The big picture is easy to see. The world’s richest few are expanding their fortunes at the cost of the vast majority. The combined wealth of the world’s 2,754 billionaires increased by US$1.8 trillion – or 24 percent – in 2017, to US$9.2 trillion. The richest 1 percent now own as much as the rest of the world’s population combined. 

Less visible are the mechanisms they use in this heist. To see them, you need to look behind the facade of “hard work” and “entrepreneurial spirit” to the grubby reality of rorts and exploitation that underlie even the shiniest of capitalist fairytales. 

One mechanism – the shifting of profits by multinational corporations into tax havens – has been laid bare in a new report by economists from the University of California, Berkeley, and the University of Copenhagen. Titled “The missing profits of nations”, it was published by the US-based National Bureau of Economic Research in June.

It found that US$600 billion in profits of multinational companies were shifted to tax havens in 2015 – close to 40 percent of total multinational profits.

This profit shifting is costing governments billions in lost tax revenues. The report estimates that “for the world as a whole, the tax revenue loss is around 10 percent”. In the European Union, the figure is much higher – around 20 percent. 

Multinationals with operations in Australia are shifting $16 billion in profits to tax havens annually, resulting in a 7 percent reduction in corporate tax revenue. Based on 2017 figures, this would have amounted to around $5.4 billion.

That’s enough to fund the construction of two new state-of-the art hospitals each year, or a new rail line like the Melbourne Metro project every two years.

The creative accounting of Google-Alphabet provides a telling case study. In 2017, its Australian arm reported revenues of $1 billion, a profit of $148 million and $23.5 million paid in tax. Google employs 1,500 people in Sydney and is looking to expand this to 10,000.

It may be surprising to hear that Google’s Australian operation is vastly less profitable than its Bermuda arm, which reported US$19.2 billion in revenue in 2016. Bermuda is a tiny island in the Atlantic with a tax rate of zero percent. Google has neither an office nor staff in the country. But it has a post office box – reportedly, and perhaps appropriately, numbered 666.

“Between 1985 and 2018, the global average statutory corporate tax rate has fallen by more than half, from 49 percent to 24 percent”, the report notes. “In 2018, most spectacularly, the United States cut its rate from 35 percent to 21 percent.”

Australia’s corporate tax rate has been lowered from 45 percent in 1980 to 30 percent today. The government wants to reduce it again to 25 percent over the next decade. These tax cuts are necessary, we’re told, because otherwise Australia will lose out in the battle to attract investment.

In a speech earlier this year, prime minister Malcolm Turnbull argued, “The need to remain competitive is more intense than ever. We know that if you reduce business tax, you get more investment, and if you get more investment, you get more and better paid jobs”.

But does lowering corporate tax rates attract more job-creating investment? According to the report, the answer is a definitive “no”. For investment to be job creating, it must be in something tangible, rather than simply moving money into low-tax jurisdictions. But, as the report notes, “Machines don’t move to low-tax places; paper profits do”.

If Turnbull’s argument made sense, you’d expect places like Bermuda to be enjoying the world’s biggest jobs boom. Yet, despite the tens of billions “invested” there by companies such as Google, this doesn’t appear to be the case. The population of the island has grown by only 5,000 in the past three decades.

Contrary to the argument made by Turnbull and other ideologues, the report found:

“Instead of increasing capital stocks in low-tax countries, boosting wages along the way, profit shifting merely reduces the taxes paid by multinationals, which mostly benefits their shareholders, who tend to be wealthy.”

In other words, the whole thing is a rort. Countries such as Australia are forgoing billions in tax revenues so that the world’s super-rich can further increase their already obscene wealth. And what’s the Australian government’s policy? Cut their taxes more!

Which brings us back to the figure of US$9.2 trillion – the combined wealth of the world’s 2,754 billionaires. This is a class of people happy to pillage the (natural and human) resources of countries around the world while creating complex mechanisms to avoid paying their way.

Given this behaviour, can we trust them to use wisely the gigantic sums they control? Even if – perhaps being overly generous – we only took the money they’ve stashed away in tax havens such as Bermuda, there are a lot useful things we could do.

Hospitals, schools, housing and other infrastructure come to mind.