Transnational Corporate Tax Shenanigans Need To Stop

It’s official. Many big transnational corporations are not paying their taxes. And the government doesn’t intend to do anything about it.

These corporations inflate the value of the goods and services supplied by their parent company, conveniently located in an offshore low-tax/no-tax haven, to equate to the value of most of their revenue from sales in New Zealand. This is ‘cost of sales’ and can be deducted from the money they make from sales as a business expense. Hey presto, very little ‘profit’. Very little tax to pay.

Is this legal? Apparently so. Is it fair? Absolutely not. New Zealand owned businesses can’t get away with it. Neither can wage workers whose tax is deducted from their pay each week.

Transnational corporations use workers educated at the taxpayer expense and kept healthy by our largely taxpayer-funded health system, make use of our taxpayer-funded infrastructure like roads and railways, and expect our taxpayer-funded justice system to protect their assets. There is not one good reason why they shouldn’t they pay a decent amount in taxes to help fund all of these things, just like the rest of us.

It needs to be sorted, but it’s not likely to be. Not while big transnational corporations hold most of the power. Not just in New Zealand, but around the world. Governments feel beholden to big corporations. They believe big corporations are crucial to a healthy economy and their country’s financial wellbeing.

The question is why? It is easy to see the benefits for the people at the top of the big corporations; it is much harder to see the benefits for the local economy and local people.

Big transnational corporations, as well as paying very little tax, more often than not pay workers lower than liveable wages that have to be topped up by government tax credits, accommodation subsidies, and even food parcels from community food banks. And if we buy their goods, the bulk of our money goes out of the country to an elite wealthy few. It is not spent locally, fostering other businesses and creating more work for locals.

The Trans-Pacific Partnership agreement and other similar deals with their Investor State Dispute Settlement Provisions will only make it harder to change the rules to ensure that corporations contribute positively to the economies they do business in, rather than exploit them to make maximum profits for their few directors and shareholders.

Wake up to the fact that big corporations need us a lot more than we need them. Slap on a financial transactions tax. Then go to work on closing the loopholes around cost of sales. And stop signing the country up to trade deals that have nothing to do with trade but are just about allowing big corporates to roam the world ripping off whoever they feel like to make money for themselves.

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