John le Carre on all things secret – and unacceptable

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The Tax Justice Network has published the following blog, which is simply too important to ignore. So, with their permission I reproduce it, in full.

The novelist John le Carr?©, a former British intelligence operative, has given a rare interview to Democracy now, plugging his new book Our Kind of Traitor and ruminating on a wide range of things – including several issues close to TJN’s heart. One, of course, is money laundering:

"Now, this isn’t fiction. That part of it isn’t fiction. Money laundering is simply everywhere. On the grand scale, it’s endemic to banking . . . .money laundering is not some distant fantasy. It’s actually how you handle the profits of extortion, tax evasion, criminal conspiracy and huge quantities of drug money, how you get that into the white sector.
The thing is, it is very undemocratic, because if you or I go to one of these banks along here somewhere with a few thousand dollars in a briefcase, if I’m a Brit and do it, I have to give a really thorough explanation. Bank manager may call in the police. I have to produce my passport. If I want to open an account, I have to produce a utilities bill and all of that. But, if Mr. Orloff comes to a bank here and says, "I am from Russia. I have millions and millions of dollars, please. And here is a letter from a reputable lawyer in Moscow. And here is evidence that I run hotels, casinos, whatnot," bank manager says, "What are you doing for lunch?" And we’re away. So, the bigger the sum, the easier the crime."

Indeed. Just as our recent FIFA blog notes, tax havenry is about the most profoundly, absolutely, undemocratic business there is, and it breeds a suffocating arrogance, derived from a feeling of untouchability that enables the roughest, most aggressive vested interests to face down entire societies and free ride on their citizens’ backs:

"When there’s a great humanitarian need, somehow or another, it’s the conservative voice, the orthodox voice, the chauvinistic or the patriotic voice, that outshouts other people’s decent thinking processes."

Le Carr?© also speaks from his personal experiences as a spy in the late 1950s and early 1960s, and of his having watched the evolution of intelligence agencies (which infest the secrecy jurisdictions) from bodies dedicated to protecting society, into ones that have, at least at times, become prone to supporting societal abuse. This is surely no accident: as our recent blogginghas highlighted, the secrecy jurisdictions are conduits for vast tides of global money. Information follows the money, so the secret intelligence services naturally gravitate towards where it flows: in the tax havens. As these agencies have embedded themselves in these unaccountable, anti-democratic offshore zones, their operatives have inevitably imbibed a world view contemptuous of society. (As Friedrich Nietzche famously put it: "If you gaze long into an abyss, the abyss will also gaze into you.") Le Carr?© has a feeling that things have changed:

"I suppose that if I could generalize about my work in intelligence in those days, for better or worse, we counted ourselves an elite with a very considerable responsibility: to speak truth to power, like good journalists, that whatever we came upon, however offensive it was to those in power, we told it straight.
. . .
I have the feeling that the power of the counterterror market is expanding and creating a wider‚Äîan ever-widening circle of those who are initiated, indoctrinated, part of the security structure, whether directly or indirectly, and those who are not. . . . it makes it possible for a senior MP to take a neophyte aside and say, "If you’d seen the papers that I’ve seen, you would know which lobby to go into when the vote comes up." And this suggestion that there are those in the know and those not in the know, and that those not in the know are second-class citizens, is extremely dangerous to society."

And this is all tied up with the tax thing, too, of course:

"In our country, we’re up against the fact that huge corporations are effective here, control the super markets, whatever they do, and they pay virtually no tax. We’re back to how they launder their money, or, if it’s a more polite way of saying it, how they apply sophisticated taxation arrangements so that they don’t pay tax."

And, more specifically, he said something that is of particular relevance to the issue of transfer pricing:

"In The Constant Gardener, in particular, it was quite extraordinary to go to Basel, to get among the young pharmaceutical executives in a private way, promise them that I would never tell‚Äîdivulge their names, and listen to them pouring out their rage against the work they were doing, at the people who were making them do it. But they were still taking the penny, and they were still doing what they were doing. They were still contributing to the invention of diseases. They were fiddling with compounds, turn them into new patents, when they actually had no greater effect than the previous patent. They were joining the lie that every new compound put on the market cost six or eight hundred million dollars, which is pretty good nonsense when you think that many of the main health life-saving drugs that go on the market have been developed, for instance, in your own federal laboratories and then sold by some strange method to the pharmaceutical company, so they didn’t do the hard work themselves very often.

Patents are among the most powerful corporate tax avoidance tools that exist. The patent is shifted to a subsidiary in a secrecy jurisdiction – which then charges the "onshore" subsidiary high royalties, which can then be deducted against tax – while the subsidiary’s profits are in a zero-tax haven. Le Carr?©’s words put all this in an even more cynical light.