Biden makes tackling corruption a national security priority

Oliver Bullough


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You may have heard: the G7 group of wealthy democracies (it used to be the G8 thanks to Russia’s “remarkable economic and democratic transformation” under Vladimir Putin, but we don’t talk about that anymore) has agreed to new rules for taxing multinational companies. The agreement is “seismic”, “truly historic” and “ambitious,” according to the UK government, which is chairing the talks.

  • “That global minimum tax would end the race-to-the-bottom in corporate taxation, and ensure fairness for the middle class and working people in the U.S. and around the world,” said Treasury Secretary Janet Yellen.

This is indisputably great. The global tax system is flawed, and concerted efforts to improve it are thoroughly welcome.


If there is one thing I know about international tax agreements, it’s that I don’t understand them; my brain freezes up before I even get to the end of the summary of the heads of terms of the initial agreement. If there’s another thing I know about international tax, it’s that I don’t need to have an opinion on them, because I know Ronen Palan, professor and tax whisperer, and he does.

If you don’t know his work, he has analyzed the public filings of many of the world’s biggest countries, piecing together how much (or, more likely, how little) tax they pay, where they pay it, and what that means. He is also generous with his time, and prepared to talk people like me through the complexity of what he’s discovered, which is often about “jurisdictional arbitrage” – the clever way that companies exploit tiny differences between different countries’ laws, to slip through the gaps.

  • “Jurisdictional arbitrage is only for starters. Sophisticated firms – not least Amazon – also take advantage of accounting rules in conjunction with financial instruments such as derivatives and swaps to modify the very accounting data that is used in calculating taxation. They can modify the location, timing or even accounting categories of income, turnover and the like, to shift profits either from one place to another, or often to a future that never comes,” he writes.

Read his piece, and marvel at the sheer complexity of the labyrinth, before we even get out of the first room. If that doesn’t exhaust you, this is Palan’s exhaustive study of how Amazon structures its tax affairs, somehow generating losses to set against tax, and profits to invest in its business, at the same time and in the same place. Schrodinger’s Accountancy.

  • “Tax and reporting arbitrage are enabled not only by a specific set of jurisdictions, typically branded offshore financial centres, but may be arise either accidentally or indeed intentionally in geopolitical competitive markets,” he writes. 

I don’t know about you, but I worry that – no matter how hard the world’s finance ministers try, and whatever path they choose – Jeff Bezos will turn out to be many steps ahead of them. Perhaps going to space will help him escape earthbound taxation altogether?

On the subject of super-wealthy Americans and their tax rates, this is an amazing investigation about how they pay even less than even I imagined. Corporate titans of the calibre of Bezos, Elon Musk, Carl Icahn and George Soros have regularly paid little or no tax at all, for years on end.

  • “Many Americans live paycheck to paycheck, amassing little wealth and paying the federal government a percentage of their income that rises if they earn more. In recent years, the median American household earned about $70,000 annually and paid 14% in federal taxes. The highest income tax rate, 37%, kicked in this year, for couples, on earnings above $628,300. The confidential tax records obtained by ProPublica show that the ultrarich effectively sidestep this system.”

Over the past 15 years, according to ProPublica’s calculation, Bezos has paid an effective tax rate of just less than one percent. He may no longer be the richest man in the world but, is it any wonder he got so rich? We’d all be richer if we didn’t have to pay tax.

By the way, in case you’re concerned by the ethics of publishing information about a taxpayer’s private affairs, ProPublica has explained why it did so here. If you find that explanation convincing and approve of its work, please consider helping to pay for it.


It was a bit tricky knowing where to start the newsletter this week, because of the similarly big deal that was the White House’s memorandum declaring that the fight against corruption is a national security priority. I was a little bit alarmed to see – yet again – the zombie statistic that corruption costs us between two and five percent of the world’s economy (it was a guess when the IMF’s Michel Camdessus came up with it, back in the 1990s, and he wasn’t even talking about corruption at the time; it’s got no more accurate just because it’s been around for so long), but it was still great that Joe Biden is so fully on board with the battle.

  • “Corruption threatens United States national security, economic equity, global anti-poverty and development efforts, and democracy itself.  But by effectively preventing and countering corruption and demonstrating the advantages of transparent and accountable governance, we can secure a critical advantage for the United States and other democracies,” the memo said.

And Biden wasn’t alone. Speaking on behalf of the UK, Foreign Secretary Dominic Raab stood up at the United Nations to quote that same zombie statistic, and declare corruption was awful.

  • “It is the acid burning away the rule of law, democracy and public trust in their institutions. It stunts development, it drains poorer nations of their wealth, and keeps their people trapped in poverty,” he intoned.

And, then came the French.

  • “The fight against corruption is an imperative that we must all tackle together. France is very actively involved in international efforts against corruption and intends to continue its action in this regard,” said Franck Riester, Ministre délégué chargé du Commerce extérieur et de l’Attractivité (I make that “minister-delegate for foreign trade and attractiveness”, which is a gloriously French-sounding job title).

And still the interventions kept coming; you wait an age for major speeches on corruption, then so many appear at once that there isn’t room for them in your newsletter. At some point, however, the avalanche of demands that the world start taking action against corruption started to prove – for me, at any rate – counter-productive, and to remind me of nothing more than that scene in Monty Python’s The Life of Brian where the revolutionaries are holding a committee meeting to discuss the fact that they hold too many committee meetings, when Judith bursts in with the news Brian is being crucified, at which point the delegates propose “immediate discussion”.

  • “It’s action that counts, not words, and we need action now,” as Eric Idle’s character Loretta puts it, before failing to take any action at all.

All of these countries have it perfectly within their power to fight corruption on their own, or to team up with a coalition of allies to do so, and they know very well what they need to do: properly resource their law enforcement agencies, and leave officers to uphold the law; introduce verified transparency of corporate shareholders, to reveal the true owners of shell companies; help poorer countries track wealth stolen from their treasuries.

Once they’ve achieved all that, they can move onto other areas. One profitable sphere might be to fund some academics to research a more accurate assessment of the cost of corruption to the world economy, so we can find out whether it truly is between two and five percent of Gross Domestic Product. At least then in future speeches, world leaders could quote more accurate statistics.


As usual, this week I’ve been reading innumerable articles about the skulduggery of the rich and powerful, many of them published in UK-based media outlets, and written by UK-based journalists. As such, I was very interested by this open letter signed by the country’s most renowned free speech and anti-corruption organisations, warning against the potential precedents set by the aggressive legal tactics employed by the billionaires behind Eurasian Natural Resources Corporation.

“The UK and US courts will need to decide the merits of these cases, but we are deeply troubled by the chilling effect this wave of legal action has on legitimate investigative and anti-corruption work by journalists, law enforcement officials, and others,” the civil society groups said. “We cannot permit powerful actors with deep pockets to silence their critics, thwart legitimate investigations and target those whose efforts are crucial to ending corruption.”

It is well-known that British courts are a particularly welcoming forum for wealthy claimants looking to bring suits against journalists, critics and rivals, and the groups are asking the UK government to urgently introduce legal measures to insulate “public watchdogs and journalists” from attempts to silence them. That sounds to me like a very good idea.

If you are interested in knowing more about EHRC and its owners, then I highly recommend Tom Burgis’ Kleptopia, which is itself target of one of the many court cases.