Editorial: Austerity rewards corporate tax evasion

While the European Commission, the European Central Bank and the IMF wrangle over precisely how many more Greek workers must lose their jobs and how much more public spending must be slashed in order to placate investors, some of Greece’s largest companies are fleeing the country for tax havens abroad, compounding the squeeze on public revenue. Coca-Cola Hellenic Bottling Company (CCH), the country’s largest publicly listed corporation and the second-largest bottler in the Coca-Cola system, announced on October 11 that it would leave Greece for tax-friendly Switzerland and a listing on the London Stock Exchange.

CEO Dimitris Lois told the Financial Times that “In principle the Greek government will lose zero income.” In fact that is untrue – basic corporate tax rates are lower in Switzerland than in Greece, and multiple other reductions are available to transnationals, including the possibility of exemption from non-Swiss earnings. It is nonsense to claim that this will have no impact on the company’s contribution to public revenue in Greece.

CCH, According to its annual shareholder report for 2011, booked €6.85 billion in revenue and paid €102.7 million in taxes. It can be assumed that CCH, which operates in 28 countries across Europe and Africa, already devotes considerable ingenuity to whittling down its global tax bill through transfer pricing and careful routing of invoices. Tax charges as a percentage of its profits have been declining over the crisis years, but this hasn’t stopped it from grumbling. So CCH shares are being traded for shares in a newly-created Swiss holding company and a change of domicile.

One day before the CCH announcement one of Greece’s largest dairy companies, FAGE, announced that it was leaving Greece for Luxembourg, where it had installed a holding company of its own. “This corporate restructuring builds on our Greek heritage while allowing us to compete more efficiently in international markets,” said the CEO. No question here of ‘sharing the burden’ of the country’s torment. For tax purposes, the famous Greek yogurt is now made in Luxembourg.

Do we know the impact of the move on the company’s Greek taxes? We don’t, but we should, and that is the point.

Shortly after these major food companies quit Greece for still sunnier tax havens, journalist Kostas Vaxevanis was jailed and threatened with criminal prosecution for publishing the names of some 2,000 wealthy Greeks with undeclared foreign bank accounts. That list, now known as “the Lagarde list” because two years ago it was handed to the Greek government by then French finance minister Christine Lagarde (who now heads the IMF), is only a list of Greek clients of one bank, HSBC. It is but a small piece of the wider universe of tax evasion. As far as is known, the government of Greece has yet to act on this or other lists detailing the systematic removal of a huge piece of the national wealth from the country’s tax base..

So while police attack Greek workers demonstrating against savage attacks on living standards, the elimination of collective bargaining and massive cuts in public services, and a journalist is jailed for exposing government collusion in tax evasion, hugely profitable companies are rewarded with a berth in the FTSE 100 and improved share prices for their contribution to reducing public revenue. This is corporate, not individual, tax evasion, and it is looting on a grand scale.

Unions and civil society groups contesting austerity should be highlighting the massive hypocrisy and injustice of an austerity regime which rewards massive corporate economic crime. For starters, we need a Lagarde list of our own. The sum of current and future losses to public finances arising when a Greek (or Spanish, or Portuguese) company changes domicile to reduce its tax bill should be automatically deducted from that portion of sovereign debt being administered by the troika. A continually updated list can then be presented to Christine Lagarde.