The Social State is Affordable
Robert Misik | 03.03.2005 18:46 | Social Struggles | World
That "we" can no longer afford the social state is gossip. Thinking this gossip will end is wishful thinking. In truth, we cannot afford the prevailing financial policy. In Germany and the US, increased profits have not led to increased investments or more jobs.
THE SOCIAL STATE IS AFFORDABLE
Mammoth corporations pay less and less taxes. Ernst Schmiederer and Hans Weiss show the tricks they use and how our tax laws help them.
Book Review of Ernst Schmiederer/ Hans Weiss “Asocial Market Economy. Insiders from Politics and the Economy Reveal how Conglomerates Plunder the State” (Asozial Marktwirtschaft), Koln 2004
By Robert Misik
[This book review originally published in: die tageszeitung, 10/9/2004 is translated from the German on the World Wide Web,
http://www.taz.de/pt/2004/10/09/a0392.nf/textdruck.]
Agreement resounds from industrial bosses to commentators: taxes are too high. The social state cannot be financed. The state grows rampantly. All of us are the mourners. “Tax and spend- liberals” are the greatest danger. The “Drive-down taxes”-ideologues are largely immune to empirical reality.
Still help is available. In their book “Asocial Market Economy”, the journalists Ernst Schmiederer and Hans Weiss meticulously show “how conglomerates plundered the state”. In short, the social state may be bankrupt but the money is not far away. The money is in the pockets of big business.
Well-researched and written smoothly, the report deserves a prize. Hans Weiss has had experience with the trade. From the “Bitter Pill” to the “Black Book on Brand-Name Firms”, he has concentrated on this kind of research. Ernst Schmiederer who made a name for himself as New York correspondent of the Vienna newsmagazine profil is the co-author. All over Europe, the authors sought to uncover the tax tricks of the multinationals.
Weiss posed as a rich heir and flew to Jersey to advise the local subsidiary of Deutsche Bank. Like a few other offshore tax havens, this British channel island is notorious as a contact address for all who want to multiply their millions in overdrive. Ernst Schmiederer disguised himself as a representative of a Slovenia-American investor group and set out on an office search in a North German hole Nordfriederichskoog whose trade tax rate was exactly zero for years. The place had a magical attraction for German and international corporations that established post-office subsidiary firms there.
The trade taxes saved by the firms were missing elsewhere – in this case in the communities where these firms resided and paid taxes in the past. According to estimates, 800 million Euro were lost every year through the Nordfriederichskoog case alone.
The transfer of the corporate headquarters to an attic roo9m over a stinking hole is one of the most bizarre and amusing examples for the very individual tax savings models of large corporations. Internationally active businesses like their relations between parent companies and local subsidiary firms to be completely private so that only “losses” occur year after year in high tax countries and all their “profits” are heaped up in low tax countries. Another variant is in the mathematical indebtedness of the subsidiary with the parent company so that no profit arises any more as a result of high interest estimates. The profit is transferred effortlessly and completely legally to tax havens in Switzerland, the islands or at best Mauritius.
The consequences of these operations have long been dramatic since the governments – hectically striving to stop corporations from migration – have lowered business taxes for years or structured the tax laws so they offered good possibilities for creative organization. Many German communities face bankruptcy. Forty years ago 20 percent of the tax revenue came from profit- and property taxes. Today the amount is only 6 percent. In 1983 the corporation tax amounted to 14 percent of German tax revenue. Today it is a weak 2.3 percent.
The examples compiled by Weiss and Schmiederer are incredible. For years, Deutsche Bank did not pay any profit taxes but instead received tax refunds. Siemens, a showpiece corporation, received 119 million Euro in tax refunds from 2001 to 2003. For over a decade, DaimlerChrysler did not pay a cent in trade taxes in Stuttgart or Sindelfingen. The food multinational Unilever likes to channel Euros so that scandalously little comes to the authorities.
That “we” can no longer afford the social state is gossip. Thinking this gossip will end is wishful thinking. In truth, we cannot afford the prevailing financial policy.
Mammoth corporations pay less and less taxes. Ernst Schmiederer and Hans Weiss show the tricks they use and how our tax laws help them.
Book Review of Ernst Schmiederer/ Hans Weiss “Asocial Market Economy. Insiders from Politics and the Economy Reveal how Conglomerates Plunder the State” (Asozial Marktwirtschaft), Koln 2004
By Robert Misik
[This book review originally published in: die tageszeitung, 10/9/2004 is translated from the German on the World Wide Web,
![](/img/extlink.gif)
Agreement resounds from industrial bosses to commentators: taxes are too high. The social state cannot be financed. The state grows rampantly. All of us are the mourners. “Tax and spend- liberals” are the greatest danger. The “Drive-down taxes”-ideologues are largely immune to empirical reality.
Still help is available. In their book “Asocial Market Economy”, the journalists Ernst Schmiederer and Hans Weiss meticulously show “how conglomerates plundered the state”. In short, the social state may be bankrupt but the money is not far away. The money is in the pockets of big business.
Well-researched and written smoothly, the report deserves a prize. Hans Weiss has had experience with the trade. From the “Bitter Pill” to the “Black Book on Brand-Name Firms”, he has concentrated on this kind of research. Ernst Schmiederer who made a name for himself as New York correspondent of the Vienna newsmagazine profil is the co-author. All over Europe, the authors sought to uncover the tax tricks of the multinationals.
Weiss posed as a rich heir and flew to Jersey to advise the local subsidiary of Deutsche Bank. Like a few other offshore tax havens, this British channel island is notorious as a contact address for all who want to multiply their millions in overdrive. Ernst Schmiederer disguised himself as a representative of a Slovenia-American investor group and set out on an office search in a North German hole Nordfriederichskoog whose trade tax rate was exactly zero for years. The place had a magical attraction for German and international corporations that established post-office subsidiary firms there.
The trade taxes saved by the firms were missing elsewhere – in this case in the communities where these firms resided and paid taxes in the past. According to estimates, 800 million Euro were lost every year through the Nordfriederichskoog case alone.
The transfer of the corporate headquarters to an attic roo9m over a stinking hole is one of the most bizarre and amusing examples for the very individual tax savings models of large corporations. Internationally active businesses like their relations between parent companies and local subsidiary firms to be completely private so that only “losses” occur year after year in high tax countries and all their “profits” are heaped up in low tax countries. Another variant is in the mathematical indebtedness of the subsidiary with the parent company so that no profit arises any more as a result of high interest estimates. The profit is transferred effortlessly and completely legally to tax havens in Switzerland, the islands or at best Mauritius.
The consequences of these operations have long been dramatic since the governments – hectically striving to stop corporations from migration – have lowered business taxes for years or structured the tax laws so they offered good possibilities for creative organization. Many German communities face bankruptcy. Forty years ago 20 percent of the tax revenue came from profit- and property taxes. Today the amount is only 6 percent. In 1983 the corporation tax amounted to 14 percent of German tax revenue. Today it is a weak 2.3 percent.
The examples compiled by Weiss and Schmiederer are incredible. For years, Deutsche Bank did not pay any profit taxes but instead received tax refunds. Siemens, a showpiece corporation, received 119 million Euro in tax refunds from 2001 to 2003. For over a decade, DaimlerChrysler did not pay a cent in trade taxes in Stuttgart or Sindelfingen. The food multinational Unilever likes to channel Euros so that scandalously little comes to the authorities.
That “we” can no longer afford the social state is gossip. Thinking this gossip will end is wishful thinking. In truth, we cannot afford the prevailing financial policy.
Robert Misik
e-mail:
mbatko@lycos.com
Homepage:
http://www.mbtranslations.com
Comments
Hide the following 7 comments
Good article!
03.03.2005 23:20
Well, yeah an anarchist utopia would be nice. Maybe someday, hey :-). But in the meantime, back in the real world / short term future, the state is here to stay.
The state does a lot to protect the interests of the elite from the interests of ordinary people, sure it does.
But it also provides SOME socially useful services. NEOLIBERALISM is all about getting rid of these socially useful things and leaving only those policies which are designed to serve business, at the expense of the people (and in the long term even against the intersts of business itself, as I shall argue).
To fight against neo-liberalism, is (amongst other things) to say that as long as we have a state, it should be as much as possible a social state rather than a neo-liberal state.
It's worth noting that, up to a point, even the business leaders should be on OUR side - because ultimately neo-liberalism is not actually in their interest. To make themselves rich, they rely on many social resources within society: a workforce with an adequate amount of education to do the work, consumers who have enough money to be able to afford the products they are selling, transport infrastructure (funded by tax - abolish tax and you abolish the roads!), etc.
So what I'm saying here, is that even on their own terms, Big Business should not consider neo-liberalism to be in its interests. By insisting that governments slash taxes and welfare and public services and "red-tape" these companies are essentially (excuse my business-speak) "liquiding their social capital".
Profits may rise in the short term but when all that "social capital" is gone, they'll find it a lot harder to generate those profits. It's like cashing in your savings (that were earning you interest), or selling your internal organs (that were keeping you alive) and then saying "look how much money I've got" - ie seriously flawed in anything but the SHORT TERM.
But that's one of the main things about neo-liberalism - it's all about short-termism and un-enlightened self interest (there is such a thing as enlightened self intererest, at least up to at point - eg a manager treating their employees better will find that they become more productive and therefore profits will rise).
Well that's a digression but basically the main point is that a social state is beneficial not just for society but for the economy too (even for the big corporations) so, like the article says, it's nonsense to suggest we "can't afford it" - indeed, like it says, it's neo-liberalism which we can't afford (even if you don't count the hidden but very real costs of "externalities" such as environmental destruction and higher rates of crime which backward social and economic policies make happen).
What they mean when they say we can't afford a social state is that it's not feasible to continue with a social state because we have to compete with other countries to slash taxes and slash regulations otherwise corporations will not invest here. So in that sense, it is a valid point....
This situation, the **race to the bottom** is very real - states competing against eachother to remain "competetive" in order to "attract investment". But the solution isn't to succumb to this logic - after all the only place this race leads is, well... the bottom! Rather, the solution is to find some way out of this race, impossible as it might seem.
The corporations are playing the world's governments off against eachother. So the governments need to apply the tactic of collective bargaining whereby they all agree not to keep slashing taxes and regulations it's like a cartel - they agree to stop competing against eachother. If they have some treaty that they have to adhere to then they could together (if they wanted to!!!!!!!!! (but they don't want to!)) resist the corporate pressure. Unfortunately they are signing treaties (such as WTO treaties) which do the exact opposite. A proper world trade organisation would be facililitate states' standing up to the business bullies. But the existing WTO, basically set up BY business, obviously works to promote rather than regulate the interests of the corporations.
Expecting governments to even consider "standing up to big business" however, is naive, seeing as most government ministers seem to think that business can do no wrong - they can't see any problem and instead of being pragmatic unwilling slaves to neo-liberalism, they are fully signed up believers in this ideology - probably as a result of all that money corporations spend on lobbying.
So there's not much hope if we just expect governments to sort things out.
But if the world's people all say no to neo-liberalism and vote out (or otherwise remove from office) any party which continues to implement this programme then governments will have to stop.
In order to do this people need to get informed about neo-liberalism (resisting the barrage of propaganda in the media that tells us either that we should support neo-liberalism or that there's no such thing as neo-liberalism or that we should be more interested in David Beckham's marriage / etc) and people need to (in some sense) unite.
How's all that supposed to happen?
There are so many forces holding progress back. I guess a partial strategy is to try to understand those forces as accurately as possible and then we'll have a clearer idea of what to do next.
Here ends this rant.
Activist
TRUST NOBODY
04.03.2005 05:39
arofish
Re: trust nobody
04.03.2005 10:47
One of the main problems in society is that there is too little trust, not too much.
People are atomised from eachother.
OK don't trust the government and don't trust the corporations. But ordinary people should trust eachother and link up their struggles in solidarity. Certainly don't put your blind faith in anyone. There's no-one who you can "trust" to sort the world out - that's a job for each of us individually and together.
more trust not less
Confound my levity
04.03.2005 15:15
Look, mate, either get that stick out of your arse or at least wait for a more appropriate chance to pontificate your soggy nappy philosophy.
Incidentally, look it up, a non-sequitur (spelchek) is a conclusion which doesn't follow logically from the premise. Not a quick quip about someone's "writing" style. You're not sounding clever, and there's a SIMPLE reason why.
This is you with your silly pointy goatee beard :-(>
arofish
what the fuck?
05.03.2005 13:50
Sorry I didn't 'get' your flippant comment.
And sorry I didn't bother to look up how to spell non-sequitur.
I'll try harder at spelling next time.
Soggy-nappy philosophy? Goatee beard? What the hell are you on about??
You read my comments about the original article. And you concluded that I was saying we should "trust no-one". I couldn't even remotely see that that's what I was saying. So it looks like a non-sequetur to me. How on the earth was I saying that we should "trust no-one"?
I was talking about how I think it's bad that neo-liberalism, the extremist form of capitalism currently in fashion with the world's governments, is dismantling the already limited social functions of the state. And I was talking about some of the obstacles to fighting against this stuff.
You don't have to agree with what I wrote but I think it was a fair enough contribution to the debate.
So why the aggression??
Why can't you just think "nope, don't agree with that". There's no need to take objection to people's ideas like that.
me again
PS (that'll teach me to answer back to flippant remarks!)
05.03.2005 14:24
To be honest that was f*****g offensive what you said about me. No doubt you'll tell me I should just deal with it. But I think you'll find are lot of people are the same - people don't like being harshly insulted for no good reason. Which is entirely fair enough. Why should people have to put up with that? If you're the kind of person who's intolerant of someone offering their thoughts on some economic / political discussion then you don't have to read those thoughts.
And damn right I don't like your "quick flippant quips". Maybe you don't like my writing style. Well maybe I wouldn't like your clothes. Or your mother. But generally I keep that kind of thing to myself.
If there's something you actually disagree with then explain that. Otherwise keep your unexplained snide remarks and gratuitous insults to yourself. Because they sure as shit don't make YOU sound clever either. And neither does your superior spelling ability (why do these arguments always have to descend to the level of SPELLING ;-)!)
I could understand people making such remarks if I'd said anything offensive to anyone but I don't see how anything I said could be taken as offensive. To me, your entire reaction to what I wrote is a non-sequetur.
Can't someone offer their analysis without being accused of "pontificating"? It's not as if I was telling anyone how to think - I was just stating my views. And why would I be trying to convince people I was "clever" (whatever that means) when I was remaining anonymous??
We're part of a mass movement here (although it sometimes feels like a disparate collection of squabbling sectarian rival factions), I know it's a cliche but we don't need to be slagging eachother off when we should be directing our anger against war, sweatshops, climate change, racist immigration policy, the media, the corporations, and all the rest of it.
again
Bore off beardy
06.03.2005 02:48
"You read my comments about the original article"
Didn't even know they were yours. That's how it is when you sign with a different name every time you post, Oh Pimpernel.
"And you concluded that I was saying we should "trust no-one"
Nope, I said, (which should be obvious to a blind monkey) trust no one who draws crappy faces with brackets and commas (like you). So if there's a non-sequitur in our midst, it's yours, buddy.
On the goatee beard thing: Well, that's about your silly goatee beard.
"And sorry I didn't bother to look up how to spell non-sequitur. I'll try harder at spelling next time"
Well, Beardy, "next time" is in your second post of the 2, and you don't appear to have got any better (Go 3 paragraphs up from the bottom and check. Dullard)
"Maybe you don't like my writing style. Well maybe I wouldn't like your clothes. Or your mother"
Matter-of-factly, I was on about the "writing style" which was the (obvious) target of my first (and only other) post: the ghastly habit of facial gurning through inky blots.
So another of your blunt arrows howls off wide into the ether.
Stop shoving sticks up your arse.
arofish
Homepage:
http://arofish.org.uk