New "Taxcast" focuses on Tax Haven Ireland

 The newest edition of The Taxcast just dropped, and it's (almost) all about one of my favorite countries, Ireland. You remember Ireland, that proud adopter of the euro that was forced to undergo terrible austerity policies during the Great Recession because it couldn't devalue. It suffered six years of net emigration, literally exporting its unemployment elsewhere and making its unemployment rate look smaller than it would have otherwise. Meanwhile, currency-devaluing, banker-jailing Iceland ran rings around Ireland's performance on employment.

This month's Taxcast interviews the authors of a new book, Tax Haven Ireland, Kieran Allen (University College Dublin) and Brian O Boyle (St. Angela's College). They show how establishing Ireland as a tax haven, including through the creation of the International Financial Services Centre, has undermined democracy and public services in the Republic. Allen and O Boyle discuss how Ireland's niche with U.S. multinationals has changed somewhat in recent years, with a shift away from manufacturing toward services to tech giants like Amazon and, of course, Apple. As they point out, one of the new ways of being relevant to the tech firms was to host data centers, despite the fact that these operations typically consume gigantic amounts of electricity while creating jobs numbering in the dozens. Meanwhile, the country is looking at power blackouts this winter. This is just one of the many contradictions of the Irish economic strategy Allen and O Boyle illustrate.

The Taxcast also reports on Tax Justice Network's new "State of Tax Justice" report, which estimates that tax havens are costing nations globally a minimum of $483 billion in tax revenue annually. That is three times the cost of fully vaccinating everyone against Covid. It also discusses how the rich-state members of the Organization for Economic Cooperation and Development (OECD) are responsible for 3/4 of these tax losses, so it might make more sense to move tax haven work away from the OECD and into the United Nations.

If you prefer reading to listening, you can find the transcript here.

New research tool puts spotlight on company law-breaking in the UK

My colleagues at Good Jobs First have created a new database to track company regulatory violations in the United Kingdom. Violation Tracker UK joins the domestic US Violation Tracker as a way for a variety of users to track down information on corporate misdeeds dating back to 2010 in most cases.

“We hope that Violation Tracker UK will, like its U.S. counterpart, be helpful to a wide range of users, especially those seeking to reform corporate behavior,” said Good Jobs First Research Director Philip Mattera, who leads the work on the database.

The free tool allows users to search by company (with parents matched to subsidiaries), headquarters nation, type of offense, amount of fines, regulatory agency involved, etc. It lets researchers get a rapid overview of the determinations of over 40 agencies.

Some highlights: The largest amount of fines, £4.5 billion, has been levied in the financial service industry. Aerospace firms (mainly Airbus) accounted for £1.6 billion in penalties and telecommunications (primarily the now-defunct Nortel) came in at £1.2 billion.

Competition related violations account for £5.2 billion in fines, and £2.8 billion have been assessed for financial offenses. Good Jobs First points out that due to heavy use of warnings rather than financial penalties, health (£413 million) and environmental (£312 million) violations have been much less heavily penalized. 

UK readers in particular, check out Violation Tracker UK! Its predecessors, Subsidy Tracker and Violation Tracker, have been used in the statistical analyses of more than 40 academic papers or Ph.D. dissertations worldwide. You will find high-quality data at your fingertips, and a way to help keep track of corporate scofflaws.

Ford Announces Giant Electric Vehicle Plant in Western Tennessee

 On September 27, Ford Motor Company announced plans to invest $5.6 billion at the Memphis Regional Megasite in Stanton, Tennessee, to build an electric vehicle (EV) assembly and battery plant, jointly with SK Innovation. The facility, dubbed “Blue Oval City” by Ford (in a reference to its corporate logo), is projected to employ 5,800 people as Ford makes its first big foray into EV production. The same week, Ford and SK Innovation revealed plans for two more battery plants in Glendale, Kentucky, south of Louisville, at an estimated cost of $5.8 billion.

Together with all the other recently announced investments in EV manufacturing, Ford’s new project highlights the commercial success of electric vehicles. But if you’re like me, you want to know about the subsidies it received. Glad you asked!

The short answer is that we have only partial information so far. As with the Nissan plant in Canton, Mississippi, or the deal made by Memphis for Electrolux in 2011, there will doubtless be multiple subsidies whose details will come out long after the initial announcements. That said, what we know already is ominous.

First, the state of Tennessee has pledged over $500 million to be given as a grant to the two companies; it will be voted on in a special legislative session in the near future.

From there, adding up the incentives becomes more difficult. The Memphis Regional Megasite is a subsidy in itself: 3,600 acres (about 5.6 square miles) with dedicated infrastructure. Tennessee Governor Bill Lee (R) said that over $200 million has already been invested in the Megasite.

The biggest incentive is likely to be electricity discounts: Blue Oval City will get power from the federally owned Tennessee Valley Authority (TVA). Electric vehicle and battery manufacturing are energy-intensive, and large rate discounts over the life of the facilities will add up. Hundreds of millions of dollars is a certainty, and it is easy to imagine the electricity subsidy alone totaling billions. Don’t believe me? Check out the Alcoa Aluminum plant in Massena, New York, where hydro-power discounts are saving the company $5.6 billion over 30 years, now the largest subsidy ever given in the United States for a single project (with Boeing’s $8.7 billion Washington State deal withdrawn in a WTO settlement).

The state will also establish a satellite campus of the Tennessee College of Applied Technology (TCAT) at the location, part of an $80 million investment into the TCAT system.

Finally, there is no information available yet on local subsidies. Property tax breaks (called PILOTs in Tennessee when a public entity technically retains ownership of the project) and sales tax exemptions are likely to add many millions more to the incentive package.

What is the final number likely to be? My guess is over a billion dollars, but the question is how much over. We’ll see, eventually. If we’re lucky.

 

Cross-posted with Good Jobs First.

Thanks to my colleagues Greg LeRoy and Kasia Tarczynska for helpful editorial suggestions.

New "Taxcast" Examines Finance vs. the Environment

 The newest edition of the "Taxcast" podcast takes on two big environmental topics this month. First, John Christensen of the Tax Justice Network discusses with host Naomi Fowler how high levels of financialization of an economy degrades the environment.

Second, an even more challenging question is whether growth itself is now threatening the environment and, if so, what to do about it. Anthropologist Jason Hickel tackles this issue in his segment of the Taxcast.

Both segments are well worth your time. If you, like me, prefer to spend less time and read the transcript, see the link below.

Taxcast podcast

Transcript

United States and European Union Agree to End Tariff War Over Subsidies to Boeing and Airbus

On June 15^th, the United States and the European Union announced an agreement to finally solve their decades-long dispute over subsidies given to Boeing and Airbus. This was followed by a parallel agreement with the United Kingdom on June 17^th, since the UK is part of the Airbus consortium, but has exited the European Union.

The accord provides for a five-year truce on the WTO-approved tariff war between the two sides. In 2019, the World Trade Organization gave the United States permission to impose tariffs on $7.5 billion worth of EU exports per year due to its subsidies to Airbus. Then in 2020, the WTO approved countervailing EU tariffs on $4 billion of U.S. exports due to subsidies to Boeing.

The Biden administration and the European Union agreed to a four-month halt to these tariffs in March; they had cost EU exporters $2.2 billion and U.S. exporters $1.1 billion in 2019-20. The five-year cease-fire is the fruit of negotiations between the two parties since then, which concluded with two days of discussions in Brussels between U.S. Trade Representative Katherine Tai and European Commission Executive Vice-President Valdis Dombrovskis, the Commissioner for Trade.

The agreement establishes a working group, chaired by Tai and Dombrovskis, that will make concrete proposals to ensure that both sides provide financing to their large civil aircraft (LCA) manufacturer only on market terms and not provide subsidies via research and development programs. These principles will apply to all levels of government, including state and local.

I liked the last point of the main agreement: “8. The two sides will continue to confer on addressing outstanding support measures.” In other words, as I suggested in another blog, Boeing continues to enjoy “favorable tax treatment,” as Governor Jay Inslee put it, in Washington state, which may need to be adjusted going forward. In addition, while the Evergreen State’s subsidies for 787 production were ended early and 777X subsidies were canceled in advance, Boeing may well have subsidies in South Carolina, Missouri, or Kansas that might need to be addressed in this phase.

In addition, the European Union and United States will work together against non-market intervention in the LCA  market by other countries (read: China). This is consistent with President Biden’s actions to repair relationships with U.S. allies and rally as many of them as possible to a shared struggle against Beijing.

If this truce holds, it would finally bring an end to the longest-running dispute of the WTO era. The United States filed its first complaint against Airbus subsidies in 2004, while the European Union filed a complaint against U.S. subsidies to Boeing the following year. While 17 years is already a long time, in fact the original slate of WTO agreements in 1995 was supposed to have a Boeing-Airbus agreement within it. Indeed, my personal copy of the draft legislation for Congress to approve joining the WTO, which I received from the Office of the U.S. Trade Representative, has a page marked where that agreement was expected to be placed.

But it didn’t happen then. No agreement was reached moving into the new century, and then the WTO complaints were filed. Now, at last, the dispute has been stopped and may be on the verge of solution. Moreover, subsidies in Washington have been stopped (though not repaid), subsidies in other states will draw more scrutiny, and in the future Boeing will not be in a situation to shake down states for billions of dollars.

 

Cross-posted from Good Jobs First.

Thanks to my Good Jobs First colleague Greg LeRoy for suggesting this topic and making valuable editorial suggestions.