© By RectorRocks (Own work)
Governments make a great deal of hue and cry about punishing miscreants for their evil misdeeds. Then then one sees how mild the punishments are for gross misdeeds. Of course cynicism has a way of popping out all over. We see this in the mix of BEPS, Google’s tax avoidance, the destruction of Indonesia’s forests and peatlands and the Singapore government’s ineffectual response to the consequences.
Does anyone actually believe that the Indonesian government cares one whit about the planet-destroying pollution that pours out of its country each year like clockwork? Jusuf Kalla figuratively told everyone to simply shut up and hold their breath. As Vice President, he presumably has some standing but his only real sin was saying what “leaders” all over the region actually think. “Just hold your breath.”
Singapore Deals with World-Destroying Haze
Take for example Singapore’s much-publicised Transboundary Haze Pollution Act. With a possible fine of SGD 100,000 per day of transgression, it seems like it might have some impact… but then, built right into the law is a cap of two million dollars! This is getting serious?
It has taken five companies to task but not to court: Asia Pulp and Paper, Rimba Hutani Mas, Sebangun Bumi Andalas Wood Industries, Bumi Sriwijaya Sentosa and Wachyuni Jandira.
One would think that the revised expectation of a two meter rise in sea-level by 2100 would have the legislature in low-lying Singapore up in arms about this. After all, Indonesia is one of the world’s major CO2 emitters, thanks to its endless fires.
In the case of Asia Pulp and Paper, their 2015 consolidated net income in 2015 was SGD 222.7 million. Had they actually been fined in Singapore, the worst they could have expected to be fined was less than one percent of their net income… and no jail time.
On the other hand, if one of their executives was caught for the second time using a mobile phone while driving he would pay SGD 5,000 and could be imprisoned for up to two years. That’s a real disincentive And he would pay. So far as I can determine, none of the five companies above nor any of their officers have received any punishment yet.
For the record, the published net income that Asia Pulp and Paper reported may be the tip of the iceberg; they have a network of distributors and finance companies domiciled in the Netherlands, Mauritius, the Cayman Islands and the British Virgin Islands.
If they are punished at all by the Singapore government, it will amount to a one-finger slap on the wrist. Vivian Balakrishnan’s quiver seems quite empty of arrows. The wise man speaks softly but carries a big stick. Singaporean legislators might consider giving the NEA a decent-sized stick with which to do its job. The problem is a knotty one, but one can’t even say that the first step towards solving it has been taken in Singapore.
BEPS Targets Google as Google Targets Indonesia
But the real subject of this piece is Google. Although fewer people are affected by Google’s creative basing of its profits than are by Indonesian haze, Google provides us with a good example of why so many governments are up in arms over Base Erosion and Profit Shifting (BEPS).
Google operates in Indonesia as it does in the rest of the world – it sells advertising and books profits from the advertising. It maintains a small office in Indonesia which, it says, is there for managing its conferences in Indonesia. It pays the office for the costs associated with the conferences plus an eight percent markup to cover the cost of operating the office. That, it says, is in accordance with the law.
“Foul” cries taxman Muhammad Haniv. This is unethical. It’s immoral, he says. Ah, but this is business and we all know that there’s no place in business for morality and ethics. The question is, is it legal? And Google contends that it is. So all those beautiful Indonesian advertising revenues show up in Singapore where, surprise of surprises, the tax is much lower than in Indonesia.
Indonesia Destroys the Earth While Google Walks Away with its Taxes
Mr Haniv quotes estimates that Google Asia Pacific’s total revenue from Indonesia last year may have been as much as USD455 million, generating some USD152 million in profit. He estimates that Indonesia has lost out on some USD 76 million in taxes. Those $76 million could certainly have been steered to the companies that are burning the country down in order to persuade them to stop their planet-destroying pollution. Could have, but most likely would have found its way into someone’s “charity” and nothing would have changed.
And… what’s Haniv doing about it? Have the tax laws been changed? Does he have a cudgel to bring Google into line? Nope. Haniv has his headlines and apparently that is all he can do. The folks who really run things, the ones who keep the haze billowing, are quite happy with the status quo. Their personal “charities” are probably full of Google stock.
It’s enough to make me a cynic.