ANN CAHILL: Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Inequality is reaching new extremes, fuelled by an ongoing monopoly on power as well as money, and Ireland’s low tax regime is complicit, says Europe Correspondent Ann Cahill.

Oxfam, in the business of battling poverty worldwide for more than 70 years, says inequality is reaching new extremes despite massive growth in the global economy. But it is benefitting almost uniquely the rich, and even their club is getting smaller.

Part of the reason, the British-based charity shows, is that “tax is for little people”, with the wealthiest having $7.6tn (€6.98tn) salted away in tax havens — more than the combined gross domestic product of Britain and Germany.

Oxfam includes Ireland as one of 10 regimes that allow wealthy individuals and massive multinational corporations to avoid paying out the same percentage of their income in taxes as ordinary citizens.

IMF data referenced in the report also shows that corporate investment in these tax havens increased by almost four times between2000 and 2014

This may come as something of a shock given the recent changes to the country’s tax rules, but Oxfam points out that, despite this, and the OECD devising new structures, not enough is changing and countries, including Ireland, have ensured new rules have been watered down.

The average yearly income of the poorest 10% has increased by less than $3 in the past 25 years. Close to half the overall growth in income went to the top 10%, while the bottom 10% got a miserable 0.6%.

“Far from trickling down, income and wealth are instead being sucked upwards at an alarming rate,” the report says. “Once there, an ever more elaborate system of tax havens and an industry of wealth managers ensure that it stays there, far from the reach of ordinary citizens and their governments.”

But the money being sucked up by the top 1% is not just coming from the poor, but also from ordinary workers as they receive less of what they help create, while more of it goes to the owners of capital and the men at the top. The CEOs in top US companies have had a pay rise of more than 54% in the past five years, while ordinary wages have barely moved — despite big increases in labour productivity.

This creates a spiral of inequalities, with women in particular falling behind even further, with poorer health care, education, political representation, and work compared to men. Even among the richest, women get less of the pie, with 445 of the richest 500 being men while, at the other end of the scale, women make up the majority of low-paid workers.

And as the rich get richer, they also get more powerful, persuading or dictating to governments the policies they want.

“Economic and policy changes over the past 30 years — including deregulation, privatisation, financial secrecy and globalisation, especially of finance — have supercharged the age-old ability of the rich and powerful to use their position to further concentrate their wealth,” the report states.

Our politicians have bought into the myth that low taxes for rich people and companies are needed to spur economic growth that will trickle down to all. With some countries acting as tax havens, it puts pressure on others to lower taxes on businesses and the rich in what Oxfam describes as a “relentless race to the bottom”.

It feeds into a cycle of doom, as fewer taxes mean fewer services, with higher indirect tax such as Vat hitting the poorest most. And tax avoidance is rapidly getting worse, says Oxfam.

They analysed 200 companies and found that nine out of 10 have a presence in at least one tax haven, while, in 2014, corporate investment in these tax havens was almost four times more than it was in 2001.

The financial sector has grown most rapidly in recent years and now produces one in every five billionaires. The difference between what they pay themselves and the actual value their industry adds to the country is greater than in any other sector. Added to this is the fact that the majority of offshore wealth is managed by just 50 big banks.

Oxfam quotes a recent study by the OECD that is pertinent for Ireland, which shows countries with oversized financial sectors suffer greater economic instability and higher inequality.

The report fingers another sector that is big in Ireland — pharmaceutical companies — and especially their use of monopoly and intellectual property to drive up prices. They lobby to keep their monopoly and, rather than putting the needs of the ill first, they orchestrate their business to create profit at almost any cost to others.

Oxfam found that pharmaceutical companies spent more than $228m lobbying in Washington in 2014 — which several examples show is money well spent, having convinced the US to pressure India, and the EU and the US pressured Thailand to step back from allowing generics to be produced at a fraction of the cost they were paying Big Pharma. Limits on governments’ ability to act for cheaper medicines is also being enshrined in free trade agreements.

The “takeover” by Ireland-based Allergen of the much larger Pfizer as a way of ensuring Pfizer can avail of Ireland’s low corporation tax is one instance in the report of companies trying to influence tax law.

Intellectual property has spawned a whole new industry and is what allows companies such as Apple to charge companies they own massive sums for the use of’ their intellectual property, and offset it against tax. It is particularly valuable to the pharma industry — one of the most profitable on the planet that has helped create more than 90 billionaires.

But they are doing less high-risk research and development and, in the US, 75% of the most innovative drugs owe their existence to public funding. They now spend more on marketing than on research and development.

Now with the OECD clamping down on some traditional tax avoidance methods, countries including Ireland are devising new systems to allow multinationals to reduce their tax liability, such as patent boxes or, in Ireland’s case, “knowledge development boxes”.

They are ostensibly designed to encourage research and development, and Oxfam points out that intellectual property protection can ensure the creators are rewarded, or allow companies to dominate markets.

The growth of monopolies is also hurting the real economy, with massive companies dominating markets, from Google to drinks giant AB InBev and Monsanto that genetically engineers 80% of the corn in the US and dominates research globally on GM crops and their safety.

There is little good news on the horizon, with the millions laid off during the economic crisis globally still out of work and with the fastest growing sector, high-tech services, creating the fewest jobs. And despite better education, the International Labour Organization says that young people and women in particular are suffering the most.

“The current system did not come about by accident; it is the result of deliberate policy choices, of our leaders listening to the 1% and their supporters rather than acting in the interests of the majority. It is time to reject this broken economic model,” Oxfam says.

It is calling for an end to tax havens as a priority; pay workers a living wage; promote women’s economic equality; keep in check the influence of powerful elites; change the global system for R&D and pricing of medicines; share the tax burden fairly; and use progressive public spending to tackle inequality.

The Billionaire Club

Bill Gates, the founder of technology company Microsoft , topped Forbes’ 2015 list of the world’s top billionaires for the second straight year.

In 2013, Mexican billionaire Carlos Slim Helu was on top. He ranked second this time. Forbes said it calculated each person’s net worth based on stock prices and exchange rates on February 13, 2014.

Here’s a list of the Top 10, along with the Irish Top 5:

1. Bill Gates

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $79.2bn

Source of wealth: Technology company Microsoft

Nationality: American

2. Carlos Slim Helu

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $77.1bn

Source of wealth: Telecommunications

Nationality: Mexican

 

3. Warren Buffett

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $72.7bn

Source of wealth: Investment holding firm Berkshire Hathaway Inc

Nationality: American

 

4. Amancio Ortega

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $64.5bn

Source of wealth: Retail chain Zara

Nationality: Spanish

 

5. Larry Ellison

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $54.3bn

Source of wealth: Technology company Oracle Corp.

Nationality: American

 

6. Charles Koch (tie)

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $42.9bn

Source of wealth: Koch Industries.

Nationality: American

 

6. David Koch (tie)

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $42.9bn

Source of wealth: Koch Industries.

Nationality: American

 

8. Christy Walton

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $41.7bn

Source of wealth: Retailer Wal-Mart Stores.

Nationality: American

 

9. Jim Walton

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $40.6bn

Source of wealth: Retailer Wal-Mart Stores.

Nationality: American

 

10. Liliane Bettencourt

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: $40.1bn

Source of wealth: Cosmetics company L’Oreal

Nationality: French

And flying the green flag....

1. Pallonji Mistry

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: €14.5bn

Source of wealth: Construction - The 85-year-old became an Irish citizen in 2003 following his marriage to Dublin-born Patsy Perin Dubash.

 

2. Denis O’Brien

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: €6.08bn

Source of wealth: Telecoms and media empire.

 

3. Martin Naughton

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: €2.5bn

Source of wealth: In 1973, he founded Glen Electric, a manufacturing firm employing 10 people in Newry, Co Down. In 1977, he acquired leading electrical heating brand 

 

4. John Dorrance III

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: €2.3bn

Source of wealth: Campbells Soup heir. The American-born Irish citizen lives in South Dublin.

 

5. Dermot Desmond

Global inequality rises at a truly staggering rate and Ireland’s low tax regime is complicit

Net worth: €1.5bn

Source of wealth: The Dubliner created a private equity firm after founding and selling NCB Stockbrokers.

  • The Oxfam report can be read in full below ...  


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