The economy is cleverly being used to trump the environment in both Canada and the United States, largely by exploiting people’s ignorance of economic matters.
As part of deficit reduction, the Harper government has announced cuts of 776 jobs at Environment Canada; the Federal Fisheries’ budget has been cut by $53 million; and Harper plans to cut the budget of the Canadian Environmental Assessment Agency (CEAA) by at least 43% ($12.9 million), along with one-third of its staff.
“There are all kinds of big projects lined up across the country,” says Ottawa-based environmental lawyer Stephen Hazell. “The level of non-renewable resource development activities in this country is just going insane. The agency [CEAA] has got more responsibility than ever in terms of managing the environmental assessments for all these big projects,” so the cuts will be crippling.
In the U.S., Tea Party Republicans this past summer forced the so-called “debt ceiling crisis,” with a resulting deal that will see almost $3 trillion in federal government spending cuts over the next decade – cuts that will be devastating for the poor and will also affect environmental regulation.
The Sierra Club’s Melinda Pierce says the cuts will decimate enforcement of the U.S. Clean Water Act and Clean Air Act.
“There just won’t physically be the funds available to protect drinking water and to ensure there’s clean air to breathe,” she says.
Republican presidential candidates have subsequently called for the dismantling of the U.S. Environmental Protection Agency (EPA), claiming that “over-regulation from the EPA” is what’s causing a stalled economy.
But there is little evidence for such a claim.
The Globe & Mail reported (Aug. 9) that U.S. multinational corporations “are collectively sitting on almost $2 trillion (US) in cash and contributing little in the way of job creation.”
For example, global giant General Electric is reportedly sitting on $91 billion in cash, but in 2010 the company paid no U.S. federal income tax at all – even though it made $14.2 billion in profits last year, including $5.4 billion from its U.S. operations. In fact, GE got a $3.3 billion U.S. federal tax refund in 2010. But, despite such corporate coddling, GE has eliminated 20% of its U.S. workforce, while moving jobs to China.
Responding to critics,General Electric CEO Jeffrey Immelt recently told CBS 60 Minutes correspondent Lesley Stahl, “I want you to root for me. You know, everybody in Germany roots for Siemens. Everybody in Japan roots for Toshiba. Everybody in China roots for China South Rail. I want you to say, ‘Win, GE’.” Immelt also told Stahl, “I’m a complete globalist. I think like a global CEO. But I’m an American. I run an American company. But in order for GE to be successful in the coming years, I’ve gotta sell my products in every corner of the world.”
To which economist Paul Krugman responded on his New York Times blog: “GE isn’t in any important sense an ‘American’ company. More than half its employees are overseas. I’m sure Immelt would claim that this is just he what needs to do to compete; but in that case, he can’t have it both ways and also demand that we cheer for GE as an American champion” -- especially one who pays no taxes because of generous corporate tax cuts and loopholes.
According to The Tyee (Sept. 9, 2011), thanks to corporate tax cuts in Canada, “Since 2008, the amount of cash stashed away by Canadian non-financial corporations rose by $83 billion,” amounting to a “total cash cushion of roughly $479 billion.”
A July report issued by the B.C. Federation of Labour, Failed Policies, showed that a decade of Campbell-era corporate tax cuts have not improved the province’s economy. Since 2001, the B.C. Liberals have lowered the corporate tax rate in five stages, from 16.5% to 10%, thereby lavishing some $7.7 billion more on the corporate sector. As well, says Federation President Jim Sinclair, “These numbers don’t include an estimated $500 million annually in cuts to taxes on banks and capital. Factoring these in, the total tax savings to corporations under the B.C. Liberals to date exceeds $12 billion.”
The Globe & Mail’s Robert Matas asked rhetorically (Aug. 31), “Where did that money go? Not into new machinery, equipment, and other capital items, says a draft of part two of the Failed Policies report. The growth of capital expenditures in B.C. during the decade largely mirrored that of the rest of Canada, the draft report says.” And not in job creaion, with the B.C. unemployment rate higher in 2011 than it was in 2001.
Where did that money go? Likely it went into tax havens – the “elephant in the room” that right-wing conservatives never talk about when discussing economic turmoil.
The Tea Party movement has as its goal what it calls “starving the beast” of government, and clearly, the multinationals are doing just that, in order to foster privatization and deregulation (especially of federal environmental regulations).
One of the easiest ways for the corporate sector to “starve the beast” of government is by sending as much of their profits as possible to overseas tax havens.
Some time before the end of December, the Harper cabinet will quietly sign an Order-in-Council ratifying a new Canada-Bahamas Tax Information Exchange Agreement (TIEA), by which Canadian corporations can set up subsidiaries in the Bahamas in order to repatriate profits back to the Canadian parent-company tax-free. The only reason we even know about this is that The Nassau Guardian (July 21) ran an article about the delay, explaining that the details of the TIEA were contained in Bill C-3, signed on June 17 by Canadian legislators, but Parliamentary summer break intervened before full ratification could take place.
The new TIEAs are being touted as a means for more “transparency” about tax avoidance, but there is little to justify such a claim.
Back in March 2011, the House of Commons Finance Committee heard from several proponents of TIEAs, including Montreal billionaire Stephen Jarislowsky. But Quebec activist Louise Champoux-Paille told the Finance Committee that (for example) the five Canadian banks that already have branches in tax havens thereby save an estimated $2.5 billion in Canadian taxes annually. During 2011, Canadian TIEAs with at least 10 tax haven jurisdictions came into effect.
Statistics Canada has reported that $88 billion of Canadian corporate assets were held in offshore tax havens in 2003 – the latest figure I could find.
TIEAs likely won’t change the tax avoidance methods used. As Peter Gillespsie explained (CCPA Monitor, Dec. 2010 – Jan. 2011), frequently offshore affiliates “are shell companies that conduct no business in the offshore jurisdiction and whose presence is little more than a postal address and a bank account... Today, more than half of all global trade is conducted among affiliates of the same parent company.”
Such offshore affiliates facilitate the tax avoidance trick called “transfer pricing.” By adjusting its internal pricing, a corporation can shift the profits offshore – where it pays little or no tax – and shift the costs onshore, where they are deducted against taxes owed.
According to Reuters (July 28), “Nearly $1.2 trillion of accumulated U.S. corporate profits are now held in overseas subsidiaries” to avoid taxes.
“Transfer pricing” allows a corporation to then claim a “tax deferral” – usually a figure in the millions of dollars that is added to and rolled over year after year. As Nicholas Shaxon, author of Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens (Palgrave Macmillan, 2011) explains: if corporations leave their earnings off shore, “they can ‘defer’ tax on them indefinitely [like] an interest-free loan from the government, with no repayment date.”
Someone in the know (like Statistics Canada) could read a corporation’s annual report and, from the deferred tax item, estimate the profits it had hidden away in offshore havens. Now, with the new TIEAs, a corporation can simply repatriate those offshore profits tax-free – avoiding tax in any jurisdiction and leaving no trace of the taxes deferred.
The Tax Justice Network estimates that individual and corporate assets held offshore in tax havens globally amount to more than $11.5 trillion.
“Starving the Beast”
So the corporate sector is sitting on trillions in cash and hiding trillions in tax havens in order to “starve the beast” of governments worldwide: forcing “austerity measures,” deregulation, privatizations, resources royalty cuts, “streamlining” of environmental assessments, and further tax cuts. Like other neo-cons, Harper is actively cooperating by cutting the federal corporate tax rate, decimating Environment Canada, and making tax havens even more corporate-friendly through signing TIEAs.
By increasingly shifting the tax burden to low- and middle-income Canadians, the Harper Conservatives are expecting that, like the Tea Party followers in the U.S., we will all start clamouring for even less environmental regulation, and jobs at any cost to the planet.
But, as people worldwide are realizing, there would likely be no high government deficits if corporations and the rich paid their fair share of taxes.
Eliminating Federal Regulation
Actually, Harper pre-empted by at least two years the U.S. Tea Party manoeuvrings to eliminate federal environmental regulation. For example, in 2007, the Harper government introduced new rules to limit access to Environment Canada scientists by journalists. Next, Harper’s 2009 budget included revisions to the Navigable Waters Protection Act, exempting certain projects and waterways from the Act and reducing the need for federal reviews in some cases. This paved the way for independent power producers (IPPs) and their “run-of-river” megaprojects.
Harper’s 2010 budget then announced that federal environmental review of major energy projects would henceforth be undertaken by the National Energy Board and the Canadian Nuclear Safety Commission – both pro-industry – rather than by the CEAA.
This was followed by the announcement that the Environment Minister would now have wide-ranging powers to limit federal environmental assessment of controversial projects to specific aspects like a road into the site or a nearby waterway.
In March 2011, the Treasury Board Secretariat revealed cuts of $1.6 billion from environmental services across different departments - including $222 million in spending at Environment Canada. Then, later this year, came the announced cuts to the Fisheries budget, Environment Canada jobs, and CEAA budget and staffing.
Harper also intends to end funding to a federal program that compels government to consult with First Nations before making decisions on proposed projects. This “duty to consult” requirement has already been disregarded by some federal agencies.
Last year, Green Party Leader Elizabeth May told the Victoria Times-Colonist (April 25, 2010) that, while the Canadian Constitution treats the environment as a shared responsibility between federal and provincial governments, the Harper Conservatives want to rewrite the rules “so the federal government doesn’t have any role at all.” That’s what is quietly happening, under the blanket of economic crisis.
(Joyce Nelson is a freelance writer/researcher and author of five books.)
“Thanks to corporate tax cuts in Canada, the amount of cash stashed away by Canadian non-financial companies rose by $83 billion, amounting to a total cash cushion of roughly $479 billion.”
“Corporations are being allowed to deprive governments of billions of taxable profits stashed in offshore tax havens, thus creating deficits that can be used as an excuse for more ‘austerity’ measures and even more corporate tax cuts.”