Glencore and (no) tax

In Glencore tax bill on $15b income: zip, zilch, zero Michael West reports on an analysis of Glencoe's accounts and the methods it uses to ensure it doesn't pay tax in Australia.

Australia's largest coalminer, Glencore, paid almost zero tax over the past three years, despite income of $15 billion, as it radically reduced its tax exposure by taking large, unnecessarily expensive loans from its associates overseas.

At up to 9 per cent, the interest rates on these $3.4 billion in loans were double what the company would have had to pay had it simply borrowed the money from the bank.

As it was claiming tax breaks in Australia on these inflated interest payments, the secretive Swiss-based multinational actually increased its lending to other related parties interest free. This may include its executives. Nobody from Glencore, which used to be called Xstrata, was available for comment despite repeated requests.

The aggressive tax avoidance tactics of Glencore Coal International Australia Pty Ltd have been identified in an independent analysis of the company's accounts for Fairfax Media by an expert in multinational financing.

Along with the blatant irregularities in its borrowing and lending, the study also found a hefty increase in Glencore's coal sales to related companies (up from 27 per cent to 46 per cent of total sales, with no explanation), indicative of transfer pricing - also known as profit-shifting - and an activity that appears to breach Section IVA of the Income Tax Assessment Act - the part that deals with schemes designed to comply technically with the law but whose ''dominant purpose'' is really to avoid tax.

Nice looking Spinach, Parmesan and Bolognaise Pinwheel

Another Danielle Colley recipe: Spinach, Parmesan and Bolognaise Pinwheel.

A Bolognaise recipe

I haven't tried it yet: Basic Bolognaise Sauce.

Copyright maths

Rob Reid has a TED talk where he explains copyright maths in The $8 billion iPod.

Sliding Floor Pullup

In The Move That Will Make You a Pullup Powerhouse Kelsey Cannon shows one way to do a pullup if you don't have a bar, or the strength.

Equivalent names for US and Australian ingredients

Found on Facebook:

John Hewson has an interesting point on Superannuation

In Tony Abbott choked by lack of vision, not ideology Peter Hartcher interviewed John Hewson about the recent budget and Tony Abbott's performance. He made an interesting point about Superannuation:

What could the government have done to make the budget fairer? “I’m in favour of tightening the eligibility for pensions, but you should increase the pension payment for the people who remain, pay bigger pensions.
“And at the same time you look at pensions you have to look at superannuation tax concessions. It’s heavily skewed in favour of wealthy people.”
To get a $100 benefit from the superannuation system, a person with a modest income of $20,000 a year must put in $118, he says. A person on $250,000 a year must put in only $62.50 to get a $100 benefit.
“That’s a staggering inequity. If you had a more broad-based approach”, dealing with both welfare reform and reform to the generosity of tax concessions for the rich, “you’d have a much more defensible position”.

Direct Action is really no action

Lenore Taylor in Tony Abbott is no action man on climate change looks at the many problems with the Government's Direct Action policy.

In 2009, Turnbull, still smarting at his demise, wrote: “The fact is that Tony and the people who put him in his job do not want to do anything about climate change. They do not believe in human-caused global warming. As Tony observed on one occasion 'climate change is crap' or if you consider his mentor, (then) senator (Nick) Minchin, the world is not warming, it’s cooling and the climate change issue is part of a vast leftwing conspiracy to de-industrialise the world.”
Turnbull may have been wrong. Abbott may have revised his views since then. But on the basis of the available evidence, not by much. It may indeed be possible to meet credible greenhouse emission reduction targets in an affordable way using policies other than a carbon price. But on the basis of the available evidence, not by using this policy.

Julian Burnside suggests some more humane options on the treatment of asylum seekers

Julian Burnside in Asylum seekers can be managed with cheaper and more humane options presents two options for processing refugees humanely:

• Settlement in the community, after a brief period of detention for health and security checks, in country towns or Tasmania. They would be entitled to work and to social security and Medicare.
• Regional processing in Indonesia. Burnside writes:

Those who are assessed as refugees would be resettled, in Australia or elsewhere, in the order in which they have been accepted as refugees. On assessment, people would be told that they will be resettled safely within (say) two or three months. Provided the process was demonstrably fair, the incentive to get on a boat would disappear instantly.
At present, people assessed by the UNHCR in Indonesia face a wait of 10 or 20 years before they have a prospect of being resettled. During that time, they are not allowed to work, and can’t send their kids to school. No wonder they chance their luck by getting on a boat.
Genuine offshore processing, with a guarantee of swift resettlement, was the means by which the Fraser government managed to bring about 80,000 Vietnamese boat people to Australia in the late 1970s. It worked, but it was crucially different from the manner of offshore processing presently supported by both major parties. In addition, other countries also resettled some of the refugees processed in this way. It is likely that Australians would be more receptive to this approach if they thought other countries were contributing to the effort.

I think both ideas have merit. The Indonesian idea shouldn't see significant numbers of people risking their lives in dangerous boats either.

A few more Iraq articles

Why U.S. military involvement will hurt Iraq and increase suicide terrorism by Robert Pape
Gwynne Dyer: Tony Blair talks ISIS and the Middle East
Mulling Iraq options: Begin by telling me which of these groups you want to bomb by Thomas E. Ricks
Uprising brings civil war threat closer to Iraq by Ruth Pollard

Chubb on Power Failure and climate politics in Australia

In Philip Chubb: on culture wars, revenge and the triumph of climate denial Willow Aliento speaks to Philip Chubb about his book Power Failure – the inside story of climate politics under Rudd and Gillard.

Higher minimum wages may be better for the economy

In Australian business gets a good deal from the minimum wage Damian Oliver and John Buchanan show why the minimum wage can be good for business.

These are precisely the factors that the Fair Work Commission takes into account each year in its minimum wage case and they are the reasons why the latest increase is entirely justifiable on economic as well as social grounds. Far from being ashamed or embarrassed by our wage rates, Australians should be proud of our minimum wage and the institution we as a nation have nurtured for over a century.

Jonathan Holmes on the real reason the US invaded Iraq

Jonathan Holmes in Neo-cons's naive dream to liberate Iraq explodes into nightmare writes that the reason for America's invasion of Iraq wasn't oil, it was ideology. It's one of the best articles I have read on why the invasion happened.

It’s easy to see clearly in hindsight. But sometimes it’s worth looking back at what people foresaw. The current crisis in Iraq displays more starkly than ever the wilful blindness of the architects of America’s invasion of Iraq in March 2003.

“When Saddam Hussein and his regime are nothing more than a horrible memory, the United States will remain committed to helping the Iraqi people establish a free, prosperous and peaceful Iraq that can serve as a beacon for the entire region.”

That’s what Paul Wolfowitz, Deputy Secretary of Defence in the Bush Administration, told the Iraqi-American community in Detroit in February 2003.

Wolfowitz was one of the most influential of that group of intellectuals and political activists who had, for 30 years before 2003, urged that America must use its military might to oppose totalitarian dictatorships. They had attracted the label “neo-conservative”. But the title of the Four Corners program I made about them, which was aired just a week before the Iraq war began, was “American Dreamers”.

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Paul Wolfowitz’s friend and academic ally, Lebanese-born Shi-ite Fouad Ajami, put it this way: “An idea is attached to this war, there is no doubt about it … it really is about the reform, not only of Iraq but … of the Arab world, an attempt to show the Egyptians and the Saudis and others that there is another way of organising political life.”

This was not mere rhetoric for the masses. The neo-cons believed it. And they had persuaded George W. to share the vision. In late February, he told the neo-cons’ own think tank, the American Enterprise Institute: “A liberated Iraq can show the power of freedom to transform that vital region, by bringing hope and progress into the lives of millions.“

It was a beautiful dream. But to many, even then, it was extraordinarily naive.

The neo-cons, said Kurt Campbell, were not conservative at all: “one of the most powerful contributions that conservatives have made to our understanding of how to conduct foreign policy is not to overestimate consequences, don't be overly optimistic… if necessary be pessimistic… I think there is entirely too much optimism about what are the potential hopeful consequences of a major war in Iraq.”

When dreamers control armies, their dreams can be dangerous. But it tends not to be they who suffer, when the real-life nightmares arrive.

Conspiracies and conspiracy theories

In 9/11, Moon Landing, JFK assassination: conspiracy theories follow a deep pattern Richard Evans looks at conspiracies and conspiracy theories.

A lot remains to be done in researching the history, structure and dynamics of conspiracy theories, their relationship with real conspiracies, and the changes they have undergone through time.

It's easy to be alarmist and suggest they are a threat to democracy and to confidence and trust in democratic political systems, but there have been relatively few times in democratic countries where this has really been the case: the McCarthy period in post-war America, which arguably reduced the possibility of democratic dissent and restricted the range of political opinions it was legitimate to express, could be said to have been one. But the mere proliferation of such theories is surely not a threat in itself. The fact that some people believe that men never landed on the Moon isn't going to undermine the American political system or any other. And the widespread belief among Republicans that President Obama is not American is an expression rather than a cause of the divisions now affecting America's public life and political institutions.

Few people in the end believe that we are ruled by alien lizards in disguise. It's only where conspiracy theories are directed at long-term trends rather than specific incidents or single observable phenomena, as in the case of global warming, that there seems to be no easily obtainable resolution to the clash of opinion; and even here, the overwhelming consensus of scientists and experts is solidly behind the conclusion that global warming is happening and is the product of man-made climate change. The debate goes on, but it's not a case of conspiracy theories threatening democracy, whatever else it might be. By themselves, such theories may reinforce political suspicion and prejudice, but they're not the origin of it.

To learn more about the Conspiracy and Democracy project, visit the website conspiracyanddemocracy.org

Sharri Markson seems to back up Wilson's claim about Nowicki

Richard Farmer on his Political Owl blog has a snip of a Sharri Markson column in The Australian with a tidbit on Bruce Wilson's claim that Harry Nowicki offered him $200,000 for a story. Here's the bit:

Glencore Xstrata and tax avoidance

Michael West in Gushing Glencore converts tax flow into tiny trickle notes how Glencore Xstrata manages to pay virtually no company income tax in Australia on its revenue:

Lo and behold, Glencore had booked cash of almost $15 billion from coal mining in Australia in the past three years and had effectively paid zero tax. They make roughly $5 billion a year from copper, zinc and nickel too, but we'll stick with coal today as it would take another two weeks to dig out the rest of the accounts.

Anyway, the boys from Zug - the Swiss tax haven from which Glencore sprang - did actually pay some tax. They managed to ''leak'', as they say in the trade, just $507 million in income tax, on cash receipts of $30 billion. That's roughly 1.7 per cent leakage in seven years.

Tax is levied on profits, or course, not on sales. Cash is more relevant though, since multinationals engage in the practice of transfer pricing; that is, siphoning profits out of this country, where the corporate tax rate is 30 per cent, into more tax-amenable jurisdictions.

Here they were, drowning in cash - the biggest coal boom in history was in full swing - but what does Glencore do? It borrows billions from its parent and other associates overseas and pays them interest on these loans of $1.4 billion. That's flair for you. Get the money out, and saunter off with a tax deduction on your interest payments to boot.

And that is just profit shifting via a few loans. Of Glencore's $4.3 billion in sales last year, some $1.97 billion worth were made to related parties.

Stephen Fry on language pedants

In The Best Response to Grammar Nazis, Ever Hillary Kelly has a YouTube video of Stephen Fry hitting back at grammar pedants.

Devolving environmental approvals is a bad idea

Peter Martin in Don't put Australia's treasures in state hands explains the advantages in allowing states to compete with each other. However, he says, this should not extend to environmental approvals.

By competing, each state strengthens the whole. If an innovation in one state doesn't work, it stays there and doesn't damage the rest. If it does work, it spreads and makes the rest stronger. A paper commissioned by former premier Steve Bracks for the Council for the Australian Federation described Australia as a ship with eight separate watertight compartments: "When a leak is sprung in one compartment, the cargo stowed there may be damaged, but the other compartments remain dry and keep the ship afloat", it said.

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But until now no Australian government has seriously countenanced the proposition that the environment was a matter solely for the states. Even the Gillard government, which experimented with devolution in an effort to counter "green tape", gave up after it realised state governments wouldn't impose the same high standards as the Commonwealth.

Now the Abbott government is legislating for what it calls a "one-stop shop". Billed as a "major step forward in the government's commitment to reduce red tape" the law would devolve responsibility for environmental approvals to "the most appropriate level of government".

Abbott and Hunt believe the appropriate level is state government, and if it chooses to delegate, local government, raising the spectre of at least eight "one-stop shops", each with different approval processes and none of them necessarily inclined to protect the national environment.

The immense wealth held in tax havens

Heather Stewart in Wealth doesn't trickle down – it just floods offshore, research reveals looks at a report about the vast wealth hidden away in tax havens.

Using the BIS's measure of "offshore deposits" – cash held outside the depositor's home country – and scaling it up according to the proportion of their portfolio large investors usually hold in cash, he estimates that between $21tn (£13tn) and $32tn (£20tn) in financial assets has been hidden from the world's tax authorities.

"These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network. "Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people.

"This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich."

In total, 10 million individuals around the world hold assets offshore, according to Henry's analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world's movers and shakers like to use as homes for their immense riches.

It seems this hurts poorer countries in particular. In many cases wealth hidden offshore exceeds the value of the debt such a country might have.

He corroborates his findings by using national accounts to assemble estimates of the cumulative capital flight from more than 130 low- to middle-income countries over almost 40 years, and the returns their wealthy owners are likely to have made from them.

In many cases, , the total worth of these assets far exceeds the value of the overseas debts of the countries they came from.

The struggles of the authorities in Egypt to recover the vast sums hidden abroad by Hosni Mubarak, his family and other cronies during his many years in power have provided a striking recent example of the fact that kleptocratic rulers can use their time to amass immense fortunes while many of their citizens are trapped in poverty.

The world's poorest countries, particularly in sub-Saharan Africa, have fought long and hard in recent years to receive debt forgiveness from the international community; but this research suggests that in many cases, if they had been able to draw their richest citizens into the tax net, they could have avoided being dragged into indebtedness in the first place. Oil-rich Nigeria has seen more than $300bn spirited away since 1970, for example, while Ivory Coast has lost $141bn.

Assuming that super-rich investors earn a relatively modest 3% a year on their $21tn, taxing that vast wall of money at 30% would generate a very useful $189bn a year – more than rich economies spend on aid to the rest of the world.

How wrong was Hayek on Democracy?

William K. Black in Why the Worst Get on Top – in Economics and as CEOs writes that:

Libertarians are profoundly anti-democratic. The folks at Cato that I debate make no bones about their disdain for and fear of democracy. Friedrich von Hayek is so popular among libertarians because of his denial of the legitimacy of democratic government and his claims that it is inherently monstrous and murderous to its own citizens.