Verrechnungspreismissbrauch

Transfer pricing tax evasion.

Under international finance rules that allowed corporations to assign profits earned by subsidiaries in countries with taxes to subsidiaries in countries without taxes, an online documentary explained, commodities companies could avoid taxes in source countries by having their extracting subsidiary sell the commodity to subsidiaries abroad at prices that did not reflect market prices, moving around on-paper profits and on-paper losses. The tactic is called transfer pricing. Rules supposed to prevent it required among other things that divisions of the same organization deal with each other “at arm’s length,” as if they were not part of the same organization.

Profits from this and other paper shuffles can apparently show up decades later and inflict serious fiscal damage on countries, even countries with the resources to give government auditors enough training to stand up to international corporations’ negotiators. In 2013 Rupert Murdoch’s giant News Corp. appears to have received the “largest cash payout from the Australian Tax Office ever,” a rebate of US$800 million for some on-paper loans to itself made in 1989. The money showed up in News Corp’s U.S. subsidiary’s Q4 2013 accounts as a US$800 million payment from “a foreign tax authority.” The original deduction was estimated by the Australian Financial Review at AU$600 million, but it was decided that News Corp was owed additional interest on it of almost AU$300 million.

The huge payment is being described as a substantial inconvenience or “blowout” to the current Australian federal budget. Last summer then-Australian prime minister Kevin Rudd accused News Corp companies in Australia of running a “ferocious” media campaign against his government, including accusing the Labour government of overspending. Kevin Rudd lost the Australian election to Tony Abbott on 07 Sep 2013.

This is how the tax deduction happened, according to an online 17 Feb 2014 article from the Australian Financial Review:

“In a 1989 meeting, four News Corp Australia executives exchanged cheques and share transfers between local and overseas subsidiaries that moved through several currencies.

“They were paper transactions; no funds actually moved. In 2000 and 2001 the loans were unwound. With the Australian dollar riding high, News Corp’s Australian subsidiaries recorded a $2 billion loss, while other subsidiaries in tax havens recorded a $2 billion gain.

“By last July that paper “loss”, booked against News Corp’s Australian newspaper operations, had become an [A]$882 million cash payout.

“Under a legal arrangement when the company was spun off last June, News was forced to pass all of the tax payout to Mr Murdoch’s 21st Century Fox.

“News Corp said it had retained $A81 million because it faced income tax charges on the interest payments by the Tax Office. However it seems unlikely to actually pay these funds: News Corp Australia carried another $1.5 billion in tax deductions from a separate paper shuffle that it made when News reincorporated in the US.”

(Fair ECHH noongs price mis BROW chh.)

Trennungsjournalismus vs. Journalismus der richtigen Zusammenhänge

“Separation journalism vs. journalism of correct connections.” A NiemanLab.org book review said Jay Rosen wrote that U.S. journalist ethics have been about getting the separations right and should move on to getting the connections right.

Bob Garfield made a seemingly related comment about journalistic problems with lack of context in the 02 Aug 2013 episode of National Public Radio’s “On the Media” when he said, “Journalism is pretty terrible at covering ongoing conditions. It tends to be very good covering the acute. Poverty and de-industrialization, they’re just hard to cover because they require constantly paying attention to things that are changing only very incrementally, right?” I think he went on to indicate the longer term was only two weeks though.

The wonderful Seymour Hersh mentioned the recognizing relevance problem—after substance’s having been neglected too long in favor of style—in a talk at Boston University from what may have been the first year of President Obama’s first term because health reform hadn’t passed yet.

“[T]here’s no knowledge. I can’t tell you how many times… just last weekend, a senior official was interviewed live, maybe to camera, but the interview was broadcast live on a major show by somebody who didn’t really understand what he had said. He gave away something, and the person wasn’t smart enough, though a very eminent person, wasn’t smart enough to jump on it. So you have a lack of acumen too, because it’s all gone stylish. And so there you are.”

Lacking the information you need doesn’t mean you’re not smart. But it’s everyone’s tragedy if it’s not remedied.

Speaking of style/substance and context’s deep undercurrents: In the 1990’s my fellow German history majors and I were instantly suspicious of German television news anchors who smiled. In addition to exceeding what was necessary in the exquisitely minimalist atmosphere of the time, and implicitly giving permission to models that ultimately drove news into entertainment, they appeared to be knowingly or unknowingly siding with encroaching private media empires that were trying then to undermine the decent public television channels you could still find in Germany. Some of those entrepreneurial, debt-fueled private channels have since gone broke while others resemble empires. There have been changes at the top as well: British media mogul Robert Maxwell was found floating dead next to his yacht, and Bavarian media mogul Leo Kirch died of old age after suing Deutsche Bank for accidentally bankrupting his company by managerial loose talk. For a time, Australian media mogul Rupert Murdoch’s interest in purchasing German media scared people so much they hoped Italian media mogul Silvio Berlusconi would get them instead. Today I think the smiling-news-anchors “tell” no longer applies—you can be a very good German news anchor now and occasionally smile on television!—but persistently mugging for the camera might remain a bad indicator. Sounds terrible in the context of 2013 U.S.A., criticizing someone for smiling!

F.y.i., here is NiemandLab.org’s interesting Rosen-brainstormed collection of ideas about contemporary deliberate U.S. journalistic separations:

  • Editorial functions are separated from the business side.
  • The news pages are separated from the opinion pages.
  • Facts are separated from values.
  • Those who make the news are separated from those who cover the news.
  • Truth-telling must be separated from its consequences so that journalists can “tell it like it is.”
  • The newspaper is separated from other institutions by its duty to report on them.
  • One day is separated from another because news is what’s “new” today.
  • A good journalist separates reality from rhetoric.
  • One’s professional identity must be separated from one’s personal identity as a citizen.
  • How one “feels” about something is separate from how one reports on it.
  • The journalist’s mind is separate from the journalist’s soul.

(TRENN oongz joor nah LEEZ moose   VAIR seuss   joor nah LEEZ moose   dare   tsoo ZOM en heng eh.)

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