There appeared to be two major takeaways from the global grandee get-together at Davos last month — 1 500 of them arrived in private jets, and a Dutch historian called out the gathering for being focused on philanthropy when the real issue is “taxes, taxes, taxes”.
“The rest is bullshit,” said Rutger Bregman, author of Utopia for Realists and How We Can Get There, which wants a universal basic income and an equitable life. A clip of Bregman on a Davos panel went viral.
Next was an interview with Tucker Carlson of Fox News, but the exchange quickly unravelled when Bregman told Carlson that “most of the people in Davos, but also here on this channel, have been bought by the billionaire class”.
Fox media stars were millionaires bought by billionaires, paid to speak about subjects such as immigration and to stay away from the real economic issues.
Carlson went into meltdown, telling Bregman in what was intended to be a pre-recorded interview: “Why don’t you go fuck yourself. You tiny brain … moron.”
Fox did not air the interview but Bregman, who made his own recording, did. It went viral too.
Oxfam’s Winnie Byanyima, a fellow panellist at Davos, said that $170-billion flows annually to tax havens, denying developing countries much-needed revenue. Tax avoidance has also been identified by economists such as Thomas Piketty as a primary contributor to continuing inequality.
Bregman’s intervention at Davos and his altercation with Carlson were fresh in my mind when I went to Hurlingham, Sandton, to meet Michael Hewson of Graphene Economics, which specialises in advice on transfer pricing, the way transactions within and between enterprises under common control are priced.
It was a surprise to be invited to a company that specialises in such advice, but Graphene, not yet two years old, is a break with the past.
“We are positioning ourselves to help companies transition from what was before to what the new rules mean,” Hewson said.
These new rules developed from a G20 initiative begun in 2012, which called on the Organisation for Economic Co-operation and Development (OECD) to investigate Beps (base erosion and profit shifting). Its recommendations have now been adopted by G20-OECD members, which require country-by-country reporting by multinationals, which allows tax data to be shared by the various authorities so that a comprehensive picture of who pays what and where can be determined.
The new approach is built on three pillars: substance, which links tax paid to real economic activity; consistency, so that companies follow the same rules in the different countries in which they operate; and transparency, so that stakeholders are able to form an accurate picture of the activities of the company.
Hewson says 60% to 70% of global trade is conducted by multinationals.
The new rules came into effect in in 2016, which means they are in their infancy. Graphene restricts its work to clients who wish to comply with the rules.
Transparency means that, should there be a disparity between economic activity and tax paid, the company can expect some serious discussion with the tax authority. There should be little doubt that new requirements will be the subject of contention but it will help governments to determine, for instance, which investors are desirable and which are not. Transparency will also be required when licences and tenders are issued.
But this does not mean that, from tomorrow, everything will be hunky-dory and Bregman will no longer go viral when he makes public appearances. The tax authorities in many countries in Africa, for instance, have capacity problems. Indeed, this is South Africa’s case, because jailer-turned-taxman-turned-florist Tom Moyane so denuded our revenue service that it is likely to be some time before we reap the full benefits of the emerging new global tax regime.
Hewson says that Tax Inspectors Without Borders has been set up to help where there are capacity issues.
Our new South African Revenue Service head, when appointed, should bear these shock troops in mind. Our fiscus needs all the funds it can get.