When Legality Is a Ruse, Colltalers
They did it. Brazil’s lower house of congress started proceedings yesterday to impeach President Dilma Rousseff. It’s an expected but no less stunning decision, that disenfranchises 54 million Brazilians who voted in 2014 to reelect their first woman as president.
More in a moment, but first something else that, despite its similar veneer of legality, disenfranchises common citizens too: the practice, by corporations and wealthy individuals, of keeping profits in offshore accounts, out of the reach of their countries’ tax laws.
Just like the process in course in Brazil, where one group is selectively using the legislation to pick winners and reverse poll results, loopholes in regulation do create conditions for a precious few to avoid paying taxes, while the great majority foots the bill.
Worse. Such conditions are not ultimately illegal, even if only some are in a position to take advantage of them. But they’re clearly against the very spirit of a law designed to be fair to everybody. Or, in the case of Brazil, to preserve the rights of the majority.
Since today is Tax Day in the U.S., as it’ll be too in Brazil a week from Friday, the issue is relevant and the implications go beyond income and politics. At the very least, it’s about the own concept and validity of having just and fair laws to regulate society.
Two reports that came out last week shed a critical light on the supposedly inherent fairness of tax laws in the context of increased income inequality: Oxfam’s Broken at the Top report and a U.S. Government Accountability Office study, requested by presidential candidate Sen. Bernie Sanders. Both are about the staggering amount of earnings that American corporations stash in tax havens.
Oxfam, an anti-poverty charity organization, lists for instance, Apple, Walmart, and General Electric as having accumulated and hidden away from the U.S. tax code, a combined $1.4 trillion between 2008 and 2014, through an obscure string of over 1,600 units.
They’ve got another $11.2 trillion in federal loans, bailouts and loan guarantees, in the same period, ultimately paid for by taxpayers, of course. In the end, corporations pay an average 26,5% tax rate, below their 35% statutory rate, and the 31,5% U.S. workers pay.
The GAO report is no better. It found that at least two-thirds of U.S. companies have paid zero federal income taxes between 2006 and 2012, a time when the U.S. economy suffered its biggest blow in almost a century by the 2008 financial collapse and its aftermath.
The studies show, however, that while most individuals are still struggling to recover, corporations have rebounded just fine.
The rise in income inequality has also generated
another side effect: while regular tax payers are mostly restricted to their working income, high earners, individuals and corporations, can use sophisticated means to optimize profits, and pay less taxes.
Naturally, to the budget-constricted, reduced workforce IRS, it’s way easier to go after individuals than high earners. Which is what may be reinforcing the public perception that there’s been an increase lately in auditing of people who make less than 50K a year.
Just two weeks ago, the German newspaper Süddeutsche Zeitung, the International Consortium of Investigative Journalists and other news outlets began reporting on a massive trove of documents leaked from an offshore financial firm, Mossack Fonseca.
What came to be known as the Panama Papers offered an unprecedented, if not completely ignored, glimpse of the closely guarded world of undeclared income, which corporations and wealthy individuals use to hide their fortunes. The amounts and prominent leaders and celebrities involved caused all the proper commotion, even if only a fraction of the documents has so far come to light.
But what was hardly emphasized in the diminishing reports about the leak was not so much the extension and depth of the riches kept from having any positive impact on the world’s biggest ills – poverty, hunger, education, and health -, but that it exists at all. Or rather, that such a gargantuan movement of cash circulates through more or less legal conduits, even if they’re clearly an abhorrence.
Exposure, rather than any formal investigation so far, is what has caused any counteraction to the astonishing revelations. But apart from the fall of a few big government wigs, or others who may fall shortly, no serious, coordinated official effort exists to curb it.
In other words, despite all government rhetoric in both sides of the Atlantic, when it comes to taxing wealth, or regulate income in the billion bracket, there’s a resolute attitude that nothing that can be done will fix the problem. So, nothing will. After all, such income sustain the very system designed to regulate it. As in a tale of foxes and hens, this goes way beyond a mere conflict of interest.
Back in Brazil, what started as a legitimate campaign to rid the government of, at least, the most blatant acts of corruption and graft, may put the country in the hands of three politicians so enmeshed with illicit enrichment that any court would have no qualms sending them straight to jail: Eduardo Cunha, lower house speaker, vice president Michel Temer, and senate leader Renan Calheiros.
Problem is, if the Rousseff impeachment goes through, they may not have to go, even if found guilty. That is because Temer may be the next president, Cunha, his vice, and Calheiros, well he’ll may play bench for now, in one capacity or another, all shield from prosecution by the Brazilian laws, the same they’re so diligently applying to Rousseff, even without her votes, honorable past, and accomplishments.
Cunha is slated to go to trial at the Supremo Tribunal Federal on charges he stole as much as $40 million in bribes and laundered it through an evangelical megachurch. A probe also has found illegal accounts in Switzerland under his name, despite his denials.
Temer is accused of involvement on a large scheme to buy and profit from ethanol fuel. And evidence points to bribes that Calheiros has received through state-run oil giant Petrobras, a curiously similar charge leveraged at Rousseff that investigators failed to prove.
Thus, Brazilians who cried all over the Internet when the national soccer team was humiliated by Germany in the World Cup at home, may have another reason, way more unsettling, to weep for: they’ve been duped into believing they were fighting the good fight against corruption, but were actually setting the scenario of a coup for a regime change. And it was all apparently within the law.
Speaking of which, it’s not over, of course. Along Brazilians and international jurists who expressed serious doubts about Rousseff’s public shaming, and disavowed the constitutionality of the Cunha-led maneuver, artists, intellectuals, political leaders, and more than half of Brazil’s 200 million population vehemently disagree with what’s going on. Whether they will succeed, though, is up for grabs.
Many of those who since before Rousseff’s reelection were giving the impeachment a serious thought have lately become more aware of what may be lost in the shuffle. Even if such a radical proceeding is ultimately guaranteed by the constitution, Brazil’s young democracy and strength of its institutions are being tested to the extreme, and as the poet once put it, the center may not hold.
And it’s not lost to the world that a president, against whom no charges of personal enrichment or illegal acts have been leveled, is being judged by a legislative body, whose members have among them a high percentage of criminals or under suspicion politicians.
Even from a biased, or at least uninformed, U.S. media, the tide seems to be turning. From reports tinged by empty claims, such as ‘people’s revolt,’ or ‘fight against corruption,’ there are now some critical views on the role of the Brazilian media and right-wing elites in creating a charged atmosphere of confrontation and political impasse. But it’s all now a little too late, that’s for sure.
A baffling aspect of our shared reality is the ‘appearance’ of legality standing in for legality, truthiness instead of plain truth, loopholes as integral components of the law. But such built-in ways out are accessible only to a few. Thus corporations cheat taxes because they can. Or a case might be brought out against a political ideology even when it’s trading in principles of inclusion and fairness.
It’s a fact that many people can and will be fooled but hopefully never for very long. For now, though, us, the officially part of ‘the rest,’ will watch from the sidelines what was already set in motion. Public pressure is an effective, but short-breath, way of seeking change.
An international probe on tax havens may be bound to fail from the start because what may be accomplished favors those who can’t even imagine how to go about taking advantage of them. One country could lead by exemple, though. Hum, which one will stand out?
As for Brazil, maybe enough people will realize that the time for a regime change is not May, or only up to the Senate, but at the polls in 2018 and if the majority really wants it. Too impatient? Hey, look at how long the country’s been waiting, on a standing still.
History may be told by the victorious, but memory belongs to losers, the dispossessed, the disenfranchised. We’ll still pay our taxes, because that’s our way of pitching in for the benefit of a majority. And democracy will not betray Brazilians, even if those in charge of enforcing it have failed them. Keep knocking on their door, and the next time around, we’ll have our day. Chin up and enjoy the week. WC
What a sad story! Thank you very much.
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It is indeed. One can see clearly that there will be a time of reckoning and much despair. But the cycle has to be completed first, now that it’s been ignited, for good or for worse. Thanks for your input, Martina.
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When you actually examine what’s happening it appears the wealthy only stash money abroad to keep out of the hands of the rest of us. After all, there’s a limit to how much you can spend of your money when it’s parked in an off-shore account.
The most obvious move would be to allow these parasites to take as much as they want out of the system but not allow them to bring any back. That way governments would have the freedom to issue the much-needed funds against the money that was being held in hidden accounts. In effect, the funds would be neutralised by having no value beyond the shores of the fiscal paradises they had been moved to.
Though absolutely possible, and the most obvious solution, governments aren’t going to do it, as most of them are funded by the very people who stash money abroad to stop the rest of us having any.
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It’s true but it’s this kind of thinking proves that it’s not impossible to find alternatives to at least neutralize them. Thanks Bryan. Cheers
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