Obama might be sending troops to the US southern border to protect us from the economic refugees that are forced to flee north in search of work and food, but there is not quite the same zeal when it comes to the free flow of capital, and especially profits.
In its May 17th issue, Business Week reported on what it calls an accounting “technique” known as transfer pricing.* What this amounts to is the transfer of profits made on sales in the US to other countries with lower tax rates and where the corporation concerned has no sales, or very limited sales, as well as few employees. In some cases, an office with a few people in it will do.
The particular example in the report is profits from the anti-depressant Lexapro, made by Forest Laboratories. Since 2002, Lexapro has made $13.8 billion in sales and, according to Business Week, accounted for 58% of Forest’s total sales for the fiscal year ending March 31st earning $2.3 billion in revenue in 2009.
The numbers are staggering. GlaxoSmithKline, the UK drug company paid a $3.4 billion fine for transfer pricing. One study estimates that $60 billion a year in US tax revenue is lost each year due to this practice and BW estimates that by 2009, “US companies amassed at least $1trillion in foreign profits not taxed in the US.”
Business Week breaks down the trail of profit for Lexapro that has all its sales in the US. It describes the consumer in Phoenix who pays $99 for a bottle of the stuff and estimates that with the market norm, the retailer would keep $12, the wholesaler $2 and Forest would keep the rest.
So the remaining $85 dollars travels the 2100 miles to the company’s corporate offices in Manhattan. From there, it heads off 3200 miles to Ireland unhindered by Minutement protests (they only oppose immigration, not emigration I suppose). This branch of the company, Forest Laboratories Ireland, makes and tests Lexapro But this is a key stop on the route to profit accumulation. Business Week describes the process, “This transaction is at the heart of transfer pricing. With each tablet Forest buys from its Irish subsidiary, it shifts profits to Ireland.” In Ireland, corporate tax rates are a third of US tax rates, a gift to US corporations from Irish capitalism along with cheaper Labor, in order to encourage investment there. Ireland’s 12.5%v tax rate has become an international “brand” says one Irish bourgeois.
Forest, like Glaxo, has already paid an undisclosed amount to the IRS for another price transfer deal with another of its anti-depressants. The amount of money sloshing around is staggering. The big business press often uses the term “awash”, that the world is “awash” with cash. And this small piece in Business Week is just the tip of the iceberg. It estimates that the cumulative total of foreign profits not taxed in the US through 2009 is $1 trillion.
This is a bit of an irritant for Business Week and its billionaire owners especially in difficult economic times when the anger among the public has the potential to burst in to the open. But the example of Forest is one of many, the one trillion dollars Business Week talks of is a miniscule amount of the wealth of society that is plundered by the capitalist class on a daily basis and it leaves aside the unpaid Labor that is stolen through the productive process itself. None of this activity is illegal.
As this goes on we are told of the need to tighten our belts. Education is slashed; people are thrown out of homes. Jobs are lost, public services are savaged, all because “there is no money available”. Obviously, this argument is nonsense.
In my local paper as in mass publications throughout the country and the world, we read about the choices we have to make at the ballot box, or in Union contracts. It’s higher taxes, cuts in services or a combination of both. “There is no money” the capitalist class tell us and this argument is echoed from the pulpit, and the hierarchy in the workers’ organizations. But we must reject that argument.
The other day I was on a subway train heading over to San Francisco and a middle aged woman who I bumped in to responded to my apology,
“It can’t be as bad as what happened to me”, she said beginning to cry.”
“What’s that?” I replied
“I just got laid off” she said, weeping as she left the train.
My young friend who has been laid off has just lost his health coverage. With three children this is a scary prospect and has happened to millions of people throughout the US because medical care is supposed to be too expensive.
Perhaps the greatest obstacle to a fightback is overcoming the acceptance of their ideas. As Marx pointed out, the dominant ideas of society are the ideas of the ruling class and we have to reject their view of the world. It is a struggle, no doubt, as they own the means of communication. It is not an accident that Iran, terrorism, and the constant fear of external enemies or would be enemies are featured so prominently in the media. We are all supposed to fear Iran, a country, like Iraq, that has not threatened us and is no threat to us. The Business Week story on transfer pricing is for their ears, a squabble among thieves; it will not be mass produced expanded and brought to us daily, served up like the phony Iran threat is. Iran is there to obscure the real threat, the folks that bring us transfer pricing, foreclosures and the BP oil rig disaster.
There is no shortage of money. The massive increase in the use of anti-depressants is in fact market driven. The society in which we live is depressing; it makes us sick. For those that propagate it the most profitable solution is a magic pill.
For us, the solution is to be found elsewhere. Like workers in every country, our greatest threat, our biggest enemy is domestic. We have to settle our affairs with our own capitalist class first. Firstly, a struggle to change the situation so we are more makers of history as opposed to simply victims of it. More leisure time, control over production and the organization of work. These are cures to most depression. And in the struggle to accomplish this, we build solidarity with workers around us and throughout the world. The Irish workers who are ripped of by the corporations that move there. The Chinese, Latin American and all workers who are exploited by global capital or forced to leave their homes, friends and communities and risk death to find work and food to feed their children.
We are all in the same boat and it is not Warren Buffets.
*Forest Laboratories Globe-Trotting Profits BW May 17th -23rd 2010
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