Event: Screening and panel discussion of ‘We’re Not Broke’

Film: ‘We’re Not Broke

Award-winning director-producer team Karin Hayes and Victoria Bruce tell the story of how U.S. corporations have been able to hide over a trillion dollars from Uncle Sam, and how seven fed-up Americans from across the country, take their frustration to the streets.

8 June 2013

Panel Discussion: tax avoidance, evasion and impact on global south


Nick Dearden, Jubilee Debt Campaign
Liz Nelson, Tax Justice Network
Pablo Navarrete, film-maker and founder of Alborada, a website covering Latin America related issues
Tom Pursey, activist and founder member of UK Uncut

Chaired by Deborah Burton, Tipping Point Film Fund

Special Thanks to St Ethelburga’s Centre for their hosting of this event

made by Lin Ho-Chih
photographed and transcribed by Isabelle Chaize

Deborah: I like to start by introducing Liz Nelson -Liz is with the Tax Justice Network, We are partnering with TJN  on this day’s events. TJN basically exists to promote research and development into tax issues, with the idea of promoting development, encouraging citizenship and to relieve poverty within the local, national and international economies and societies. Nick who’s just come from a G8 stunt, is the director of Jubilee Debt Campaign, was formerly with War on WantAmnesty UK, and joined Jubilee Debt in 2008. Tom is one of the founders of UK Uncut and has been seven years working as a grassroots activist. His day job is as a filmmaker, and worth saying that clearly UK Uncut was instrumental in the story we’ve just seen. And Pablo Navarrete is a filmmaker; I first came across Pablo when he made a film called Inside the Revolution which was looking at the 10th anniversary of Chavez’s election in 2008; he’s the founder of Alborada which is an independent website covering Latin American related issues, politics, media and culture. So we’ve got a very good range of people here…Liz, do you want to maybe give us a bit of background on Tax Justice…

Liz: You’ve kind of outlined it pretty much, but TJN is involved in developing research and advocacy tools from that research. Our purpose is around creating tools which are accessible, the whole mystique around tax is often over-complicated, making the research accessible to a whole range of different people. So some of the research things that we’ve done within TJN is investigated the amount of wealth that is held offshore, and you saw Jim Henry there who works very closely with us.

We’ve undertaken something we do every two years called the Financial Secrecy Index which ranks tax havens in terms of their capacity and the capital that flows through them, and I think that’s very useful work in picturing where that money is and where it’s flowing to, largely out of the developing South. And we have monthly podcasts which look in detail at tax issues and explore particular news which is current at the time. So a whole range of advocacy tools that we use, and we work closely with the media, with social media to get those messages out, and other civil society that is involved in doing that.

About nine months ago we started working with the directors of We’re Not Broke, trying to support their screenings, a lot of them have been in Europe and North America, but what we wanted to try and do is get those in the Southern countries in Latin America, in Peru, Argentina, Brazil. And also we asked our colleagues at TJN Africa if they would screen as part of their training program, they did some training on tax, and although the context is obviously very North America, we just wanted to see how it would play out and how valuable it would be. And the feedback was very positive, and obviously we were saying in the Francophile African countries it would be useful to be in French, Spanish, Portuguese, which we’ve done. But also a very positive feedback in just taking quite a daunting subject to people who’ve been involved in civil society, involved in policy development, advocacy and so on, and unwrapping the subject and making it more accessible. And they also said how valuable it was, this is people working in Sierra Leone, Uganda, Tanzania, and they were saying it was particularly useful for students in higher education but also in schools to try and improve that literacy around economic issues.

Deborah: We were talking earlier about the detail threshold, I think an awful lot of people coming to this issue face, how you get around the complexity without being so blinded by it you can’t…The OECD, which is a European institution that lies at the heart of a lot of this tax issue, tax regulation, that you’ve been pushing and pressurising, have just recently come out and said that they are looking at implementing something that lots of campaigners have been pushing for which is a country by country reporting standard so that multinationals can’t play games in terms of accounting for their profit made in countries, particularly developing world countries. And for the OECD to be coming out saying, ‘yes we’re going to start to look at how we make the European Union apply country by country reporting to some of these big multinationals’ feels like a big step forward, particularly for developing world countries. Can you give us an update on that, is that a big step forward?

Liz: Yeah, I think generally the view is that it’s a positive step forward, I don’t know if it’s a big step forward but it’s certainly a positive step forward, recognition that something has to change, the system doesn’t work. So I suppose it is positive, but you have to balance the strength of civil society and other lobbying in promoting country by country reporting, automatic information exchange, these other things which push back on and create a more transparent system, you’ve got to balance that with the pressure, that obviously the multinationals will be working damn hard to make sure that doesn’t work. It’s worth just saying, last week a blog was about Kenya, which is currently or has recently been investigating the possibilities of becoming a ‘special economic zone’ or tax haven, a financial centre for services. And interestingly given we’re here in the City of London, and we’ll visit this on the walking tour, TheCityUK is deep in there facilitating that process.

Deborah: Nick, pick up on the debt campaign, structural campaigns, campaigns that are trying to get beyond just the aid story  and some of the underlying causes that people are now beginning to understand. Can you say a little bit about that, the degree to which aid is a bit of a red herring, in terms of funding public services, how tax avoidance plays into that?

Nick: I think there’s two things to say on aid, which has really come back onto the agenda as the big thing, too many ? as the answer to world poverty. And I think the reason for that is it means that people can work very closely with government, because governments quite like people talking about aid, particularly our government which has now said it’s going to meet its aid commitments that have been around for 40 years. And I think the reason governments like that is because it makes them look like the good guys. So it’s all about ‘we do good stuff in the world, we just need to do more of it, and here’s our program of how we do more of it’ and it completely obscures the fact that what we actually do is drain the global South of wealth, and that’s what we have been doing for hundreds of years, and that’s why they’re in the state they’re in.

So these figures are a few years old now but a few years ago we looked at the total amount of wealth that flows into the South and the total amount of wealth that flows out of the South. And in, you’ve got about 900 billion dollars going into the South, and you’ve got about 1200 billion coming out; 900 going in and 1200 coming out, so it’s a net loss for the South. And going in, included in what goes in is aid, but aid is quite a small proportion of it, it’s about 130 billion of that; much bigger than that is migrants’ remittances so people who come to work here and send money back home, that’s much bigger than aid; and also foreign direct investments, so corporations investing in the South, whether it’s a real investment or not is questionable. And then on the outside you’ve got debt repayments, which is about 450 billion still, it’s what my organisation works on; you’ve got profit repatriation, so this is really interesting because foreign direct investment goes in, but a whole heap of it comes back out again to be reinvested in Northern banks, that’s profit repatriation; and then you’ve got what we call illicit capital flows, which is basically about tax avoidance and tax evasion. And that’s the biggest chunk, that’s about 500 billion or something like that a year. And that includes a lot of different things, illicit capital flow is not a very user friendly term, so we need to come up with a better term than that. But of that, about 5% of that is corruption; 31% is other criminal activities, and that includes drug dealing, smuggling, that kind of thing; 64% is really about tax avoidance, mostly legal. Most of it is about stuff that’s completely legal.

There was a report a couple of weeks ago about how much Africa has lost over the last 30 years, so in the period of globalisation, and it’s between, a lot of this is very rough estimates because we don’t know, that’s part of the point, but between 850 billion and 1.8 trillion dollars lost from Africa over 30 years. So when we talk about aid I think it’s problematic because we’re reinforcing a story that really isn’t true in terms of our relationship with the continent.

And I was a bit late for the film this morning because we were down at a protest and I’ve got a load of soil on my trousers because we were making a little garden outside the pre-G8 summit, which is the nutrition summit that’s being held this morning, DC’s there, various popstars are there, the great and the good are there, talking about how they’re going to use aid to improve agriculture in Africa. And again I’m sad to say that I think too many NGOs, too many charities, have fallen into the trap of saying ‘well this sounds good, we’re trying to improve nutrition, trying to stop hunger in parts of Africa’. But actually what we’re talking about is the same old market-knows-best corporations and investment agenda that we’ve talking about for a very very long time. So a big part of it is called the New Alliance and it’s about investing aid money in partnership with big corporations like Monsanto, Cargill and Unilever so that they can invest in African countries and help the small farmers to grow more. And part of what the country has to do as part of this partnership is things like stop distributing free seeds to farmers because they want them to buy them off the big corporations; things like making it easier for big corporations to get access to land, buy land in their countries. As far as we’re concerned this is just nonsense, this is the same free trade policies that have led to so much starvation.

There isn’t a problem with food in the world, there’s enough food to feed everybody; why isn’t it getting to them? Because people don’t have enough control; and people don’t have enough control because corporate giants are in control of the food system. So we were down there campaigning for food sovereignty this morning. So Zambia is quite a nice example…Zambia has been a very indebted country for a long time, so we’ve campaigned for a long time to get Zambia’s debt cancelled. One of the reasons so many countries got so heavily into debt is precisely because our part of the world and the international institutions that we control lent huge amount of money to countries – and our banks – in the 1970s and 1980s, they got horrendously into debt, they couldn’t pay the debt off, but they paid such huge amounts in trying to pay it off that they couldn’t develop, and they stopped spending on health and education and so on. A lot of that could have been completely prevented by decent taxation systems.

It’s incredible, you look at a country like Democratic Republic of Congo, why isn’t it the richest country in the world given the resources that it’s got? A large part of the story is the amount of debt, like Mobutu, the dictator Mobutu, one of the most corrupt dictators that Africa’s ever seen, was put in the power in the first place and then kept in power by loans running to his regime that created massive debts that Congo is still paying off bits of, despite that fact that it’s now had debt cancellation after a very long time. The total amount – very quickly I’ll give you some fascinating figures to make the connection – the total amount of debt that Congo owed when Mobutu fell was 12 billion dollars; the amount of money that we think left Congo between about 1970 and 2008 in tax evasion, tax avoidance, theft and smuggling was about 17 billion dollars. So it could easily have paid off the debt. Even today after debt cancellation Congo spends about 300 million a year in debt service payments, and it loses about 438 million a year in illicit outflows. And that’s just the stuff we can track.

Anyway Zambia should also be quite rich because it has a lot of copper. The copper industry traditionally has paid very little tax, last year 10 billion dollars of copper was exported, and the government revenue was only 2.4% of that amount, so that’s pretty low, a horrifically low tax rate, it’s losing about 2 billion dollars a year as a result of tax avoidance and transfer pricing, which is equivalent to 10% of its gross domestic product. A recent report by the Africa Progress Panel found that Zambian miners were paying a higher rate of tax than the major multinationals they were working for. So they’ve come up with some new laws which are going to much better monitor money that’s being transferred out of the country by these companies; monitor it and then tax money that’s being transferred out of the country that’s in excess of $10,000. So it’s not just going to apply to copper but copper will be hopefully the big winner. And there will be, if companies fail to comply with telling them so they can be properly taxed, companies face a jail sentence of 10 years for company directors and company management. So that’s a really interesting development, the Financial Times had a really interesting article on it where it said that Zambia totally needs a solution to the fact that it’s losing so much tax, which is an amazing result of the campaigning that’s been done that even the Financial Times pays lip service. But, it says, and it’s true, it’s going to be very difficult for Zambia to do this on its own, and it needs regional agreements.And one of the problems – and that’s absolutely true and that’s what we need to keep pushing for, it’s no good Zambia doing that when as Liz just said Kenya is being pushed into tax haven status, what they call international financial centre, by the City of London that we’re sitting in.

The government has taken up this rhetoric of ‘we need to crack down on tax havens’, but I just couldn’t believe it when I saw George Osborne, in the same sentence, as saying ‘everyone must pay their tax, and we believe in aggressive tax competition’. You can’t have both those things. If you’re competing with other countries for the lowest rate of tax, that’s where tax evasion and tax avoidance comes from, that’s how we start. Coming from a country which has the biggest network of tax havens in the world, and we developed those tax havens to maintain the pound’s power in the world and our own power in the world, it’s a little bit ironic. So I think it’s really important we focus on tax, I think it’s great, and I think it’s a really important structural campaign, it’s really important to move us away from this idea that what we do in the world is good and give this aid to poor Africans who can’t manage themselves when we’ve done so much damage in the past. And tax is a way of exploring that damage and trying to put it right.

Deborah: And it broke out in the UK in no small part thanks to UK Uncut, the work that you all did. I just wondered, Tom is going to tell us later on in the walk in more detail about how UK Uncut took on Goldman Sachs and HMRC, so save some of the details of that, but I just want you to share a bit of insight with us on how it feels to be relatively small in numbers and resources and taking on massive institutions and breaking through, certainly in terms of profile and some small wins, and how it must feel to be trying take on this issue in somewhere like Zambia, the David and Goliath nature of it?

Tom: To begin with, the nature of social movements is quite a strange phenomenon, there’s this issue of momentum, which is the thing that no one can predict, and that when things are going well you can feel like the most powerful people in the world, and when it’s not going so well you feel completely powerless. Things rose up in the UK very very quickly, we went from one protest at one Vodafone shop in October, three days later there were 12 protests outside 12 different Vodafone shops in 12 different parts of the country, a month later there were 50 protests outside 50 Topshop stores in 50 different locations. By February we had 100 protests in two different countries, in the US and in the UK. How did it feel? It’s quite hard to say really.

In those early days it was quite hard to really break through with our argument because the media just kept buying the line that it’s all legal and that no one would really give us the time of day. We were talking about very complicated issues that the media didn’t have time to really explore, they just wanted quick soundbites. We were dealing with the tax settlement between Vodafone and HMRC that was very complicated in nature, it had taken ten years to settle; HMRC was saying that Vodafone owed no money, Vodafone was saying that they owed no money, but here you’ve got these strange people on the street saying they owe six billion pounds, how can the two be so far apart from each other.

To begin with it was really hard to break through, but then just through creative protest people in the media start picking things up and when they run with it they can really run with it and things can spiral very quickly. There was a two week period when our phone never stopped calling; there was everyone from the New York Times, to Newsnight to the Today program who wanted to talk about tax avoidance and it’s a very empowering thing to be part of that. Hundreds if not thousands of fairly ordinary people around the UK were doing their thing on the local high street but seemingly really taking on a narrative about austerity and taking on people like George Osborne and the government, some of the biggest corporations in the world. And here we are, really worrying them.

What we were most pleased about was that tax avoidance was an issue that had been bubbling under the surface for such a long time thanks to the brilliant work of people like the Tax Justice Network. But things aren’t easy in social movements. Things can bubble up like Occupy did and things can dissipate, and when they dissipate it’s quite hard to keep going. But what he have done is placed it on the agenda and we’ve set, ‘there’s the issue’, and journalists in the media have run with it now and they’re off doing their own investigations. Things like Jimmy Carr have really pushed it. I feel that we did our job, we did what we set out to do. Tax avoidance is an issue right at the heart of the global economy, it’s fundamental to the way the economy works, and a thousand people on the streets of Britain can put it on the agenda but I personally can’t go and shut down a tax haven.

Deborah: Well what’s interesting about the whole social movement story, which is why I’m really pleased that Pablo is here with us, is how Latin American social movements lack of fear in taking on vested interests – which may not be as prominent in sub-Saharan Africa – and there you’ve got leaders there who take it on. I just wanted you to paint the other side of the picture in terms of Chavez, Venezuela, tax, tax regimes, your own home country, and to compare with Chile.

Pablo: I’m here to talk quite generally, I’m not an expert on tax, and I think what’s most interesting perhaps for the discussion we’re having today is to look at Chile, primarily, with the student movement which is a movement that came up in 2011, had been bubbling with 6th formers and young people who had been completely dissatisfied with the neo-liberal model that was installed brutally in 1973 under the Pinochet dictatorship. It was a laboratory for the model which basically rules supreme today in Britain and the US and across the world. And in Chile it was enforced with an extra level of brutality, with killings etc., but you also had the privatizations, the deregulations etc. So you had the return to democracy, or transition democracy in 1990 with ostensibly a centre-left coalition which ruled until 2010 but primarily the model itself wasn’t touched. There were some sort of new measures soften the worst impacts of the model, but the basic reimagining of the economy, the policies which completely transformed the economy into allowing transnationals to exploit the copper economy which is the mainstay of the Chilean economy, it makes up about 60% of export revenues; the multinationals were allowed to come in and basically take the money from Chile. And so this model has basically been in place since the era of Pinochet, and the students have been the first people who have really come onto the scene a bit like UK Uncut but I’d say even more.

They’ve come onto the scene and said, ‘look, we want free education’ –Chile has got one of the most privatized systems of education in the world as part of this neo-liberal model, and they say, ‘we want free education, and not only that but we’ve actually thought about how we’re going to get free education because we need a transformation in the tax regime in this country. And we’ve looked at the tax regime in this country and this is how it could work, to fund free education, to fund services for the poor. So they’ve really come up with a complex, well-thought out…and they’ve really burst onto the political scene in the sense that they’re getting 500,000 students on marches regularly in a country of 17 million, so imagine that would be 2 million students in Britain. And they are now to a large degree calling the shots to the political class, they’ve got education minister sacked, they’re meeting with the government, the right-wing government that’s been in place since 2010 has had to concede a lot to the students, and now you’ve got the old president Bachelet from the socialist party, who now has come in saying, ‘my main platform will be the free education system which will be based upon new policies with regard to tax’. So this shows the power of a social movement that is able to break through the media silence and really put its policies that it wants on tax and education.

But the interesting thing about the Chilean movement is that there’s also now presently been a bit of a break within the movement between those who don’t believe they should engage in the political process as such, it’s similar in the way the centre-left coalition could be seen as loosely parallel with Labour, some of the members are now running for Congress. There’s lots of leaders now who are running for political power because they say that ultimately the only way to create real transformation in society is to win political power and to use political power to actually change the laws. So there is a big debate going on in the student movement, in the social movements, about how you relate to political power.

And Venezuela obviously is a completely different case, where you’ve had a government come in under the Chavez government that as Nick was saying in Latin America in the 80s you had what’s called the ‘lost decade’; the debt crisis which was inflicted on Latin American, and Venezuela was a country which was devastated by these policies; per capita income fell nearly 35% between 1970 and 1997 which was the year before Chavez came to power, which is a bigger fall than the whole of the continent of Africa during that period. It’s one of the highest falls in the world during that period. Inequality by 1997 was worse than South Africa and Brazil, poverty was 50%. So again in looking at why a government that have a rhetoric which is anti-neoliberal coming to power, you obviously have to look in the case of Latin America at the material conditions on the ground and why people feel attracted to policies which are challenging the neoliberal consensus, the Washington consensus.

And without going into detail about Venezuela there’s been, in basic terms, oil being the mainstay of the Venezuelan economy there was a big negotiation with the transnationals with regards to oil, and a massive increase in taxation with the transnationals; as well as basically for the first time Venezuelans were asked to pay taxes – in Venezuela no one paid taxes before 1998. I have family there that own a small business and it was well known that there was someone you bribed and they got you off the taxes; that’s essentially how it worked. So these are the kinds of measures that have also in Venezuela led to political polarization. People who have seen new terms, rules of the game come in, both multinationals and smaller businessmen, who obviously react in a negative fashion and it creates a spiral of polarization which ultimately has been well documented in the case of Venezuela. I want to leave it there but I think that Chile and Venezuela show in different ways how social movements and how governments can challenge dominant narratives on tax and the economy.

Deborah: we’ve got time for maybe two burning questions.

  • I just want to say, from all non-activists thank you for what you do as activists, it was a great film and four great talks so thank you.
  • I just wanted to ask, if you compare with corruption there are two sides, one who gives the bribe and one who receives. In this particular case it feels like you are more focussing on those who evade the tax, but there is another side obviously, the government and in the UK case the revenue service which actually allows that to happen. And I’m thinking from the campaigning perspective, to what extent you can target more the government and those public services which need to deal with this, because most of this information coming out comes from journalists who NGOs, not actually from government.

Deborah: ultimately the responsibility for this lies on targeting government, regulation, fundamentally I think that’s fair to say. On the walk you’ll hear Tom talk about the role of government, basically how HMRC is challenged. Fundamentally you’re right, the focus is government. We can’t expect Google and corporations to negotiate their own tax terms, there should be rules and regulations in place.

Nick: it’s a really big question that’s been going on a long time; I used to work on sweatshops a long time ago and it’s the same issue that it’s easier to get people mobilized around the company that they knew; it’s almost a result of the crisis in our democracy, that someone can identify more with the name on the trainers they wear than with their own government; they somehow feel they have more of a connection to it and they should be more responsive. And that is a massive issue. I went on some of the Uncut things, and they were great but you were always thinking, how can we make a protest against the government this exciting, it’s really hard if you actually think about how you would do that.

  •  There was corruption revealed in the film, because there is effectively bribery by corporations of politicians. For example the idea of having an amnesty to repatriate money. There are two legal issues there; the whole idea that you can defer tax by sticking it on an island, notionally, they could just remove that, remove the deferral entitlement; and they could mandate repatriation. But they don’t, because they’re subject to bribery.

Deborah: I just want to end with something that I finish discussions with from time to time, and it goes back years. I was on a campaign with Christian Aid and we had a Bolivian partner come to speak to us and he said something that was blindingly obvious and clear. He said ‘when Morales came in, the line basically was that, as they understood it,  corporations understand one thing: they understand weak government and they understand strong government’. And if you have something they want, don’t be afraid of going strong rather than weak. In the case of Bolivia and Venezuela that’s exactly what they did and I think in Bolivia, through some renegotiation of gas contracts, they were able to implement a state pension from the age of 60. That was a big step for an indigenous leader, but he did it and it worked.

Nick: and the corporations are still there, for all they say they’re going to leave they’re still there. They might not be happy, but they’re still there making a bit of money.