The Triumph of Injustice

Is there a tax collection problem? Are companies not paying their fair share? If so, how much? And, who cares? Is it just because they are smart, as Trump proclaimed when asked about his lack of paying taxes? The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay (2019) by Saez and Zucman answer these questions (most of which is available and updated on their website. A few notes:

"At the heart of today's tax dodging lies a powerful and versatile technology: the offshore shell company. Popularized in 2016 by the revelations in the Panama Papers, the offshore shell company is like a multi-tool. It can be used to avoid estate taxes, capital gains taxes, ordinary income taxes, wealth taxes, corporate income taxes, withholding taxes on cross-border payments of interest, dividends, and royalties. It can also come in handy if you want to defraud the IRS, ex-spouses, children, business partners, or creditors. It's not unhelpful if your goal is to practice insider trading, launder money, pocket illegal commissions, fund an electoral campaign under the table, or finance terrorist groups. As an emblem of the zero-sum economy, the offshore shell has no rivals." (p. 63-64)

"In 2003, a year before it was listed as a public company in August 2004, Google sold its search and advertisement technology to its own "Google Holdings," a subsidiary incorporated in Ireland, but for Irish tax purposes a tax resident of Bermuda, an island in the Atlantic where its "mind and management" are supposedly located... In just one year, 2017 (the latest year available), Google Holdings in Bermuda made $22.7 billion in revenue. How so? Because it's the legal owner of some of Google's most valuable technologies. Google Holdings licenses the right to use its technology to Google's affiliates throughout Europe. (A similar scheme is used in Asia, with Singapore in lieu of Bermuda). Google's subsidiaries in Germany or France pay billions of dollars in royalties to Google Holdings for the right to use to so-called Bermudian technology, reducing the tax base in Germany and in France, and increasing it in Bermuda by the same amount. The corporate tax rate in Bermuda? Zero." (p. 75-75)

"A recent study estimates that globally, 40% of all multinational profits - profits made by firms outside of the country where they are incorporated, such as the profits made by Apple outside of the United States, or those of Volkswagen outside of Germany - are booked in tax havens today. This corresponds to around $800 billion in income earned in the United States, France, or Brazil that ends up being booked and taxed in the Cayman Islands, Luxembourg, or Singapore, usually at rates between 5% and 10%. In this war of all multinationals against all states, US multinationals appear to be the boldest: they shift not 40% (the world average) but 60% of their foreign profits to offshore tax havens each year." (p. 78)

"With tax avoidance reduced to a minimum, there's a wide consensus that increasing the amount of revenue collected from the wealthy is possible. But how much exactly? According to our computations, by about four percentage points of national income, or $750 billion a year in 2019." (p. 143)

"Among the many policies that can curb the power of established wealth and contain rent-seeking, the quasi-confiscatory taxation of very high incomes historically has proved effective. But it faces a major limitation: as we've seen, it's become too easy for the very rich to own a lot of wealth while reporting little taxable income. Reinstating a 90% top marginal income tax rate would not make a meaningful difference to the tax bills of many of America's billionaires. Overcoming this limitation requires taxing top wealth itself at high rates. A moderate wealth tax at a marginal tax rates of 2% above $50 million and 3% above $1 billion, such as the one discussed in the previous chapter, would generate a lot of revenue - about 1% of GDP each year, according to our estimates." (p. 173-174) 

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Ending Aid Dependence

Looking for a different perspective on aid? A short publication (144 pages) called Ending Aid Dependence (2008) by Yash Tandon, with a forward by the former President of Tanzania Benjamin Mkapa, is well worth your read. The book is published by Fahamu, which also published Shivji's book on NGOs. A few notes:

"The political rationale and teleological direction of the South Commission Report was succinctly summarised by Nyerere in these five headings: development shall be people centred; pursue a policy of maximum national self-reliance; supplement that with a policy of maximum collective South-South self-reliance; build maximum South-South solidarity in your relationships with the North; develop science and technology." (p. 16) 

"Historically, all imperial projects begin with military conquest, then with economic restructuring so that the colonised country's economy services the needs of the imperial nations, and finally ideological conversion of the colonised leadership and population through education, training, etc. It is the same pattern with the present development aid architecture." (p. 22)

"It is clear that IMF bail-outs to the hard-pressed economies of all these countries in the South that, through ignorance or naivety, accepted them, were not to protect these economies. The objective, or at any rate the effect, was to bail out hard-pressed American financial and banking interests, and to create conditions for further control by American (and allied) capital over the national economies of the developing countries in distress. In other words, these developing countries were placed in distress through debt burden, trade liberalisation, and the other Red Aid conditionalities of donor funding, and then to get them out of the distress, the IMF moved in and cleared the way for AmericanEuropean-Japanese capital to take over. This, at least, is what evidence shows on the ground, whatever the neoliberal theorists might say in their erudite books." (p. 62)

 "Ending aid dependence is not a one-day project. Deeply embedded structures and the power of vested interests do not disappear overnight. Neither do they disappear on their own. Cutting off from aid dependence is an act of political will. Aid's demise has to be strategised carefully, like fighting a war, no less. It cannot be left only to politicians, or officials, or experts. However, without their active involvement the strategy cannot succeed. It is the combined efforts of the people and their leaders that can lift the mental shackles of the past." (p. 77)

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The Racial Contract

Mills' The Racial Contract (1997) is essential reading - short and generally accessible (the philosophy might be a challenge for those outside of it), but well worth struggling through. Charles W. Mills is currently at City University of New York and has written a number of books (reviews of others to come). The book seems to be available here, via the Publisher. A selection of notes from this book:

"White supremacy is the unnamed political system that has made the modern world what it is today. You will not find this term in introductory, or even advanced, texts in political theory. A standard undergraduate philosophy course will start off with Plato and Aristotle, perhaps say something about Augustine, Aquinas, and Machiavelli, move on to Hobbes, Locke, Mill, and Marx, and then wind up with Rawls and Nozick. It will introduce you to notions of aristocracy, democracy, absolutism, liberalism, representative government, socialism, welfare capitalism, and libertarianism. But though it covers more than two thousand years of Western political thought and runs the ostensible gamut of political systems, there will be no mention of the basic political system that has shaped the world for the past several hundred years. And this omission is not accidental. Rather, it reflects the fact that standard textbooks and courses have for the most part been written and designed by whites, who take their racial privilege so much for granted that they do not even see it as political, as a form of domination. Ironically, the most important political system of recent global history—the system of domination by which white people have historically ruled over and, in certain important ways, continue to rule over nonwhite people—is not seen as a political system at all. It is just taken for granted; it is the background against which other systems, which we are to see as political, are highlighted. This book is an attempt to redirect your vision, to make you see what, in a sense, has been there all along." (p. 1-2)

"What is needed, in other words, is a recognition that racism (or, as I will argue, global white supremacy) is itself a political system, a particular power structure of formal or informal rule, socioeconomic privilege, and norms for the differential distribution of material wealth and opportunities, benefits and burdens, rights and duties." (p. 3)

"All whites are beneficiaries of the Contract, though some whites are not signatories to it." (p. 11)

"In philosophy one could trace this common thread through Locke's speculations on the incapacities of primitive minds, David Hume's denial that any other race but whites had created worthwhile civilizations, Kant's thoughts on the rationality differentials between blacks and whites, Voltaire's polygenetic conclusion that blacks were a distinct and less able species, John Stuart Mill's judgment that those races "in their nonage" were fit only for "despotism." The assumption of nonwhite intellectual inferiority was widespread, even if not always tricked out in the pseudoscientific apparatus that Darwinism would later make possible. Once this theoretical advance had been made, of course, there was a tremendous outpouring of attempts to put the norming on a quantifiable basis—a revitalized craniometry, claims about brain size and brain corrugations, measurings of facial angles, pronouncements about dolichocephalic and brachycephalic heads, recapitulationism, and finally, of course, IQ theory—the feature putatively correlated with intelligence varying, but the desired outcome of confirming nonwhite intellectual inferiority always achieved." (p. 59-60)

"By the social contract's decision to remain in the space of the European nation-state, the connection between the development of this space's industry, culture, civilization, and the material and cultural contributions of Afro-Asia and the Americas is denied, so it seems as if this space and its denizens are peculiarly rational and industrious, differentially endowed with qualities that have enabled them to dominate the world." (p. 74)

"...in a racially structured polity, the only people who can find it psychologically possible to deny the centrality of race are those who are racially privileged, for whom race is invisible precisely because the world is structured around them, whiteness as the ground against which the figures of other races—those who, unlike us, are raced—appear. The fish does not see the water, and whites do not see the racial nature of a white polity because it is natural to them, the element in which they move." (p. 76)

"Whiteness is not really a color at all, but a set of power relations." (p. 127) 

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Waqf in the Islamic World

In an earlier post I commented on the remarkable amount of land and resources managed by charitable foundations / endowments in the Middle East and North Africa, but was also challenged to find the primary source for that data (despite digging from reference to reference, only to hit dead ends). To look into the waqf (pl. awqaf) institutions of charitable foundations / endowments further I picked up Held in Trust: Waqf in the Islamic World (2011), edited by Pascale Ghazaleh and published by the American University in Cairo Press. The chapters provide some detailed case studies, which are fascinating for those interested in the topic. A few generic notes on the structure of the waqf:

"For centuries, waqfs (endowments or foundations) were a crucial part of the political, economic, and social history of the Arab and Muslim world. As service-providing institutions, waqfs were a major source of education, health care, and employment... Generally speaking, they had to consist of two main elements: first, a source of revenue, such as a building rented out for residential or commercial purposes, agricultural land that generated taxes, a public bath, or a warehouse; and second, a beneficiary, such as a mosque, a hospital, the poor, members of the founder's family, freed slaves, or any other recipient of the founder's choosing. To be valid, a waqf had to consist of an object or objects originally held in full property; the founder had to be of sound mind and body, and able to dedicate the property in question to God (in other words, a waqf could not be established by a bankrupt founder seeking to protect his property from confiscation); and the waqf had to be permanent, which meant that the revenue it generated had to be renewable, the property had to be subject to renewal or renovation, and the founder had to stipulate means of ensuring the perpetuity of the waqf and the continual disbursement of its revenues." (p. 1-2, from the editor)

"In the medieval Islamic world, many of the services today provided by modern governments and municipalities were left to 'civil agents' such as waqfs and charitable institutions. States were to provide security, against both internal and external threats, and to distribute and maintain justice. Services such as education, health, relief of poverty, public and religious constructions (mosques, ablution pools, cemeteries, baths), and infrastructure projects (water supply, bridges, roads) were all provided by the waqf system." (p. 23, from Riza Yildirim)

For the details on how these operated, the contributions to this book cover different geographies, time periods, and waqf structures. Well worth picking up for those interested.

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