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How does corruption happen in developed countries?



Corruption is in every part of the world, whether it is about making a hairpin or an aeroplane, there is literally nothing in the world that has not been affected by corruption.

Though it happens at every level of every country but no one admits it and did you know that there are 2 types of corruption :-

  1. Organised Corruption
  2. Un-Organized Corruption

 

1)  Organized Corruption – As the name suggests it is performed in such a manner that it appears to be a part of the system.

It mostly happens in the developed countries as the top businessmen and top corporates simply avoid paying taxes instead of evading it. Evasion is illegal. Avoidance is not.

Let me go you through some of the instances which can give you some clarity:-

 

  • Amazon.com

World’s top and most popular e-commerce company which enjoys a lot of profit pay peanuts of tax.

As reported by BBC.co.uk, even after having millions or billions in profit, Amazon UK tax bill fell drastically.

The bill of Amazon UK Services, the division which includes the process, packaging and post deliveries services was £4.6m and it was down from the previous year £7.4m.

But this division, which operates the warehouse “fulfilment centres”, was able to defer £2.9m.

Which means that the Amazon UK has paid £1.7m in tax for now even though even though pre-tax profits rose from £24.3m to £72.3m and to its defence Amazon said that “Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low-margin business and our continued heavy investment.”

When analysing it a bit more investigators came to know that Amazon reports its revenues from UK sales through a separate company based in Luxembourg which was a shadow company.

 

  • Apple

The United States’s first trillion dollar company which is more than the GDPs of the Netherlands, Turkey, Saudi Arabia, Switzerland and Argentina.

And even the GDPs of Ireland, Israel and Greece combined don’t even reach $1 trillion.

Related:-

Is Apple going to fall?

The company who has a mountain full of profit pays a small fraction of it.

As per the  U.S.-based International Consortium of Investigative Journalists (ICIJ), Apple shifted much of its offshore wealth in the face of a tax crackdown on a haven it had in Ireland, according to reporting on Monday on the Paradise Papers on the iPhone maker’s tax strategy.

Though it was prior to 2014, but these large corporates always finds a way to avoid taxes.

 

  • Ikea

It’s not just about American conglomerate even Sweden based company is “World Champion of Tax Avoidance”.

Ikea has also exploited loopholes within the EU in order to pay as little tax as possible.

After the investigation, it came to notice to the European Parliament that there is actually a second company called Inter Ikea.

The mother company of this “second” Ikea has its headquarters in a small street in Belair. This Luxembourg Holding was created in 1992 and is the key to the tax avoidance scheme put in place by Ikea’s founder Ingvar Kamprad.

The difference between corruption in developed countries and those in developing countries is that the former is organised, done at the top and made with the full approval of the legal system. They have lobbies, Luxembourg shell companies, Cayman bank accounts and a fairly complex system to hoodwink the tax authorities in a legal way.

In the developing countries, businessmen are less educated, use crude tactics and lower levels of government — employees not as well paid, and rely on bribes — lead the show.

But there is one difference of the companies and individuals who avoid taxes, vs. evading them, is that the avoiders honestly report what taxes they are avoiding, and what officially approved venues of avoidance they are claiming apply to their income.

Tax evaders are most known for simply not disclosing streams of income. Follow the Paul Manafort trial to see how this is attempted, and why you really should not attempt it…

But the end result is the same — non-payment of fair taxes.

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