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Archived material from historical editions of The Generator

  • Yemen frees Sydney men

    Their arrests captured national attention, not least because of revelations in the Herald that they were the sons of Abdul Rahim Ayub, the man credited with setting up a Jemaah Islamiah cell here in the 1990s.

    Ms Hutchison divorced Ayub and later went to Taliban-era Afghanistan to work as a midwife and nurse. She fled Afghanistan after the September 11, 2001, attacks as coalition troops prepared to invade. Ms Hutchison remains in Sydney after ASIO confiscated her passport, although she says she does not know why.

    In response to questions from the Herald after her sons’ arrest, she said they were innocent and were being unfairly vilified. Ms Hutchison was interviewed by ASIO just before the arrests, raising suspicions of some Australian co-operation in their capture.

    The Attorney-General, Philip Ruddock, has declined to comment, citing conventions not to comment on operational matters.

    The Government has defended the time it took for Australian consular officials to get to the men. It took more than two weeks to do so, but the Department of Foreign Affairs says the Ramadan religious festival hampered their efforts.

    Australian officials visited Samulski in jail at the weekend. Samulski is being treated well, said his lawyer, Stephen Hopper.

    — ENDS — 

    (Let’s not forget that if the brothers had returned to Australia, having already been convicted by the media and facing trial in secret dressed up as "terrorists" in orange jumpsuits and shackles, they probably would have faced long prison sentences.) Paul

     

  • Govt and Labor expanding nuclear industry, claims Greens Senator Milne

    Reference: Commonwealth of Australia, Senate, Hansard, Thursday, December 7, 2006, p.134-135

    Erisk Net, 7/12/2006, p. 134-135

     

  • Tax Evaders: Multinationals Rob Taxpayers Blind

    A few weeks ago U.K.-based GlaxoSmithKline (GSK), one of the largest pharmaceutical companies in the world, together with the Internal Revenue Service (IRS) announced that GSK will pay $3.4 billion to the IRS to settle a transfer pricing dispute dating back 17 years. The IRS alleges that GSK improperly shifted profits from their U.S. to the U.K. entity.

    And U.K. pharmaceutical companies are not alone with these kinds of problems. Merck, one of the largest U.S. drug companies, also this month disclosed that they face four separate tax disputes in the U.S. and Canada with potential liabilities of $5.6 billion. Out of that amount, Merck disclosed that the Canada Revenue Agency issued the company a notice for $1.8 billion in back taxes and interest "related to certain inter-company pricing matters."

    And according to the IRS, one of the schemes Merck used to cheat American tax payers was by setting up a subsidiary in tax-friendly Bermuda. Merck then quietly transferred patents for several blockbuster drugs to the new subsidiary and then paid the subsidiary for use of the patents. The arrangement in effect allowed some of the profits to disappear into Merck’s own "Bermuda triangle."

    So what’s going on here, how have multinational drug companies been able to gouge us for years selling expensive drugs and then avoid paying tax on their astronomical profits?

    The answer is simple. For companies in certain businesses, such as pharmaceuticals, it is very easy to simply "invent" the price a company charges their U.S.business for buying the company’s product which they manufacture in another country. And if they charge enough, poof; all the profit vanishes from the US, or Canada, or any other regular jurisdiction and end up in a corporate tax-haven. And that means American and Canadian tax payers don’t get their fair share.

    Many multinational corporations essentially have two sets of bookkeeping. One set, with artificially inflated transfer prices is what they use to prepare local tax returns, and show auditors in high-tax jurisdictions, and another set of books, in which management can see the true profit and lost statement, based on real cost of goods, are used for the executives to determine the actual performance of their various operations.

    Of course, not every multinational industry can do this as easily as the drug industry. It would be difficult to motivate $6,000 toilet seats. But the drug industry, where real cost of goods to manufacture drugs is usually around 5 percent of selling price, has a lot of room to artificially increase that cost of goods to 50 percent or 75 percent of selling price.

    This money is then accumulated in corporate tax-havens where the drugs are manufactured, such as Puerto Rico and Ireland.Puerto Rico has for many years attracted lots of pharmaceutical plants and Ireland is the new destination for such facilities, not because of the skilled labor or the beautiful scenery or the great beer — but because of the low taxes. Ireland has, in fact, one of the world’s lowest corporate tax rates with a maximum rate of 12.5 percent.

    In Puerto Rico, over a quarter of the country’s gross domestic product already comes from pharmaceutical manufacturing. That shouldn’t be surprising. According to the U.S. Federal Tax Reform Act of 1976, manufacturers are permitted to repatriate profits from Puerto Rico to the U.S. free of U.S. federal taxes. And by the way, the Puerto Rico withholding tax is only 10 percent.

    Of course, no company should have to pay more tax than they are legally obligated to, and they are entitled to locate to any low-tax jurisdiction. The problem starts when they use fraudulent transfer pricing and other tricks to artificially shift their income from the U.S. to a tax-haven. According to current OECD guidelines transfer prices should be based upon the arm’s length principle – that means the transfer price should be the same as if the two companies involved were indeed two independents, not part of the same corporate structure. Reality is that standard operating procedure for multinationals is to consistently violate this rule. And why shouldn’t they? After all, it takes 17 years for them to pay up, per the GSK example above, even when they get caught.

    Another industry which successfully exploits overseas tax strategies to cheat us all is the hi-tech industry. In fact, Microsoft Corp. recently shaved at least $500 million from its annual tax bill using a similar strategy to the one the drug industry has used for so many years. Microsoft has set up a subsidiary inIreland, called Round Island One Ltd. This company pays more than $300 million in taxes to this small island country with only 4 million inhabitants, and most of this comes from licensing fees for copyrighted software, originally developed in the U.S. Interesting thing is, at the same time, Round Island paid a total of just under $17 million in taxes to about 20 other countries, with more than 300 million people. The result of this was that Microsoft’s world-wide tax rate plunged to 26 percent in 2004, from 33 percent the year before. Almost half of the drop was due to "foreign earnings taxed at lower rates," according to a Microsoft financial filing. And this is how Microsoft has radically reduced its corporate taxes in much of Europe and been able to shield billions of dollars from U.S. taxation.

    But remember, this is only one example. Most of the other tech companies are doing the same thing. Google recently also set up an Irish operation that the firm credited in a SEC filing with reducing its tax rate.

    Here’s how this is done in the software industry and any other industry with valuable intellectual property. A company takes a great, patented, American product and then develops a new generation. Then, of course, the old product disappears. Some, or all, of the cost and development work for the new product takes place in Ireland, or at least, so the company claims. The ownership of the new generation product and all income from licensing can then legally be shared between the U.S. parent company and the offshore corporation or transferred outright to the tax-haven. The deal, to pass IRS scrutiny, has to be made using the "arms-length principle." Reality is that the IRS has no way of controlling all these transactions.

    Unfortunately those of us working and paying tax in the U.S. can’t relocate our jobs and our income to Ireland or another tax haven. So we have to make up the income shortfall. In the U.S. we have a highly educated society with a very qualified workforce, partly supported by our tax payers. This helps us generate breakthrough products. But once a company has a successful product, they have every incentive to move the second generation of a successful product overseas, to Ireland and a few other corporate tax havens.

    There is only one problem for U.S. companies with this strategy, and that is that if they repatriate this money to the U.S. they have to pay full corporate taxes. In fact, according to BusinessWeek, U.S. multinational corporations have built up profits of as much as $750 billion overseas, much of it in tax havens such as the Ireland, Bahamas, and Singapore to avoid the stiff 35 percent levy they’d face if they repatriated the funds back into the U.S. But of course, Congress, which is basically paid for by our multinational corporations, generously provided for a one-time provision in the corporate tax code, so that they could repatriate profits earned before 2003, and held in foreign subsidiaries, at an effective 5.25 percent tax rate.

    And so the game goes on.

    In the end, multinational corporations live in a global world which allows them to pretty much send their money to corporate tax havens at will, and then repatriate this money almost tax free, with the help of the U.S. Congress.

    The people left holding the bag are you and me.

    Peter Rost, M.D., is a former Vice President of Pfizer. He became well known in 2004 when he emerged as the first drug company executive to speak out in favor of reimportation of drugs. He is the author of "The Whistleblower, Confessions of a Healthcare Hitman."

    © 2006 Independent Media Institute. All rights reserved.
    View this story online at: http://www.alternet.org/story/45019/

  • Letter from Congress


    Dear Jeff:

    I just finished reading your critique of Noam Chomsky’s positions in an e mail sent to me by Tony Saidy.

    I had never paid much attention to Chomsky’s writings, as I had all along assumed that he was correct and proper in his position on the Arab-Israeli conflict.

    But now, upon learning that his first assumption is that Israel is simply doing what the imperial leaders in the U.S. wants them to do, I concur with you that this assumption is completely wrong.

    I can tell you from personal experience that, at least in the Congress, the support Israel has in that body is based completely on political fear–fear of defeat by anyone who does not do what Israel wants done. I can also tell you that very few members of Congress–at least when I served there–have any affection for Israel or for its Lobby. What they have is contempt, but it is silenced by fear of being found out exactly how they feel. I’ve heard too many cloakroom conversations in which members of the Senate will voice their bitter feelings about how they’re pushed around by the Lobby to think otherwise. In private one hears the dislike of Israel and the tactics of the Lobby, but not one of them is willing to risk the Lobby’s animosity by making their feelings public.

    Thus, I see no desire on the part of Members of Congress to further any U.S. imperial dreams by using Israel as their pit bull. The only exceptions to that rule are the feelings of Jewish members, whom, I believe, are sincere in their efforts to keep U.S. money flowing to Israel. But that minority does not a U.S. imperial policy make.

    Secondly, the Lobby is quite clear in its efforts to suppress any congressional dissent from the policy of complete support for Israel which might hurt annual appropriations. Even one voice is attacked, as I was, on grounds that if Congress is completely silent on the issue, the press will have no one to quote, which effectively silences the press as well. Any journalists or editors who step out of line are quickly brought under control by well organized economic pressure against the newspaper caught sinning.

    I once made a trip through the Middle East, taking with me a reporter friend who wrote for Knight-Ridder newspapers. He was writing honestly about what he saw with respect to the Palestinians and other countries bordering on Israel. The St. Paul Pioneer press executives received threats from several of their large advertisers that their advertising would be terminated if they continued publishing the journalist’s articles. It’s a lesson quickly learned by those who controlled the paper.

    With respect to the positions of several administrations on the question of Israel, there are two things that bring them into line: One is pressure from members of Congress who bring that pressure resulting in the demands of AIPAC, and the other is the desire on the part of the President and his advisers to keep their respective political parties from crumbling under that pressure. I do not recall a single instance where any administration saw the need for Israel’s military power to advance U.S. Imperial interests. In fact, as we saw in the Gulf War, Israel’s involvement was detrimental to what Bush, Sr. wanted to accomplish in that war. They had, as you might remember, to suppress any Israeli assistance so that the coalition would not be destroyed by their involvement.

    So far as the argument that we need to use Israel as a base for U.S. operations, I’m not aware of any U.S. bases there of any kind. The U.S. has enough military bases, and fleets, in the area to be able to handle any kind of military needs without using Israel. In fact I can’t think of an instance where the U.S. would want to involve Israel militarily for fear of upsetting the current allies the U.S. has, i.e., Saudi Arabia and the Emirates. The public in those countries would not allow the monarchies to continue their alliance with the U.S. should Israel become involved.

    I suppose one could argue that Bush’s encouragement of Israel in the Lebanon war this summer was the result of some imperial urge, but it was merely an extension of the U.S. policy of helping Israel because of the Lobby’s continual pressure. In fact, I heard not one voice of opposition to the Israeli invasion of Lebanon this summer (except Chuck Hagel). Lebanon always has been a "throw away" country so far as the congress is concerned, that is, what happens there has no effect on U.S. interests. There is no Lebanon Lobby. The same was true in 1982, when the Congress fell completely silent over the invasion that year.

    I think in the heart of hearts of both members of congress and of the administrations they would prefer not to have Israel fouling things up for U.S. foreign policy, which is to keep oil flowing to the Western world to prevent an economic depression. But what our policy makers do is to juggle the Lobby’s pressure on them to support Israel with keeping the oil countries from cutting off oil to the western nations. So far they’ve been able to do that. With the exception of King Feisal and his oil embargo, there hasn’t been a Saudi leader able to stand up to U.S. policy.

    So I believe that divestment, and especially cutting off U.S. aid to Israel would immediately result in Israel’s giving up the West Bank and leaving the Gaza to the Palestinians. Such pressure would work, I think, because the Israeli public would be able to determine what is causing their misery and would demand that an immediate peace agreement be made with the Palestinians. It would work because of the democracy there, unlike sanctions against a dictatorship where the public could do little about changing their leaders’ minds. One need only look at the objectives of the Israeli Lobby to determine how to best change their minds. The Lobby’s principal objectives are to keep money flowing from the U.S. treasury to Israel, requiring a docile congress and a compliant administration. As Willie Sutton once said, "That’s where the money is."

    Jim Abourezk

     

    Regular readers of Ebono Institute may find it instructive to compare this article to the analysis of Israel and Turkey’s involvement in the Asian oil pipelines . 

  • Sydney’s air pollution deteriorates as other states improve

    The Daily Telegraph, 7/12/2006, p. 9

    Source: Erisk Net 

     

  • Melbourne is running out of water

    The Age, 7/12/2006, p. 12

    Source: Erisk Net