government, it was reported this way: “CSIRO tried to license this product. In 2003 and 2004, it became aware of products that it believed infringed on its patent, and sent letters to 28 companies asking them to please discuss terms for a license from CSIRO. The companies did not accept CSIRO's offer.”17 CSIRO had to decide whether to pursue its case in the courts or not.


pages: 249 words: 73,731

Car Guys vs. Bean Counters: The Battle for the Soul of American Business by Bob Lutz

corporate governance, creative destruction, currency manipulation / currency intervention, flex fuel, medical malpractice, Ponzi scheme, profit maximization, Ralph Nader, shareholder value, Steve Jobs, Toyota Production System, transfer pricing, Unsafe at Any Speed, upwardly mobile

“If this is really what you want, why deal with Asia-Pacific? We can do exactly the same thing, right here in North America!” I wasn’t buying. Changing a car that much really meant “all-new car,” and at the anticipated modest sales volume, would never make business sense. I just kept insisting on a Holden-based idea, which had evolved into a coupe body style, to be marketed as a reborn Pontiac GTO. Months passed in arguments over “transfer price” and “Who’s going to pay for the engineering and the tooling for the U.S. headlights?” GM North America’s view was “Why should we fund an Asia-Pacific project so they can sell in our market?” Asia-Pacific’s view was “You’re the customer and the beneficiary; why should we pay?” My somewhat naïvely utopian view was “Hello! This is all GM. These are wooden nickels we’re pushing back and forth.Toyota wouldn’t be having this stupid discussion, since they care about corporate profitability and don’t suboptimize by region.”


pages: 264 words: 76,643

The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations by David Pilling

Airbnb, banking crisis, Bernie Sanders, Big bang: deregulation of the City of London, Branko Milanovic, call centre, centre right, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, dark matter, Deng Xiaoping, Diane Coyle, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, falling living standards, financial deregulation, financial intermediation, financial repression, Gini coefficient, Goldman Sachs: Vampire Squid, Google Hangouts, Hans Rosling, happiness index / gross national happiness, income inequality, income per capita, informal economy, invisible hand, job satisfaction, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, Monkeys Reject Unequal Pay, mortgage debt, off grid, old-boy network, Panopticon Jeremy Bentham, peak oil, performance metric, pez dispenser, profit motive, purchasing power parity, race to the bottom, rent-seeking, Robert Gordon, Ronald Reagan, Rory Sutherland, science of happiness, shareholder value, sharing economy, Simon Kuznets, sovereign wealth fund, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, transaction costs, transfer pricing, trickle-down economics, urban sprawl, women in the workforce, World Values Survey

Even for something as seemingly tangible as a jet engine, customers pay not only for the piece of equipment but also for sophisticated service contracts in which the provider monitors the engine in real time and keeps it running smoothly throughout its life. Many multinational companies are able to move the source of value of their products—whether intellectual property, service contracts, or legal services—around their international networks almost willy-nilly. You may buy your engine in Seattle, but the people ensuring the engine keeps running for twenty years are in Mumbai. Through a practice known as transfer pricing one subsidiary charges another for the use of these intangible services and the profit is logged in one location—almost certainly the one with the lower tax rate. In 2014 Facebook caused an outcry in Britain by paying tax of just £4,327, a fact that helped provoke a tax revolt in one small Welsh town where tiny businesses were paying substantially more than that.14 GDP was conceived of in terms of the nation state, but businesses increasingly operate across borders.


pages: 290 words: 76,216

What's Wrong with Economics? by Robert Skidelsky

"Robert Solow", additive manufacturing, agricultural Revolution, Black Swan, Bretton Woods, business cycle, Cass Sunstein, central bank independence, cognitive bias, conceptual framework, Corn Laws, corporate social responsibility, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, disruptive innovation, Donald Trump, full employment, George Akerlof, George Santayana, global supply chain, global village, Gunnar Myrdal, happiness index / gross national happiness, hindsight bias, Hyman Minsky, income inequality, index fund, inflation targeting, information asymmetry, Internet Archive, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labour market flexibility, loss aversion, Mark Zuckerberg, market clearing, market friction, market fundamentalism, Martin Wolf, means of production, moral hazard, paradox of thrift, Pareto efficiency, Paul Samuelson, Philip Mirowski, precariat, price anchoring, principal–agent problem, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, shareholder value, Silicon Valley, Simon Kuznets, survivorship bias, technoutopianism, The Chicago School, The Market for Lemons, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, transaction costs, transfer pricing, Vilfredo Pareto, Washington Consensus, Wolfgang Streeck, zero-sum game

Richard Cooper writes: ‘Widespread economic capacity, in a globally competitive environment, creates options for all parties; and the presence of alternatives undermines the capacity of any one player to achieve its preferred ends, except through good performance in the eyes of its customers’.9 This is a highly idealised picture of the actual global system in which large corporations can allocate markets, choose where to invest, and move money from place to place; and, by using transfer pricing – buying at inflated prices from their own subsidiaries – pay tax wherever they want.10 To these abuses of competition, most economists have one answer: more competition. A far more common – and complex – form of market power is oligopoly: a market dominated by a few large firms (cars, oil, telecoms, aviation), rather than just one. Each firm knows that any pricing or output decision could provoke a reaction from the others.


pages: 263 words: 80,594

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Robert Solow", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, housing crisis, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low skilled workers, market clearing, means of production, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Ponzi scheme, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

Rather than investing themselves, today’s big tech monopolies are growing by merging with or acquiring other firms, increasing their power. They are using this monopoly control to acquire rents, overcharging for some services and failing to pay workers in line with their productivity. Rent extraction and wage suppression amongst some of the largest firms in the global economy accelerate the problems associated with finance-led growth that have been outlined in this book. Many of these corporations are also using transfer pricing and other tactics to avoid paying tax, and some have become so powerful that they are able to escape most attempts to regulate them. These corporations control one of the modern economy’s most valuable resources — data — and they are monopolising this to maximise their profits, rather than using it for innovation or the public good. With the fall of finance-led growth and the rise of the global monopolies constraining investment and productivity in the global North, China has become the engine of global growth since the recession.


pages: 892 words: 91,000

Valuation: Measuring and Managing the Value of Companies by Tim Koller, McKinsey, Company Inc., Marc Goedhart, David Wessels, Barbara Schwimmer, Franziska Manoury

activist fund / activist shareholder / activist investor, air freight, barriers to entry, Basel III, BRICs, business climate, business cycle, business process, capital asset pricing model, capital controls, Chuck Templeton: OpenTable:, cloud computing, commoditize, compound rate of return, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, discounted cash flows, distributed generation, diversified portfolio, energy security, equity premium, fixed income, index fund, intangible asset, iterative process, Long Term Capital Management, market bubble, market friction, Myron Scholes, negative equity, new economy, p-value, performance metric, Ponzi scheme, price anchoring, purchasing power parity, quantitative easing, risk/return, Robert Shiller, Robert Shiller, shareholder value, six sigma, sovereign wealth fund, speech recognition, stocks for the long run, survivorship bias, technology bubble, time value of money, too big to fail, transaction costs, transfer pricing, value at risk, yield curve, zero-coupon bond

The net effect would eliminate $2 million in earnings for ConsumerCo’s consolidated financials (see the Eliminations I column in Exhibit 17.5).4 As for ConsumerCo, in most situations, the earnings impact is small because it is driven by the change in inventory, not the ending inventory. In addition, the $50 million of ending inventory of internal supplies is eliminated in ConsumerCo’s 2015 consolidated financials, with 3 The cumulative value of business units will equal the aggregate value, but the value split depends on the level of transfer pricing between the two units. The higher the transfer price, the more aggregate value is transferred to the private-label business. To value each business unit accurately, record intercompany transfers at the value that would be transacted with third parties. Otherwise, the relative value of the business units will be distorted. 4 There is no impact on cash taxes or NOPLAT from the accounting consolidation. We abstract from any impact of tax consolidation (fiscal grouping) in this example. 384 VALUATION BY PARTS a corresponding deduction from adjusted equity.

Procurement contracts, long-term contracts with customers, and loan agreements, for example, often require the creation of transitional service agreements between buyer and seller to guarantee continuity of the business unit. Or they may include 640 DIVESTITURES change-of-ownership clauses activated upon divestiture that render the existing contract or agreement invalid when ownership in the business transfers. Pricing and Liquidity As discussed in Chapter 5, market valuation levels are generally in line with intrinsic value potential in the long term but can deviate in the short term. A near-term divestiture would seem to be a good idea if the market would price a business above management’s estimate of its intrinsic value. The reverse holds as well: Siemens, for example, abandoned the initial public offering (IPO) of its lighting business OSRAM several times due to adverse market conditions.


pages: 312 words: 91,835

Global Inequality: A New Approach for the Age of Globalization by Branko Milanovic

"Robert Solow", Asian financial crisis, assortative mating, Berlin Wall, bitcoin, Black Swan, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, centre right, colonial exploitation, colonial rule, David Ricardo: comparative advantage, deglobalization, demographic transition, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, Francis Fukuyama: the end of history, full employment, Gini coefficient, Gunnar Myrdal, income inequality, income per capita, invisible hand, labor-force participation, liberal capitalism, low skilled workers, Martin Wolf, means of production, mittelstand, moral hazard, Nash equilibrium, offshore financial centre, oil shock, open borders, Paul Samuelson, place-making, plutocrats, Plutocrats, post scarcity, post-industrial society, profit motive, purchasing power parity, Ralph Nader, Second Machine Age, seigniorage, Silicon Valley, Simon Kuznets, special economic zone, stakhanovite, trade route, transfer pricing, very high income, Vilfredo Pareto, Washington Consensus, women in the workforce

In other words, they limit the ability of national authorities to conduct monetary policy.11 Or take the example of EU laws that supersede national laws or require harmonization between the laws of different nations. Methodological nationalism is clearly inappropriate in this situation. It is also unclear what relevance national exports and imports have in an integrated and globalized economy where large companies, through transfer pricing or internal “exports” and “imports” designed to minimize taxes, can strongly affect national trade statistics, showing a country’s exports to be higher or lower without anything having been effectively changed. Similarly, if, for example, a high proportion of a country’s exports comes from companies that belong to foreigners (as is the case with Ireland), export statistics may look high and Gross Domestic Product may increase, but Gross National Product (which includes only the earnings of citizens) may be much smaller or may move differently from the GDP.


pages: 364 words: 101,286

The Misbehavior of Markets: A Fractal View of Financial Turbulence by Benoit Mandelbrot, Richard L. Hudson

Albert Einstein, asset allocation, Augustin-Louis Cauchy, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black-Scholes formula, British Empire, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, carbon-based life, discounted cash flows, diversification, double helix, Edward Lorenz: Chaos theory, Elliott wave, equity premium, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, full employment, Georg Cantor, Henri Poincaré, implied volatility, index fund, informal economy, invisible hand, John Meriwether, John von Neumann, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market microstructure, Myron Scholes, new economy, paper trading, passive investing, Paul Lévy, Paul Samuelson, plutocrats, Plutocrats, price mechanism, quantitative trading / quantitative finance, Ralph Nelson Elliott, RAND corporation, random walk, risk tolerance, Robert Shiller, Robert Shiller, short selling, statistical arbitrage, statistical model, Steve Ballmer, stochastic volatility, transfer pricing, value at risk, Vilfredo Pareto, volatility smile

He was born in Boston, the son of a Harvard University placement officer; but when World War II began he and his family migrated from city to city, following his father’s military assignments. He also changed universities and concentrations—from the University of California in Berkeley to the campus in Los Angeles, and from medicine to business to economics. His thesis, on a classic economics topic called transfer pricing, was not going well; in fact, one professor advised he drop it. Another suggested he go visit Markowitz, who had left Chicago and was working near UCLA at a well-known think-tank, the RAND Corp. “I introduced myself to him and said I was a great fan of his work,” Sharpe recalled later. And, of course, Markowitz had a good thesis idea, for which he became Sharpe’s unofficial adviser: Simplify the portfolio model.


pages: 489 words: 111,305

How the World Works by Noam Chomsky, Arthur Naiman, David Barsamian

affirmative action, anti-communist, Ayatollah Khomeini, Berlin Wall, Bernie Sanders, Bretton Woods, British Empire, business climate, capital controls, clean water, corporate governance, deindustrialization, Fall of the Berlin Wall, feminist movement, glass ceiling, Howard Zinn, income inequality, interchangeable parts, Isaac Newton, joint-stock company, land reform, liberation theology, Monroe Doctrine, offshore financial centre, plutocrats, Plutocrats, race to the bottom, Ralph Nader, Ronald Reagan, Rosa Parks, single-payer health, strikebreaker, Telecommunications Act of 1996, transfer pricing, union organizing, War on Poverty, working poor

They don’t enter the Mexican market, and there’s no meaningful sense in which they’re exports to Mexico. Still, that’s called “trade.” The corporations that do this are huge totalitarian institutions, and they aren’t governed by market principles—in fact, they promote severe market distortions. For example, a US corporation that has an outlet in Puerto Rico may decide to take its profits in Puerto Rico, because of tax rebates. It shifts its prices around, using what’s called “transfer pricing,” so it doesn’t seem to be making a profit here. There are estimates of the scale of governmental operations that interfere with trade, but I know of no estimates of internal corporate interferences with market processes. They’re no doubt vast in scale, and are sure to be extended by the trade agreements. GATT and NAFTA ought to be called “investor rights agreements,” not “free trade agreements.”


pages: 464 words: 117,495

The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management by Alexander Elder

additive manufacturing, Atul Gawande, backtesting, Benoit Mandelbrot, buy and hold, buy low sell high, Checklist Manifesto, computerized trading, deliberate practice, diversification, Elliott wave, endowment effect, loss aversion, mandelbrot fractal, margin call, offshore financial centre, paper trading, Ponzi scheme, price stability, psychological pricing, quantitative easing, random walk, risk tolerance, short selling, South Sea Bubble, systematic trading, The Wisdom of Crowds, transaction costs, transfer pricing, traveling salesman, tulip mania, zero-sum game

It allows commercial interests to concentrate on their core businesses, offer stable consumer pricing, and obtain a long-term competitive advantage. Hedgers give up a chance of a windfall but insulate themselves from price risks. Survivors value stability. That why the Exxons, the Coca-Colas, and the Nabiscos of the world are among the major players in commodity markets. Hedgers are the ultimate insiders, and a good hedging department not only buys price insurance, but also serves as a profit center. Hedgers transfer price risks to speculators who enter the markets, lured by the glitter of potential profits. It's ironic that hedgers, who have inside information, are not fully confident about prices, while crowds of cheerful outsiders plunk down money to bet on futures. The two largest groups of speculators are farmers and engineers. Farmers produce commodities, while engineers love to apply scientific methods to the futures game.


pages: 436 words: 114,278

Crude Volatility: The History and the Future of Boom-Bust Oil Prices by Robert McNally

American energy revolution, Asian financial crisis, banking crisis, barriers to entry, Bretton Woods, collective bargaining, credit crunch, energy security, energy transition, housing crisis, hydraulic fracturing, index fund, Induced demand, interchangeable parts, invisible hand, joint-stock company, market clearing, market fundamentalism, moral hazard, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, price discrimination, price stability, sovereign wealth fund, transfer pricing

Socal took it over from Gulf in 1934. 90. Parra, Oil Politics, 9. 91. Federal Trade Commission. International Petroleum Cartel, 23. Proved oil reserves are reserves that are economical to produce at prevailing prices and with technology. 92. Federal Trade Commission. International Petroleum Cartel, 25–28. 93. Skeet, OPEC, 5; Parra, Oil Politics, 69–73. 94. Parra, Oil Politics,72. 95. These intra-company transfer prices did not reflect a market price and were used to calculate taxes. Companies shifted profits from higher to lower tax jurisdictions (Fattouh, “Origins and Evolution,” 43). 96. In the industry’s parlance, prices quoted in receiving ports are called “CIF,” which stands for cost, insurance, freight. Prices quoted at shipping terminals are called “FOB,” which stands for free on board. 97. Adelman, World Petroleum Market, 172. 98.


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

"Robert Solow", accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, different worldview, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

All of us together, in and out of government, must bear the burden.” 6 OECD (2009). 7 Baker (2010). 8 Dunleavy and Hood (1994), World Bank (2000), Dunleavy et al. (2006); “The New Public Management and its Legacy,” The World Bank, (2000), http://www.mh-lectures.co.uk/npm_2.htm 9 Kay (2010). 10 Surveys of this literature include O’Flynn (2007), OECD (2001, 2003). 11 OECD (2003), 3. 12 Kamarck (2003). 13 Ibid., 7. 14 The study of the role, nature, and evolution of institutions in economic growth and economic behaviour. 15 The well-known difficulty of establishing correct transfer prices within big organizations illustrates how hard it would be for the transactions concerned to involve explicit prices in an external market. 16 For recent examples see Sowell (2007, 2008), Blond (2010). 17 Simon (1991). 18 An overview of their work is available in the 2009 Nobel citation and background paper http://nobelprize.org/nobel_prizes/economics/laureates/2009/sci.html. Accessed 8 June 2010. 19 Ostrom and Ostrom (2004). 20 Helpman (2004). 21 Thomas Jefferson, letter to Isaac McPherson, 13 August 1813, http://press-pubs.uchicago.edu/founders/documents/a1_8_8s12.html. 22 Andersen (2009). 23 Coyle (2003). 24 Johnson (2009); see also Johnson and Kwak (2010). 25 Kay (2009). 26 European Committee for Interoperable Systems, “The Court of First Instance’s Judgement in Case T-201/04, Microsoft v.


pages: 409 words: 125,611

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"Robert Solow", accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Asian financial crisis, banking crisis, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, Plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Ronald Reagan, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

These international corporations are the big beneficiaries of globalization—it is not, for instance, the average American worker and those in many other countries, who, partly under the pressure from globalization, has seen his income fully adjusted for inflation, including the lowering of prices that globalization has brought about, fall year after year, to the point where a full-time male worker in the U.S. has an income lower than four decades ago. Our multinationals have learned how to exploit globalization in every sense of the term—including exploiting the tax loopholes that allow them to evade their global social responsibilities. The U.S. could not have a functioning corporate income tax system within the country if we had elected to have a transfer price system (where firms “make up” the prices of goods and services that one part buys from another, allowing profits to be booked to one state or another). The U.S. has developed a formulaic system, where global profits are allocated on the basis of employment, sales, and capital goods. But there is plenty of room to further fine-tune the system in response to the easier ability to shift profits around when a major source of the real “value added” is intellectual property.


pages: 487 words: 139,297

Dancing in the Glory of Monsters: The Collapse of the Congo and the Great War of Africa by Jason Stearns

Berlin Wall, business climate, clean water, colonial rule, failed state, Fall of the Berlin Wall, land tenure, Mahatma Gandhi, means of production, microcredit, Nelson Mandela, technology bubble, transfer pricing, unemployed young men, working-age population, éminence grise

Ann Wright and Renée Fenby (London: Verso, 2001), 31. 13 “Demands and Derailment,” Africa Energy & Mining, May 21, 1997. 14 Special Commission Charged with Examining the Validity of Economic and Financial Conventions Concluded During the Wars of 1996–1997 and 1998: The Lutundula Report , National Assembly of the Democratic Republic of the Congo, February 26, 2006, 35. 15 Author’s interview with Mabi Mulumba, Kinshasa, December 2007. 16 Author’s interview with former presidential advisor, Kinshasa, November 2007. 17 Ibid. 18 Lutundula Report, 32–33. 19 The commander of the armed forces was General Vitalis Zvinavashe and the minister of defense Sidney Sekeramayi. 20 Author’s interview with businessman in Paris, February 2008. 21 “Rautenbach Denies Murder Allegation,” South African Press Agency, December 16, 1999. 22 Author’s interview with Gécamines official, Kinshasa, July 2009. 23 Report of the United Nations Panel on the Illegal Exploitation of Natural Resources in the Democratic Republic of the Congo, United Nations, October 8, 2002, 11; Gérard Prunier, Africa’s World War: Congo, the Rwandan Genocide, and the Making of a Continental Catastrophe (Oxford: Oxford University Press, 2009), 218. 24 Author’s off-the-record telephone interview with a mining executive, May 2009. 25 Confidential South African intelligence report in the author’s possession. 26 Report of the United Nations Panel on the Illegal Exploitation of Natural Resources in the Democratic Republic of the Congo, United Nations, April 12, 2001, 33. 27 International Monetary Fund, Democratic Republic of the Congo: Selected Issues and Statistical Appendix, Country Report 1/123, July 2001, 16. 28 Author’s interview with Jean Mbuyu, Kinshasa, November 2007; author’s interview with Mwenze Kongolo, Kinshasa, May 2009. 29 Confidential industry intelligence report on Billy Rautenbach, August 10, 2000. 30 Ibid. 31 Cliff Taylor, “Congo Wealth Lures Africa’s Power-Players,” Independent (London), October 31, 1998; Michael Nest, “Ambitions, Profits and Loss: Zimbabwean Economic Involvement in the DRC,” African Affairs 100, no. 400 (2001): 484. 32 Report of the United Nations Panel, 8. 33 Martin Meredith, Our Votes, Our Guns: Robert Mugabe and the Tragedy of Zimbabwe (New York: PublicAffairs, 2002), 142. 34 Author’s interview with mining officials, Kinshasa, May 2009. There are, unfortunately, almost no legal safeguards in the Congo to prevent such transfer pricing. 35 Author’s interview with Dona Kampata, Kinshasa, July 2009. 36 Prunier, Africa’s World War, 239. 37 His name has been changed to protect his identity. 38 This section is based on several interviews with the pilot in the Eastern Congo, March 2008. 39 The UN panel of experts that was researching the illegal exploitation of natural resources in the Congo at the time was given similar information regarding how long it took to fly the stockpiles to Kigali. 40 According to Global Witness, a kilo of tin was being sold for $6 in Goma in 1998, when the world coltan price was hovering around $60 per kilo of refined tantalum.


pages: 493 words: 132,290

Vultures' Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores by Greg Palast

anti-communist, back-to-the-land, bank run, Berlin Wall, Bernie Madoff, British Empire, capital asset pricing model, capital controls, centre right, Chelsea Manning, clean water, collateralized debt obligation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, energy security, Exxon Valdez, invisible hand, means of production, Myron Scholes, Nelson Mandela, offshore financial centre, Pepto Bismol, random walk, Ronald Reagan, sensible shoes, transfer pricing, uranium enrichment, Washington Consensus, Yogi Berra

I did, and simultaneously worked my way into a closed little circle called “The Workshop on Latin America,” led by Arnold Harberger, the post-graduate seminar better known as the Chicago Boys, the crew then advising the dictator of Chile, Augusto Pinochet. Milton Friedman was easy to charm. The charm I used on him was a theory I had about a new phenomenon: multinational corporations. These huge international corporations could, through their internal transfer pricing and accounting methods, work around the centuries-old laws that controlled, and pretty much prevented, speculators from shifting capital across borders. Once these capital controls were finally defeated and removed, I foresaw a dystopic world, with borders erased, with international corporations more powerful than any nation and above any one nation’s laws or regulations, markets unchained, trade barriers demolished, and finance capital racing like a wild animal from continent to continent.


How I Became a Quant: Insights From 25 of Wall Street's Elite by Richard R. Lindsey, Barry Schachter

Albert Einstein, algorithmic trading, Andrew Wiles, Antoine Gombaud: Chevalier de Méré, asset allocation, asset-backed security, backtesting, bank run, banking crisis, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, Brownian motion, business cycle, business process, butter production in bangladesh, buy and hold, buy low sell high, capital asset pricing model, centre right, collateralized debt obligation, commoditize, computerized markets, corporate governance, correlation coefficient, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, discounted cash flows, disintermediation, diversification, Donald Knuth, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial innovation, fixed income, full employment, George Akerlof, Gordon Gekko, hiring and firing, implied volatility, index fund, interest rate derivative, interest rate swap, John von Neumann, linear programming, Loma Prieta earthquake, Long Term Capital Management, margin call, market friction, market microstructure, martingale, merger arbitrage, Myron Scholes, Nick Leeson, P = NP, pattern recognition, Paul Samuelson, pensions crisis, performance metric, prediction markets, profit maximization, purchasing power parity, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Richard Feynman, Richard Stallman, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, sorting algorithm, statistical arbitrage, statistical model, stem cell, Steven Levy, stochastic process, systematic trading, technology bubble, The Great Moderation, the scientific method, too big to fail, trade route, transaction costs, transfer pricing, value at risk, volatility smile, Wiener process, yield curve, young professional

For brevity’s sake, I have excluded some themes, including my contributions into asset/liability management for both banks and insurance companies. JWPR007-Lindsey May 7, 2007 16:50 Thomas C. Wilson 99 The Early 1990s: The Market Risk Era The early 1990s marked the market risk era. During this period, the banking industry developed economic capital or value-at-risk (VaR) models, Raroc performance measures,1 and treasury funds transfer pricing rules in order to answer questions with substantial strategic consequences. In order to understand these developments, as well as the contributions I made during this period, it is useful to provide some historical context. Although complex and difficult to summarize, several forces were at work in the early 1990s that helped to shape the market risk and treasury agenda. Primary among these was “The Great Derivatives Debate.”


Adam Smith: Father of Economics by Jesse Norman

"Robert Solow", active measures, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

These companies have grown through brilliant innovations in technology and business processes, which they have used to offer new services of immense value to individual and corporate consumers. The possibilities for future social benefit are far-reaching, from artificial intelligence to smart manufacturing to the deep integration of machines into human biology. Yet the possibilities for abuse are arguably no less great. Public attention has rightly focused so far on apparently egregious uses of intra-company transfer pricing and other devices to reduce tax payments to a minimum. But there is another issue that may ultimately cast a still longer shadow. These companies enjoy gigantic and increasing asymmetries of power and information versus the individual consumer. These asymmetries often allow them the scope to exploit their consumers, both in specific segments or in groups and individually, in ways that run counter to established norms of fair dealing and justice.


pages: 641 words: 147,719

The Rough Guide to Cape Town, Winelands & Garden Route by Rough Guides, James Bembridge, Barbara McCrea

affirmative action, Airbnb, blood diamonds, British Empire, Cape to Cairo, carbon footprint, colonial rule, F. W. de Klerk, ghettoisation, haute cuisine, Maui Hawaii, Murano, Venice glass, Nelson Mandela, out of africa, ride hailing / ride sharing, Robert Gordon, Skype, sustainable-tourism, trade route, transfer pricing, young professional

The weekly outdoor market features food by the Village traders ranging from Italian to Mexican. Masiphumelele Bicyle Tour Tying in with a bike-based community scheme, Awol Tours (021 418 3803, awoltours.co.za) offers a guided cycle tour around Kommetjie’s Masiphumelele township, learning about Xhosa customs en route, visiting a crèche and a sangoma (traditional healer) and stopping for lunch at a township café or home. The half-day tour costs R950 per person, R1850 including transfers. Prices are based on two people; single guests pay a supplement. Cape Point Vineyards Silvermine Rd • Tastings Mon–Weds & Fri–Sun 11am–6pm, Thurs 11am–2pm; picnics Mon–Weds & Fri–Sat noon–4pm; community market Thurs 4.30–8.30pm • Taster R10; platter R95–295; picnic basket for two R395 • 021 789 0900, cpv.co.za Cape Point Vineyards, the main producer in the Cape Point wine region, is known for its mineral-characterised sauvignon blancs, made with the help of the cooling sea breezes.


pages: 552 words: 168,518

MacroWikinomics: Rebooting Business and the World by Don Tapscott, Anthony D. Williams

accounting loophole / creative accounting, airport security, Andrew Keen, augmented reality, Ayatollah Khomeini, barriers to entry, Ben Horowitz, bioinformatics, Bretton Woods, business climate, business process, buy and hold, car-free, carbon footprint, Charles Lindbergh, citizen journalism, Clayton Christensen, clean water, Climategate, Climatic Research Unit, cloud computing, collaborative editing, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, commoditize, corporate governance, corporate social responsibility, creative destruction, crowdsourcing, death of newspapers, demographic transition, disruptive innovation, distributed generation, don't be evil, en.wikipedia.org, energy security, energy transition, Exxon Valdez, failed state, fault tolerance, financial innovation, Galaxy Zoo, game design, global village, Google Earth, Hans Rosling, hive mind, Home mortgage interest deduction, information asymmetry, interchangeable parts, Internet of things, invention of movable type, Isaac Newton, James Watt: steam engine, Jaron Lanier, jimmy wales, Joseph Schumpeter, Julian Assange, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, Marc Andreessen, Marshall McLuhan, mass immigration, medical bankruptcy, megacity, mortgage tax deduction, Netflix Prize, new economy, Nicholas Carr, oil shock, old-boy network, online collectivism, open borders, open economy, pattern recognition, peer-to-peer lending, personalized medicine, Ray Kurzweil, RFID, ride hailing / ride sharing, Ronald Reagan, Rubik’s Cube, scientific mainstream, shareholder value, Silicon Valley, Skype, smart grid, smart meter, social graph, social web, software patent, Steve Jobs, text mining, the scientific method, The Wisdom of Crowds, transaction costs, transfer pricing, University of East Anglia, urban sprawl, value at risk, WikiLeaks, X Prize, young professional, Zipcar

Build New Revenue and Collaboration Models Between Higher Education Institutions to Break Down the Silos Between Them Right now, universities around the world are embracing, to varying degrees, levels one and two—course content exchange and co-innovation—of the Global Network for Higher Learning. But we need to move to the next level. To achieve a Global Network for Higher Learning where students can benefit from the capability of any university in the world, we will need a collaborative revenue model and a new structure of transfer pricing. Students would enroll with their “primary” university, which would handle the disbursement of their tuition fees depending on what other university courses they study. The value of, say, a second-year psychology course at Stanford would be determined by market forces, not some central bureaucracy. Change Incentive Systems to Reward Teaching, Not Just Research Why are universities judged by the number of students they exclude or by how much they spend?


pages: 596 words: 163,682

The Third Pillar: How Markets and the State Leave the Community Behind by Raghuram Rajan

activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airline deregulation, Albert Einstein, Andrei Shleifer, banking crisis, barriers to entry, basic income, battle of ideas, Bernie Sanders, blockchain, borderless world, Bretton Woods, British Empire, Build a better mousetrap, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, computer vision, conceptual framework, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, data acquisition, David Brooks, Deng Xiaoping, desegregation, deskilling, disruptive innovation, Donald Trump, Edward Glaeser, facts on the ground, financial innovation, financial repression, full employment, future of work, global supply chain, high net worth, housing crisis, illegal immigration, income inequality, industrial cluster, intangible asset, invention of the steam engine, invisible hand, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, labor-force participation, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, means of production, moral hazard, Network effects, new economy, Nicholas Carr, obamacare, Productivity paradox, profit maximization, race to the bottom, Richard Thaler, Robert Bork, Robert Gordon, Ronald Reagan, Sam Peltzman, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South China Sea, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, superstar cities, The Future of Employment, The Wealth of Nations by Adam Smith, trade liberalization, trade route, transaction costs, transfer pricing, Travis Kalanick, Tyler Cowen: Great Stagnation, universal basic income, Upton Sinclair, Walter Mischel, War on Poverty, women in the workforce, working-age population, World Values Survey, Yom Kippur War, zero-sum game

Many countries in Europe as well as in emerging markets follow such practices and the United States is attempting it again by designating certain areas as opportunity zones.14 When unaccompanied by a collective local effort to attract business and reduce the costs of doing business, such incentives typically do not offset the higher cost of doing business in remote or distressed areas. As a result, even if companies do locate in the distressed area, they often try to game such incentives by only placing a skeleton operation there. Even though they do much of the work elsewhere, they show through clever transfer pricing that the value is added in the distressed area, so that they can collect the incentives. Therefore, tax incentives are usually useful only as part of an overall package of measures that a community takes to improve its attractiveness to businesses. In practice, though, the federal government finds it hard to single out communities where a serious revival effort is under way. When it simply gives incentives to all firms that locate in distressed communities, the federal government ends up subsidizing bogus skeleton operations, firms that were going to invest there anyway, and firms whose investment does not add value, along with small quantities of genuine new useful investment.


pages: 585 words: 165,304

Trust: The Social Virtue and the Creation of Prosperity by Francis Fukuyama

barriers to entry, Berlin Wall, blue-collar work, business climate, business cycle, capital controls, collective bargaining, corporate governance, corporate raider, creative destruction, deindustrialization, Deng Xiaoping, deskilling, double entry bookkeeping, equal pay for equal work, European colonialism, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global village, Gunnar Myrdal, hiring and firing, industrial robot, Jane Jacobs, job satisfaction, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, land reform, liberal capitalism, liberation theology, low skilled workers, manufacturing employment, mittelstand, price mechanism, profit maximization, RAND corporation, rent-seeking, Ronald Coase, Silicon Valley, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, transfer pricing, traveling salesman, union organizing

Large corporations are generally able to borrow money at lower real rates of return than small ones;23 the keiretsu in effect socializes the costs of capital among its members and uses the stable income from the older and better-established firms to subsidize the newer and riskier ventures. Finally, the keiretsu bank, through preferential lending, can serve as a price-clearing agent, helping to equalize rates of return for member companies whose profits have been adversely affected by noncompetitive pricing, much like a corporate treasury that compensates divisions for losses on distorted intracompany transfer pricing. There may be other rationales for intermarket keiretsu. The keiretsu’s brand names, for instance, can be used in new product markets to establish credibility. One very important function that the keiretsu played in the 1960s and 1970s was to block or otherwise control the degree of direct foreign investment in Japan. When the Japanese government agreed to liberalize capital markets in the late 1960s, many Japanese companies feared an influx of foreign, mostly U.S., competition as outside multinationals bought stakes in Japanese businesses.


pages: 554 words: 168,114

Oil: Money, Politics, and Power in the 21st Century by Tom Bower

addicted to oil, Ayatollah Khomeini, banking crisis, bonus culture, corporate governance, credit crunch, energy security, Exxon Valdez, falling living standards, fear of failure, forensic accounting, index fund, interest rate swap, kremlinology, LNG terminal, Long Term Capital Management, margin call, Mikhail Gorbachev, millennium bug, MITM: man-in-the-middle, Nelson Mandela, new economy, North Sea oil, offshore financial centre, oil shale / tar sands, oil shock, passive investing, peak oil, Piper Alpha, price mechanism, price stability, Ronald Reagan, shareholder value, short selling, Silicon Valley, sovereign wealth fund, transaction costs, transfer pricing, zero-sum game, éminence grise

None of their experts had accurately assessed all the consequences of President Putin’s seizure of Yukos in November 2003. Nor did they link it with the decision by Gennadi Timchenko, Putin’s key adviser about oil during the Saint Petersburg era, to move Gunvor, a Russian oil trader, from London to Switzerland. Some said the move was executed to exploit an easier climate, beyond regulatory reach. Others assumed that Gunvor was involved in transfer pricing by reselling Russian crude oil and refined products bought for artificially low prices. A few in Moscow felt that Timchenko was doing the opposite, paying top prices for Russian crude to get market share and earning his profits from refined products. In more prosaic language, Albert Helmig, a former vice chairman of Nymex, who had served on several of its regulatory committees, explained that in Switzerland Timchenko could benefit from “better vocabulary texture.”


Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals by David Aronson

Albert Einstein, Andrew Wiles, asset allocation, availability heuristic, backtesting, Black Swan, butter production in bangladesh, buy and hold, capital asset pricing model, cognitive dissonance, compound rate of return, computerized trading, Daniel Kahneman / Amos Tversky, distributed generation, Elliott wave, en.wikipedia.org, feminist movement, hindsight bias, index fund, invention of the telescope, invisible hand, Long Term Capital Management, mental accounting, meta analysis, meta-analysis, p-value, pattern recognition, Paul Samuelson, Ponzi scheme, price anchoring, price stability, quantitative trading / quantitative finance, Ralph Nelson Elliott, random walk, retrograde motion, revision control, risk tolerance, risk-adjusted returns, riskless arbitrage, Robert Shiller, Robert Shiller, Sharpe ratio, short selling, source of truth, statistical model, stocks for the long run, systematic trading, the scientific method, transfer pricing, unbiased observer, yield curve, Yogi Berra

Because stocks and corporate bond investments expose investors to risks that exceed the risk-free rate (government treasury bills), investors are compensated with a risk premium—the equity risk premium and the corporate-bond risk premium. The economic function of the futures markets has nothing to do with raising capital and everything to do with price risk. Price changes, especially large ones, are a source of risk and uncertainty to businesses that produce or use commodities. The futures markets provide a means by which these businesses, called commercial hedgers, can transfer price risk to investors (speculators). At first blush, it may seem puzzling that commercial hedgers would even need investors to assume their price risk. Because some hedgers need to sell, like the farmer who grows wheat, and some need to buy, like the bread company that uses wheat, why don’t hedgers simply contract with each other? They do, but often there is an imbalance in their hedging needs. Sometimes wheat farmers have more wheat to sell than bakery companies and other commercial users of wheat need to buy.


Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, market fundamentalism, means of production, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

However, while “tax avoidance” 334 Termites of the State exploits existing loopholes in the tax legislations of countries and relies on favorable interpretations of ambiguous rules, and is thus not clearly illegal and punishable, tax evasion breaks some tax rules and is thus punishable. Large enterprises, such as Apple and Starbucks, that have paid little taxes on enormous world profits have argued, with some justification, that they have been following existing laws and have not been evading taxes. The problem is the tax laws and not their behavior. Expressions such as “inversion,” “transfer prices,” “patent boxes,” “thin capitalization,” and “double Irish” have entered the lexicon of media reporting. They reflect tax avoidance strategies used by corporations. Similar examples could be provided from several areas of the financial market or from other sectors. Once again it must be remarked that those who benefit from these interpretations are not the average workers, and that these strategies end up affecting Gini coefficients and equity.


pages: 829 words: 186,976

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't by Nate Silver

"Robert Solow", airport security, availability heuristic, Bayesian statistics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Swan, Broken windows theory, business cycle, buy and hold, Carmen Reinhart, Claude Shannon: information theory, Climategate, Climatic Research Unit, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, computer age, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, Daniel Kahneman / Amos Tversky, diversification, Donald Trump, Edmond Halley, Edward Lorenz: Chaos theory, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, everywhere but in the productivity statistics, fear of failure, Fellow of the Royal Society, Freestyle chess, fudge factor, George Akerlof, global pandemic, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the printing press, invisible hand, Isaac Newton, James Watt: steam engine, John Nash: game theory, John von Neumann, Kenneth Rogoff, knowledge economy, Laplace demon, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, negative equity, new economy, Norbert Wiener, PageRank, pattern recognition, pets.com, Pierre-Simon Laplace, prediction markets, Productivity paradox, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, Saturday Night Live, savings glut, security theater, short selling, Skype, statistical model, Steven Pinker, The Great Moderation, The Market for Lemons, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, transfer pricing, University of East Anglia, Watson beat the top human players on Jeopardy!, wikimedia commons

Bill James, who twenty-five years earlier had ushered in the Sabermetric era* by publishing a book called The Bill James Baseball Abstract, was soon to be hired as a consultant by the Red Sox. An unhealthy obsession with baseball statistics suddenly seemed like it could be more than just a hobby—and as it happened, I was looking for a new job. Two years out of college, I was living in Chicago and working as something called a transfer pricing consultant for the accounting firm KPMG. The job wasn’t so bad. My bosses and coworkers were friendly and professional. The pay was honest and I felt secure. But telling a company how to set prices at its cell phone factory in Malaysia so as to minimize its tax exposure, or hopping a 6 A.M. flight to St. Louis to value contracts for a coal company, was not exactly my idea of stimulating work.


pages: 1,065 words: 229,099

Real World Haskell by Bryan O'Sullivan, John Goerzen, Donald Stewart, Donald Bruce Stewart

bash_history, database schema, Debian, distributed revision control, domain-specific language, en.wikipedia.org, Firefox, general-purpose programming language, Guido van Rossum, job automation, Larry Wall, lateral thinking, p-value, plutocrats, Plutocrats, revision control, sorting algorithm, transfer pricing, type inference, web application

We can use retry to correct this, while keeping the function’s type the same: -- file: ch28/GameInventory.hs transfer :: Gold -> Balance -> Balance -> STM () transfer qty fromBal toBal = do fromQty <- readTVar fromBal when (qty > fromQty) $ retry writeTVar fromBal (fromQty - qty) readTVar toBal >>= writeTVar toBal . (qty +) Now that we are using retry, our item sale function becomes dramatically simpler: -- file: ch28/GameInventory.hs sellItem :: Item -> Gold -> Player -> Player -> STM () sellItem item price buyer seller = do giveItem item (inventory seller) (inventory buyer) transfer price (balance buyer) (balance seller) Its behavior is slightly different from our earlier function. Instead of immediately returning False if the seller doesn’t have the item, it will block (if necessary) until both the seller has the item and the buyer has enough money to pay for it. The beauty of STM lies in the cleanliness of the code it lets us write. We can take two functions that work correctly, and use them to create a third that will also behave itself, all with minimal effort.


Cuba Travel Guide by Lonely Planet

Bartolomé de las Casas, battle of ideas, business climate, car-free, carbon footprint, cuban missile crisis, G4S, glass ceiling, haute cuisine, Hernando de Soto, Kickstarter, Monroe Doctrine, new economy, ride hailing / ride sharing, Ronald Reagan, transatlantic slave trade, transcontinental railway, transfer pricing, urban planning

Added recently is a boat adventure in the mangroves (CUC$37) and swimming with a couple of dolphins (CUC$90) near Playa Sirena. You can also organize day trips to Havana and Trinidad (approximately CUC$150 to CUC$160). Ask at the hotels. Marina Internacional Cayo Largo DIVING, FISHING ( 24-81-33; Combinado) Just beyond the turtle farm in Combinado, this is the departure point for deep-sea fishing trips (CUC$325 for four hours and eight people) and diving (CUC$39 for one immersion including hotel transfer). Prices are more expensive here because you can’t shop around. The marina also organizes two international fishing tournaments held here in September. Sleeping All of Cayo Largo del Sur’s hotels face the 4km beach on the south side of the island. Though largely shadeless, the beach here is gorgeous and rarely crowded (as no one lives here). If you’re on a day trip, a day pass to the Sol resorts is CUC$35 including lunch.


Lonely Planet Greek Islands by Lonely Planet, Alexis Averbuck, Michael S Clark, Des Hannigan, Victoria Kyriakopoulos, Korina Miller

car-free, carbon footprint, credit crunch, eurozone crisis, G4S, haute couture, haute cuisine, low cost airline, low cost carrier, Norman Mailer, pension reform, period drama, sensible shoes, sustainable-tourism, trade route, transfer pricing, urban sprawl

Miaoulia Festival CULTURE ( 3rd weekend of Jun) Celebration of Admiral Miaoulis and the Hydriot contribution to the War of Independence with an exuberant mock battle (with fireworks) in Hydra harbour. Rembetika Conference MUSIC (www.rebetology.com; Oct) Musicians and music-lovers gather to enjoy traditional Greek rembetika (blues songs). Sleeping Accommodation in Hydra is of a high standard, but you pay accordingly. Most owners will meet you at the harbour if pre-arranged and can organise luggage transfer. Prices drop midweek and for longer stays. Hydra Hotel BOUTIQUE STUDIOS €€ Offline map ( 22980 53420, 6972868161; www.hydra-hotel.gr; Petrou Voulgari 8; studio incl breakfast €100-130, apt €160-230, maisonette €230; ) Climb high on the south side of the port to swishy, top-of-the-line apartments in an impeccably renovated ancient mansion with kitchenettes and sweeping views. Get room 202 for a tiny balcony with panoramas to die for.


pages: 1,293 words: 357,735

The Coming Plague: Newly Emerging Diseases in a World Out of Balance by Laurie Garrett

Albert Einstein, Berlin Wall, biofilm, British Empire, Buckminster Fuller, clean water, correlation does not imply causation, discovery of penicillin, double helix, European colonialism, Fall of the Berlin Wall, germ theory of disease, global pandemic, global village, indoor plumbing, invention of air conditioning, John Snow's cholera map, land reform, Live Aid, Louis Pasteur, Marshall McLuhan, mass incarceration, megacity, Menlo Park, Mikhail Gorbachev, Nelson Mandela, New Urbanism, phenotype, price mechanism, Ralph Nader, Ronald Reagan, Rosa Parks, South China Sea, the scientific method, trade route, transfer pricing, upwardly mobile, urban renewal, urban sprawl, Zimmermann PGP

Bibile, “The Political Economy of Controlling Transnationals: The Pharmaceutical Industry in Sri Lanka, 1972–1976,” International Journal of Health Services 8 (1978): 299–328: T. Heller, Poor Health, Rich Profits: Multinational Drug Companies and the Third World (London: Spokesman Books, 1977); UNCTAD Secretariat, “Dominant Positions of Market Power of Transnational Corporations: Use of the Transfer Pricing Mechanism,” Geneva, November 30, 1977; J. M. Starrels, “The World Health Organization, Resisting Third World Ideological Pressures” (Washington, D.C.: Heritage Foundation, 1985); R. Deitch, “Commentary from Westminster: More Pressure on the Profits of the Pharmaceutical Industry,” Lancet I (1984): 521; and International Federation of Pharmaceutical Manufacturers Associations (IFPMA), “Medicines and the Developing World,” Geneva, 1984. 136 S.