Sunday, May 05, 2013

The Tax Free Tour - tax havens and outsourcing

A doc about the stateless offshore world of tax havens. 

Why does Apple only pay 1.9% tax?
The Big Four : Price Waterhouse Coopers, Deloitte, Ernst & Young, KPMG

Former KPMG man : "They are the constant feature of every tax haven. Without one of those firms, or maybe all of those firms being present, you really will not have a tax haven."

He describes how the Big Four as he calls them are hired by governments to guide financial rules that benefit the Big Four.

So remember back in Sept 2011 when Steve gave Deloitte a $20-million contract to advise federal cabinet and senior officials on how to trim $4 billion from government program spending in order to balance the books by 2014?  
Ah -an outsourcing firm is being hired to recommend more outsourcing we said at the time, remembering a 2010 CBC report on the 80% increase in a parallel civil service made up of consulting firms.

At the same time, Deloitte, CORE-outsourcing, and Ryerson's Ted Rogers School of Management teamed up to produce a joint research initiative using Deloitte's "proprietary outsourcing maturity model". It was called The 3 E's of Effective Outsourcing Governance -Experience, Essentials, and Empathy -because that sounds better than Externalizing accountability, Eff Off Unions, and Economic entropy.

They projected that "almost $25 billion worth of outsourcing contracts in Canada [are] to be renewed or renegotiated over the next three years."

Pictured at the top of their 3 E's report are Ray Lavitt, President of CORE; Ian Chan, Principal at Deloitte; and Ron Babin, Professor at Ryerson.  
All three have outsourcing and/or offshoring creds : 
  • Lavitt was "VP, Global Sourcing at CIBC" before becoming CEO of CORE
  • Chan is "Leader of Deloitte Canada's Outsourcing Advisory Practice" and 
  • Babin was "a partner at Accenture and at KPMG", according to his Ryerson bio, and "his area of research is IT Planning and IT Governance with a specific focus on IT outsourcing and off-shore delivery."
Lavitt and Babin featured in an article a month ago at CBC : Offshore outsourcing 'not always a negative thing'

Lavitt is President of CORE; Chan and Babin are CORE board members.

So how did Steve's outsourcing report from Deloitte work out for us?
FinMin Jim Flaherty announced a trim to Ottawa’s annual spending by $5 billion a year in budget cutbacks in programs and services to eliminate the $26-billion deficit by 2015.

As of Dec. 31, 2012, 16,220 public service positions were eliminated, even though according to Canadian Centre for Policy Alternatives in 2011 :
Over the past five years, personnel outsourcing costs have risen 79%. While federal departments have had their budgets capped, expenditures on outside consultants have not been touched and remain above $1 billion a year,” says Macdonald.
Wednesday May 8 update : 

Star investigation: Millions in taxpayer-funded consulting work kept secret

A Star investigation has found 90 per cent of the $2.4 billion paid out in the past decade comes with no description of the work done — and more than a dozen departments refuse to provide details when pressed.
Thursday May 9 update :
Hundreds of public servants at seven departments received notices today that their jobs are on the block as part of the Conservative government’s ongoing spending cuts

Watch the doc. 
See also International Consortium of Investigative Journalists/offshore


Anonymous said...

Thanks for this.
How very satisfying to see the chair of the British parliamentary committee on corporate tax shenanigans going off on the Google, Amazon, and Starbucks reps trying to justify why they don't pay any.
Starbucks running at a loss for 14 years - yeah, right.
With respect, not sure you've made your case though about the relationship between tax havens and outsourcing.

Alison said...

Anon : You're welcome!
You mean between tax havens and outsourcing in Canada? I'm not knowledgeable enough to make that argument. I thought the doc made it rather well though :
Multinational accounting firms advise foreign governments how to establish tax-free zones for multinational outsourcing corps; then they advise those same outsourcing corps how to hide their profits and thus their taxes from the corps' governments back home. Meanwhile they're also helping to write so-called free trade deals that hardwire these outsourcing/tax haven relationships in international law, including the accompanying outsourcing intra-company transfers, as Jason Kenney mentions here.

What was new to me in the doc was that the big multi-nationals' share prices are massively inflated by the profits stashed in tax havens, and if that money were ever to be taxed in their home countries, those shares prices would suffer a huge loss.

Holly Stick said...

More notices of possible job cuts to more public servants:

Alison said...

Thanks, Holly, added to post.

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