Tax Wars

To tackle climate change and its resulting catastrophes,

food insecurity,

pandemics and rising inequality,

governments across the world

are in desperate need of money.

But where can they find it?

As states crumble under debt,

multinationals have never been richer.

Most of them

have become past masters in the art of avoiding tax

through clever tax schemes.

Faced with multinationals that are more powerful than some countries,

ordinary people are starting to fight back.

On the front line,

chosen from among leading international experts,

tax justice warriors

are engaged in a fight to eliminate this unfair tax optimisation.

Economists,

legal professionals

and former political leaders.

They represent a new hope.

They have already successfully toppled

some of the remarkable fiscal advantages

which multinationals currently enjoy.

A first victory

in a conflict that is as old as our civilisations themselves.

The Tax Wars.

Over the past few decades,

multinationals have seized control of the global economy,

building their success through the use of tax havens,

while denying governments much needed tax revenues.

We urgently need to react in the face of climate catastrophes.

From hurricanes and drought to heatwaves,

our planet is on fire.

Healthcare systems have been brought to their knees,

and more than 800 million people are suffering from famine.

But a wind of change is sweeping across our planet.

The power of multinationals and their account manipulation

can no longer be justified.

Like in Star Wars,

the story that we are about to tell you is about justice,

and a group of heroes fighting

against the dark forces of globalisation.

They came together to form the Independent Commission

for the Reform of International Corporate Taxation,

the ICRICT.

This commission for tax justice

is made up of top economists

like the Nobel Prize in Economics Joseph Stiglitz,

Thomas Piketty, author of the global bestseller

Capital in the 21st Century,

and Jayati Ghosh, a specialist on the issue of development.

They travel the world looking to convince civilians and governments

of the urgency of overhauling a century-old tax system

that is no longer fit for purpose.

Their aim couldn't be clearer:

to get multinationals to finally pay their taxes,

like everyone else.

Governments all over the world are

in desperate need for funds

and increase in corporate profits

tells you where the money is. The money is in the pocket

of the large corporations, the multinationals.

We have a system

which has become deeply skewed

in favour of big multinationals,

which is disastrous for the social contract.

Just like a citizen assumes that he or she has to pay tax,

similarly large corporations, big multinationals also

have to assume that they have to pay tax.

Multinationals are responsible

for close to half of all business trade worldwide.

How can it be possible

that they pay practically no taxes on their profits?

THE TAX EVASION EMPIRE

EMERGENCY EXIT

The first step on our journey through the galaxy of tax evasion

is the town of Belfort in France.

Eva Joly is one of the founding members of the commission.

She was born in Norway,

but has spent the bulk of her career in France.

She was an examining magistrate

before twice being elected to the European Parliament.

She is now a lawyer,

and has made tackling tax evasion her priority.

Right now, I'm on my way to Belfort.

This is about

the way in which multinationals

across the world have been minimising their tax base

for decades now.

We're looking at the former company Alstom,

which was very big in France.

The TGV we're travelling in right now was built by Alstom.

They also built turbines

which are vital to nuclear power plants.

This cutting-edge French technology

was purchased in highly suspicious circumstances

by General Electric in 2014.

Since the takeover of Alstom Energy

by the US firm General Electric,

profits have evaporated.

The company's trade unions reached out to Eva Joly.

Together, they are accusing General Electric of tax evasion,

to the detriment of employees.

I've printed you out a copy of the press release to take a look at.

Right.

- Here you go. - That's great, thank you.

Up until 2015 our profits were into

the hundreds of millions.

Employees were entitled to a profit-sharing bonus

that could be worth as much as two months' salary.

Through tax evasion and an artificial deficit,

employees are no longer receiving this money.

This has a direct impact on employees' purchasing power.

In his job as a trade unionist,

Philippe Petitcolin and his colleagues

have access to the company accounts.

They called in an expert

to try to unpack the tax schemes employed by General Electric.

We found out that the company is a closed environment.

Journalists aren't allowed in,

and neither are lawyers or politicians.

We played a vital role in that we were the only ones

who could tell the world what was going on inside the company.

This is the plant that the complaint was made about.

The trade unions discovered that General Electric

was transferring Alstom Energy's profits out of France

into a number of tax havens.

These are standard schemes which are used by all multinationals.

First,

product marketing was outsourced to Switzerland.

All of the profits made in France

are now entered into the accounts in Switzerland.

How?

Using a tax optimisation mechanism

involving what is known as transfer pricing.

Consider a turbine component

made in Belfort, which costs 100 euros to manufacture.

Before being outsourced to Switzerland,

the site in Belfort would sell this part to the end client

for 400 euros,

giving them a profit of 300 euros.

Now, the same spare part

is sold by Belfort for 110 euros

to General Electric's Swiss subsidiary,

which then sells it on for 400 euros to the end client.

The upshot of this

is that the Belfort factory makes a profit of just 10 euros,

while General Electric

in Switzerland makes a profit of 290 euros.

The same factory is producing the same component,

only now almost all of the profits

are logged in Switzerland, where almost no tax is paid on them.

All of the profits are registered in Switzerland

but there's no economic substance there.

There's no factory, no workers, nobody working on the material.

The trade unionists uncovered another ploy.

The patents that the Belfort factory needs

were registered by General Electric in Switzerland.

Now, each time the Belfort factory produces a turbine,

it has to pay a licence fee

to the institution which holds the patents in Switzerland.

There's also a third trick.

Belfort must now pay for the right

to use the General Electric brand,

which is registered in the tiny state of Delaware,

the USA's tax haven.

In Delaware, in the USA, it's a letterbox company.

There are no employees working for the brand.

This is another way for General Electric to move profits

to tax havens.

General Electric is not an isolated case.

All major companies employ this type of scheme,

which is why so much of the profits of multinationals

are not taxed.

Creative accounting is not illegal,

but there are still limits.

Eva Joly sees the legal route as a way of attacking

the tax evasion of multinationals.

She wants publicity for her fight

in order to get people thinking.

These are intentional offences.

Chief Financial Officers

who are responsible for tax evasion

totalling 550 million euros

over four years must be held responsible

in terms of their freedom and their wealth.

It is time now to put an end to all of this.

Given the government's inaction

on fighting tax evasion,

trade unions have decided to turn to the courts

to enforce the rules.

It is clear that the group

has a completely artificial deficit.

The most shocking thing

is that Belfort is being made to pay royalties

for patents

which are in the public domain.

This is ludicrous.

If the accounts hadn't been meddled with,