The laws governing illicit drugs, enforced by UN Office of Drugs and Crimes, are unnecessarily blunt and curtail access to legitimate opiates for medical purposes. This segment is part of The Pain Project, a series produced by The International Reporting Program.
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Imagine recovering from major surgery or suffering from advanced cancer without any painkillers. That’s the reality for patients in half the countries in the world. But unlike with so many global health problems, this one is not about money or a lack of drugs. Morphine, the gold standard for medical pain treatment, is simple and cheap to make and distribute. So why are so many people left in pain?
The International Reporting Program traveled to Ukraine, Uganda and India to find out, and to document the human toll of this hidden human rights crisis. It turns out a combination of bureaucratic hurdles and the chilling effect of the global war on drugs are largely to blame, leaving humanitarians scrambling to work outside the law — or change the law — to bring relief to suffering patients all over the world.
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The following exhibits were released May 21, 2013 by the Senate Permanent Subcommittee on Investigations Homeland Security and Governmental Affairs Committee.
On May 21, 2013, the Permanent Subcommittee on Investigations (PSI) of the U.S. Senate Homeland Security and Government Affairs Committee will hold a hearing that is a continuation of a series of reviews conducted by the Subcommittee on how individual and corporate taxpayers are shifting billions of dollars offshore to avoid U.S. taxes. The hearing will examine how Apple Inc., a U.S. multinational corporation, has used a variety of offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than two percent. One of Apple’s more unusual tactics has been to establish and direct substantial funds to offshore entities in Ireland, while claiming they are not tax residents of any jurisdiction. For example, Apple Inc. established an offshore subsidiary, Apple Operations International, which from 2009 to 2012 reported net income of $30 billion, but declined to declare any tax residence, filed no corporate income tax return, and paid no corporate income taxes to any national government for five years. A second Irish affiliate, Apple Sales International, received $74 billion in sales income over four years, but due in part to its alleged status as a non-tax resident, paid taxes on only a tiny fraction of that income.
In addition, the hearing will examine how Apple Inc. transferred the economic rights to its intellectual property through a cost sharing agreement with its own offshore affiliates, and was thereby able to shift tens of billions of dollars offshore to a low tax jurisdiction and avoid U.S. tax. Apple Inc. then utilized U.S. tax loopholes, including the so-called “check-the-box” rules, to avoid U.S. taxes on $44 billion in taxable offshore income over the past four years, or about $10 billion in tax avoidance per year. The hearing will also examine some of the weaknesses and loopholes in certain U.S. tax code provisions, including transfer pricing, Subpart F, and related regulations, that enable multinational corporations to avoid U.S. taxes.
A. Subcommittee Investigation
For a number of years, the Subcommittee has reviewed how U.S. citizens and multinational corporations have exploited and, at times, abused or violated U.S. tax statutes, regulations and accounting rules to shift profits and valuable assets offshore to avoid U.S. taxes. The Subcommittee inquiries have resulted in a series of hearings and reports. The Subcommittee’s recent reviews have focused on how multinational corporations have employed various complex structures and transactions to exploit taxloopholes to shift large portions of their profits offshore and dodge U.S. taxes.
At the same time as the U.S. federal debt has continued to grow – now surpassing $16 trillion – the U.S. corporate tax base has continued to decline, placing a greater burden on individual taxpayers and future generations. According to a report prepared for Congress: “At its post-WWII peak in 1952, the corporate tax generated 32.1% of all federal tax revenue. In that same year the individual tax accounted for 42.2% of federal revenue, and the payroll tax accounted for 9.7% of revenue. Today, the corporate tax accounts for 8.9% of federal tax revenue, whereas the individual and payroll taxes generate 41.5% and 40.0%, respectively, of federal revenue.”
Over the past several years, the amount of permanently reinvested foreign earnings reported by U.S. multinationals on their financial statements has increased dramatically. One study has calculated that undistributed foreign earnings for companies in the S&P 500 have increased by more than 400%. According to recent analysis by Audit Analytics, over a five year period from 2008 to 2012, total untaxed indefinitely reinvested earnings reported in 10-K filings for firms comprising the Russell 3000 increased by 70.3%. During the same period, the number of firms reporting indefinitely reinvested earnings increased by 11.4%.
The increase in multinational corporate claims regarding permanently reinvested foreign earnings and the decline in corporate tax revenue are due in part to the shifting of mobile income offshore into tax havens. A number of studies show that multinational corporations are moving “mobile” income out of the United States into low or no tax jurisdictions, including tax havens such as Ireland, Bermuda, and the Cayman Islands. In one 2012 study, a leading expert in the Office of Tax Analysis of the U.S. Department of Treasury found that foreign profit margins, not foreign sales, are the cause for significant increases in profits abroad. He wrote:
“The foreign share of the worldwide income of U.S. multinational corporations (MNCs) has risen sharply in recent years. Data from a panel of 754 large MNCs indicate that the MNC foreign income share increased by 14 percentage points from 1996 to 2004. The differential between a company’s U.S. and foreign effective tax rates exerts a significant effect on the share of its income abroad, largely through changes in foreign and domestic profit margins rather than a shift in sales. U.S.-foreign tax differentials are estimated to have raised the foreign share of MNC worldwide income by about 12 percentage points by 2004. Lower foreign effective tax rates had no significant effect on a company’s domestic sales or on the growth of its worldwide pre-tax profits. Lower taxes on foreign income do not seem to promote ‘competitiveness.’”
One study showed that foreign profits of controlled foreign corporations (CFCs) of U.S. multinationals significantly outpace the total GDP of some tax havens.” For example, profits of CFCs in Bermuda were 645% and in the Cayman Islands were 546% as a percentage of GDP, respectively. In a recent research report, JPMorgan expressed the opinion that the transfer pricing of intellectual property “explains some of the phenomenon as to why the balances of foreign cash and foreign earnings at multinational companies continue to grow at such impressive rates.”
C. Transfer Pricing and the Use of Shell Corporations
The Subcommittee’s investigations, as well as government and academic studies, have shown that U.S. multinationals use transfer pricing to move the economic rights of intangible assets to CFCs in tax havens or low tax jurisdictions, while they attribute expenses to their U.S. operations, lowering their taxable income at home. Their ability to artificially shift income to a tax haven provides multinationals with an unfair advantage over U.S. domestic corporations; it amounts to a subsidy for those multinationals. The recipient CFC in many cases is a shell entity that is created for the purpose of holding the rights. Shell companies are legal entities without any substantive existence – they have no employees, no physical presence, and produce no goods or services. Such shell companies are “ubiquitous in U.S international tax planning.” Typically, multinationals set up a shell corporation to enable it to artificially shift income to shell subsidiaries in low tax or tax haven jurisdictions.
According to a 2008 GAO study, “eighty-three of the 100 largest publicly traded U.S. corporations in terms of revenue reported having subsidiaries in jurisdictions list as tax havens or financial privacy jurisdictions….” Many of the largest U.S. multinationals use shell corporations to hold the economic rights to intellectual property and the profits generated from those rights in tax haven jurisdictions to avoid U.S. taxation. By doing this, multinational companies are shifting taxable U.S. income on paper to affiliated offshore shells. These strategies are causing the United States to lose billions of tax dollars annually. Moreover, from a broader prospective, multinationals are able to benefit from the tax rules which assume that different entities of a multinational, including shell corporations, act independently from one another. The reality today is that the entities of a parent multinational typically operate as one global enterprise following a global business plan directed by the U.S. parent. If that reality were recognized, rather than viewing the various affiliated entities as independent companies, they would not be able to benefit from creating fictitious entities in tax havens and shifting income to those entities. In fact, when Congress enacted Subpart F, discussed in detail below, more than fifty years ago in 1962, an express purpose of that law was to stop the deflection of multinational income to tax havens, an activity which is so prevalent today.
Dirty Wars follows investigative reporter Jeremy Scahill, author of the international bestseller “Blackwater,” into the heart of America’s covert wars, from Afghanistan to Yemen, Somalia and beyond.
Part political thriller and part detective story, Dirty Wars is a global investigation of the secretive and powerful Joint Special Operations Command (JSOC).
In this excerpt, Scahill travels with a self-proclaimed general who was once an enemy of the US but is now on the Americans’ payroll.
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he following special report was released May 7, 2013 by the Department of Justice Bureau of Justice Statistics.
Bureau of Justice Statistics
In 2011, a total of 478,400 fatal and nonfatal violent crimes were committed with a firearm. Homicides made up about 2% of all firearm-related crimes. There were 11,101 firearm homicides in 2011, down by 39% from a high of 18,253 in 1993. The majority of the decline in firearm-related homicides occurred between 1993 and 1998. Since 1999, the number of firearm homicides increased from 10,828 to 12,791 in 2006 before declining to 11,101 in 2011.
Nonfatal firearm-related violent victimizations against persons age 12 or older declined 70%, from 1.5 million in 1993 to 456,500 in 2004. The number then fluctuated between about 400,000 to 600,000 through 2011. While the number of firearm crimes declined over time, the percentage of all violence that involved a firearm did not change substantively, fluctuating between 6% and 9% over the same period. In 1993, 9% of all violence was committed with a firearm, compared to 8% in 2011.
The primary source of information on firearm-related homicides was obtained from mortality data based on death certificates in the National Vital Statistics System of the National Center for Health Statistics (NCHS), Centers for Disease Control and Prevention’s (CDC) Web-based Injury Statistics Query and Reporting System (WISQARS). These mortality data include causes of death reported by attending physicians, medical examiners, and coroners, and demographic information about decedents reported by funeral directors who obtain that information from family members and other informants. The NCHS collects, compiles, verifies, and prepares these data for release to the public.
The estimates of nonfatal violent victimization are based on data from the Bureau of Justice Statistics’ (BJS) National Crime Victimization Survey (NCVS), which collects information on nonfatal crimes against persons age 12 or older reported and not reported to the police from a nationally representative sample of U.S. households. Homicide rates are presented per 100,000 persons and the nonfatal victimization rates are presented per 1,000 persons age 12 or older. Additional information on firearm violence in this report comes from the School-Associated Violent Deaths Surveillance Study (SAVD), the FBI’s Supplemental Homicide Reports (SHR), the Survey of Inmates in State Correctional Facilities (SISCF), and the Survey of Inmates in Federal Correctional Facilities (SIFCF). Each source provides different information about victims and incident characteristics. Estimates are shown for different years based on data availability and measures of reliability.