Globalization as we have come to know and love it is misnamed. As it advantages corporations while disadvantaging workers and governments, it might more appropriately be called corporatization or some such thing.
Among its sins, it allows corporations to escape the democratic confines of the nation state and it allows corporations to blackmail nations into providing cheap labour. Manufacturing moves to China because China can promise workers unprotected by independent unions and without freedom of speech or freedom of association. American companies can set up in Mexico to exploit cheap labour but Mexican workers do not have the reciprocal right to move to the United States to exploit higher wages.
Another area of advantage is taxation. Coorporations can shift their profits to low tax jurisdictions regardless of where they manufacture or sell their products. A range of corporate giants have been exploiting this opportunity, including Google, Amazon, Starbucks, Cadbury and Apple. The Tax Justice Network
estimates that national governments lose tax revenues of $200 to $300-billion per year in total to corporate
off-shoring. Apple, for example, has parked about 64 percent of its global profits over the past three years in Ireland and
Bermuda, paying less than 2 per cent income tax. Amazon has paid a negligible tax on its £4.2-billion annual sales in the UK by routing its sales through Luxembourg.
The G-20 nations have now decided to do something about it. At last week's conference they endorsed the first internationally co-ordinated effort to curb the escalating problem of corporate tax avoidance. According to The Guardian, "It is the most ambitious program of reform since the principles for
bilateral tax treaties were first laid down by the League of Nations in
the 1920s." The program establishes 15 initiatives that will arm tax authorities around the world with the tools they need to crack down on some of those areas most widely exploited by multinationals.
A particularly important target is the tax breaks offered by nations in the relentless competition for investment. Tax competition has created a race to the bottom where the
tax burden is increasingly shifted to the middle class who
are unable to avoid tax by moving their assets offshore. The G-20 is trying to put an end to this
kind of predatory competition and to have more collaboration among governments.
The plan isn't perfect. For example, developing countries have effectively been excluded even though they are losing far more revenue from tax-dodging multinationals than they receive in aid. Oxfam claims corporate profit-shifting costs African nations two per cent of their GDP.
Nonetheless, it's a good start. The next step should be to go after the estimated $21-trillion of assets squirreled away offshore by individual tax-dodgers.