‘Price We Pay’ Film Puts Focus On Tax Avoidance In Inversion Age

While the practice of corporate “inversion” may be generating headlines in the business world, a new documentary argues the larger issue of tax avoidance has become a major subversion of the global order.

The Price We Pay, which makes its world premiere at the Toronto International Film Festival today, suggests that the ability of corporations and wealthy individuals to keep their cash beyond the reach of public treasuries has upended the working of liberal states while exacerbating income inequality. The governments’ inability or unwillingness to act, never mind organize a coordinated global response, means the situation will probably get worse, the film argues.

The timing of the documentary’s release couldn’t be more fortuitous for the filmmakers. So-called tax inversions, in which U.S. companies take a foreign address to lower their tax burdens, have become an increasingly popular maneuver -- and a hot political issue.

Thirteen U.S. companies have reincorporated abroad since 2012, and nine more plan to do so, including AbbVie Inc., which said in July it would buy Dublin-based Shire Plc for $55 billion, and Burger King Worldwide Inc., which agreed to buy Canada’s Tim Hortons Inc. last week. U.S. President Barack Obama has called inversions an “unpatriotic tax loophole” and ordered a Treasury Department crackdown.

Slippery Practices

The Price We Pay isn’t the only documentary at TIFF, which runs through Sept. 14, taking a timely look at slippery business practices. Others include The Yes Men Are Revolting, a chronicle of the activist-pranksters taking on energy companies, and Merchants of Doubt, an investigation by the makers of “Food, Inc.” of PR firms and lobbyists paid to debunk concerns about climate change.

Giving TIFF’s corporate-focused offerings extra resonance this year is the 25th anniversary reappearance of Michael Moore’s Roger & Me, one of the granddaddies of business-biting docs.

While films like Roger & Me and Yes Men take a comic and subversive approach to filmmaking, The Price We Pay is a more somber affair. It relies on a procession of more than 25 talking heads including economists (such as Thomas Piketty), tax experts, bureaucrats, writers and former corporate insiders to lay out the general argument.

Fair Share

While the speakers sometimes contradict each other, which can be a little disconcerting, there’s no losing the thread of the message: multinationals are jumping through all kinds of legal and quasi-legal loopholes to avoid paying their fair share of tax.

Blame the English, or maybe the French, depending on your point of view. The seed of the problem may have been planted, the documentary suggests, when William the Conqueror ended his invasion of England at the gates of the City of London.

“He never finished the job,” William Taylor, a London councilor, tells the filmmakers. That left its denizens with a fierce sense of independence that would shape their actions for years to come. Following World War II, the City became “the Mother of All Tax Havens,” as the film puts it, after the Bank of England began to allow unregulated offshore trading of U.S. dollars.

While London was thriving, “someone” industrious connected to the Bank of Nova Scotia came up with the idea that because Cayman Islands was a British overseas territory, it should be subject to the same kind of regulations as the City, according to the film. That would lead to the transformation of the islands into a major offshore financial center.

Lower-Tax Territories

Other jurisdictions followed, making it easier for corporations to move operations or the legal status of subsidiaries into lower-tax territories, depriving their home countries of much-needed revenue.

The film cites an estimate from the U.K.-based Tax Justice Network advocacy group that 10 percent to 15 percent of global private wealth, or as much as $32 trillion, was held through offshore tax havens at the end of 2010.

“The international tax system is archaic,” director Harold Crooks, who also co-directed the doc Surviving Progress (2011), said yesterday in a phone interview. “It was built for a 20th century manufacturing age; it doesn’t know how to come to terms with the fact that so many corporate assets are actually intangibles, like intellectual property, that can be easily shifted offshore.”