Business, in its zeal to satisfy shareholders’ thirst for profits, dividends and share value, has historically used tax havens for asset protection and tax avoidance. Countries such as Cayman Islands, Switzerland, Cyprus, Malta, Maldives, Luxemborg, a healthy portion of the Caribbean Islands, and Panama provide the tax shelters for business and the extremely wealthy.
The general public was none the wiser as to which companies did so, unless they were active shareholders. Others may have had exposure, but no real oversight or knowledge, through their company pension programs, investment advisers, CPP/QPP, RRSPs, or 401Ks. For most, annual portfolio increases or decreases were the extent of their concerns.
But something changed when, in the midst of the digital age, the 2008 banking crisis caused an equity meltdown, touching everyone everywhere. Suddenly, the airwaves, screens, blogs, twitter and papers were awash with financial, housing, government, banking and corporate (dis)information speaking to culprits and facilitators.
The data, causes and effects agitated the public into an increasingly angry state (see Occupation and Anonymous iterations across the world), resulting in demand for change in legislation and regulation from our governments and social institutions, and ethical ethos from businesses used to reaping profits by from corporate welfare or stashing their fortunes in tax havens.
Five years later, I think we can all agree the guilty parties don’t seem interested in curtailing behaviours that brought us to the precipice.
As citizens and patrons, we can either continue to fume passively, or actively affect change with voting intentions and investment choices. I’ll leave the political options to another day or writer. I’m hoping to nudge readers to think about the purchasing decisions they make in everyday life and where they place their investment or retirement portfolio monies.
A quick scan of some well-known Canadian companies financials on their web sites nets information on effective tax rates paid in 2011-12:
- Tim Horton, 26.3%
- Blackberry, 22.9%
- Loblaws, 24.8%
- Shopper’s Drug Mart, 27.5%
- Lululemon, 29.4%
- Maple Leaf Meats, 22.2%
- Canadian Tire, 24.7%
- BMO, 18.3%
- Sobey’s, 22.3%
When attention turns to some US companies, many are surprised to learn how little some in fact pay: (source: Nerdwallet.com)
- WalMart, 19%
- Target, 24%
- IBM, 1%
- Apple, 11%
- GE, 5%
- Coca-Cola, 3%
- Johnson & Johnson, 3%
- Starbucks, 19%
- Home Depot, 26%
- Proctor & Gamble, 12%
We’re not talking about tax cheaters today. Apple, GE, Coca-Cola, J & J, IBM and others use legal tax havens, as well as intra-company divisional transfers and many available tax credits, to avoid taxes. But, less taxes mean less revenue collected by governments necessary for public investment in education, poverty-reduction strategies, training for the unemployed, infrastructure, research and development, science, health, youth, seniors, Aboriginals, American Indians and small business.
And, legal does not translate into ethical. CBC just reported about an investigation by Washington, D.C.-based International Consortium of Investigative Journalists, with details about 10 of those countries that serve as tax havens. There is an estimated $32 trillion stashed off-shore. That’s $32 trillion not available to reinvest in our global society, at a time when Cyprus is seizing assets of individuals, when Greece is in severe austerity mode, while infrastructure in North America crumbles and youth unemployment soars to the stratosphere.
So, what can the average angry citizen do? Well, you can use your purchasing power and investment choices you make to affect corporate change. Neither of these ideas are new, but maybe we need to be reminded that talk about being mad, can translate into action.
When you choose which stores you shop in, the brands you purchase, which banks hold your savings, the car you drive, the clothes you wear and the food you eat, you are communicating your support, in essence, of that company, their decisions, and the manner in which they conduct business.
The same principle applies to the investment choices you, your advisor, your union, your company, your retirement plan, your association all make. You can choose to purchase stocks of those companies that pay taxes in their domestic markets, enabling governments to collect taxes that translate into revenues to invest in their respective citizens and countries. Companies like Tim Horton’s, Blackberry, Loblaws, Sobey’s Canadian Tire, Lululemon, Target and Home Depot.
Using tax havens to reduce tax exposure is a company choice. Accepting social responsibility in support of the governments and citizens where they conduct business, is another.
If enough people act on their anger, rather than sit idly by, and encourage others to do so as well, these companies’ bottom lines will be affected. Most companies need that strong reminder from customers and investors that accepting their money means also making decisions that are socially and ethically responsible, as RBC found out this week.
What choice will you make?