Tax Evasion: IBM dodged taxes by fictitiously moving employees to the Netherlands - by Tim Fernholz

IBM - the IT services company, under pressure to meet a high earnings forecast, has turned to the ever-malleable tax code for a boost to its earnings. That has some pretty surprising consequences, as Alex Barinka and Jesse Drucker report for Bloomberg: The company is driving more income through a subsidiary in the Netherlands. In 2008, the subsidiary, IBM International Group BV, reported just three employees, but at the end of 2012, it reported 205,000—almost half of the company’s worldwide staff of 430,000 workers.

Of course, we’d be hearing about a Dutch property bubble if those 205,000 people actually lived in the Netherlands. In fact, just 2% of them do. The rest are scattered around the world. For tax purposes, measures like these saved the company $6.5 billion from 2010 to 2012. 

In 2013, the company paid a 15.6% overall global tax rate, which it attributed to a “more favorable [than] expected geographic mix” of revenues (auditor jokes are funny). That will have added to the $44 billion of untaxed cash the company had accumulated overseas by the end of 2012, though we don’t yet know by how much.

Public-policy concerns aside, what worries analysts, of course, is a company on a cost-cutting mission running out of costs to cut. When it’s doing so much of that through tax avoidance, it inevitably raises questions about how well the primary business is going. 

Read more: IBM saved its earnings by moving almost half its employees to the Netherlands - Quartz

Artificial Food Coloring: Caramel Coloring in Soda could be cancer causing

Soft Drinks - Sodas

Caramel color, added to many soft drinks and some foods to turn them brown, may sound harmless, even appetizing. But in no way does it resemble real caramel. Some types of this artificial coloring contain a potentially carcinogenic chemical called 4-methylimidazole (4-MeI). Under California’s Proposition 65 law, any food or beverage sold in the state that exposes consumers to more than 29 micrograms of 4-MeI per day is supposed to carry a health-warning label.

In recent Consumer Reports’ tests, each of the 12-ounce samples of Pepsi One and Malta Goya had more than 29 micrograms per can or bottle. While we cannot say that this violates California's Prop 65, we believe that these levels are too high, and we have asked the California Attorney General to investigate.

Caramel color is the single most used food coloring in the world, according to a 2013 report from market research firms Mintel and Leatherhead Food Research. “There’s no reason why consumers should be exposed to an avoidable and unnecessary risk that can stem from coloring food brown,” says Urvashi Rangan, Ph.D., toxicologist and executive director of Consumer Reports’ Food Safety & Sustainability Center. “Manufacturers have lower 4-MeI alternatives available to them. Ideally there would be no 4-MeI in food.”

In 2007, a US federal government study concluded that 4-MeI caused cancer in mice and the International Agency for Research on Cancer determined the chemical to be “possibly carcinogenic to humans” in 2011.

There’s no US federal limit for levels of 4-MeI in foods and beverages, but as of January 7, 2012 California requires manufacturers to label a product sold in the state with a cancer warning if it exposes consumers to more than 29 micrograms of 4-MeI per day. In this case, the exposure comes from consumption.

The California Office of Environmental Health Hazard Assessment used 29 micrograms as the cut off point because that’s the level they determined poses a one in 100,000 risk of cancer—that is, no more than one excess cancer case per 100,000 people who are exposed to that amount daily for a lifetime.

Read more: Caramel Coloring in Soda | Artificial Food Coloring | 4-MeI - Consumer Reports

EU Lobbyist Register: Campaigners disappointed by new EU lobbying text - by Dave Keating

A draft agreement on changes to the combined European Parliament and European Commission lobbyist register, endorsed by members of the Parliament's bureau last week, has been branded “hugely disappointing” by transparency campaigners.

The draft text endorsed by the bureau on 13 January has not yet been published. But a leaked draft seen by European Voice provides more details into the results of a review process concluded in December.

The proposed text would not make it mandatory for people and entities lobbying the parliament to sign the register. But it says that people who have signed the register should benefit from better access to Parliament premises.

Other incentives could include “authorisation to organise or co-host events on its premises, facilitated transmission of information including specific mailing lists [or] participation as speakers in committee hearings.”

Transparency campaign group ALTER-EU criticised the proposal, which will be put to a vote by the Parliament's constitutional affairs committee in the coming weeks. The group will release a scorecard today (27 January) assessing the text. Out of the ten ALTER-EU recommendations for reform, five will be assessed as “no progress made” and a further three as “some improvement, more to do”.

“Our scorecard shows that there are only a handful of proposed changes which show improvement,” said Max Bank of LobbyControl, a member of the ALTER-EU steering committee. “Meanwhile it seems unlikely that many of the currently unregistered organisations and law firms will be incentivised to now join.”

The group also criticised the lack of transparency in the review process. Apart from two press releases by the Parliament and the Commission in December, no other documents have been published.

Read more: Campaigners disappointed by new EU lobbying text | European Voice

Democracy and ethical standards: is the US in troubled waters? - by RM

Perhaps the most difficult aspect of any modern political system and especially that of the US  is to be able to reconcile, at least from an ethical standpoint, the issue of campaign finance with that of moral convictions and democratic principles..

Plato's argument against democracy was that it would promote skilled campaigners rather than qualified leaders. This statement needs only to be amended slightly when we look at today's US political system.

In a sense the American democracy now promotes skilled fundraisers while leadership skills have taken a backseat to the ability of extracting funds from contributors

The real ethical issues of campaign finance lie not in their cost, but rather who is providing the funds. In today's America special interest groups have filled the huge gap between private donations and the realistic costs of running a successful political  campaign. These interest groups are quite varied in the issues they promote, but unfortunately many of the most powerful are very recognizable, such as energy, tobacco, firearm, insurance, healthcare and the pharmaceutical industry.

Perhaps, even more disturbing, however, is the way that the funds from these groups are distributed.

Historically, donations from political action committees, or PACs as they are called in America, greatly favor incumbents, at a ratio of nearly four dollars donated to incumbent campaigns to every one dollar donated to the challengers.

This notion would seem to imply a direct relationship between accepting monies from special interests and maintaining political power. In its most basic form one could call this influence peddling, but even operating on the assumption that special interest money does not directly has an influence on US political leaders, it certainly gives the appearance of doing so, and consequently has seriously eroded the US public confidence in their political leaders and democracy.

In a Gallup poll conducted recently on how Americans rate their institutions Congress ranks last with 9% on this list of 16 institutions; the military with a 76%  approval rating earns top spot.. Other institutions which did poorly and scored below 30% in this poll were: Big business (multi-nationals), banking, medical, the press, organized labour and  the criminal justice system.

Overall, even with all the above mentioned negatives, the US political system is certainly not beyond repair, but there are problems that need to be addressed with a major sense of urgency. The time to take action  is now.

The number one issue, without any doubt, is for the Congress to come to grips with campaign finance reform, along with stricter regulations on the influence and access granted to special interest groups and their lobbyists to government and elected officials.

If nothing gets done, at least in these two major area's of concern, one could assume, just by looking at the polls - which show a strong public support for the military and police (authority and order) - that the use of marshal law as a tool to restore the basic principals on which the US was founded as a Republic, is not as unthinkable as once thought before.

EU-Digest

Dutch Confront Euro’s Just Desserts as EU Appetite Ebbs - by James G. Neuger and Fred Pals

The agitators lobbed the banana-cream projectiles at the official, Gerrit Zalm, on Jan. 4, 1999, to denounce the newly arrived euro currency, a tool they warned would lead to the dismantling of the welfare state and the dominance of bankers.

“I don’t regret it at all,” Jelle Goezinnen, a pie thrower then and currently a refugee counselor in Utrecht, says today. “I still stand behind all those actions.”

Fifteen years and one existential euro crisis later, his pie brigade, known as TAART, has successors questioning what the policy makers of that era wrought for what was once a model euro nation. Now the 16.8 million Dutch are caught in a trap much like the one that has caught their bailed-out neighbors: not enough economic growth, too much debt, and a shortage of policy options fueling doubts about the benefit of union.

For Frits Bolkestein, a former center-right Dutch political leader and member of the European Commission, the lesson is simple. “The monetary union has failed,” says Bolkestein, 80, himself once a target of pie-wielding assailants. “I have considerable difficulty in imagining us continuing like this for very much longer. Let us say 10 years ahead: will we then have the same sort of mess?”

From the start, the Netherlands has been intimately bound up with the euro. One of the six founders of the group that grew into the 28-nation European Union, it hosted the 1991 summit in Maastricht that laid out the roadmap to the currency and sent Wim Duisenberg to Frankfurt as the first president of the European Central Bank. The Dutch made a fetish of the euro’s deficit rules, only to run afoul of them when the crisis struck.

Austerity is no longer the national pastime of a country that pioneered global capitalism and made “going Dutch” a synonym for thrift. Even the purveyors of marijuana who dot the city carved by the canals that made Amsterdam a latter-day tourist destination complain of hard times made harder by government rules.

“Look what I got since we opened at nine this morning -- not even 10 euros,” Mohamed Ouchene, 38, co-owner of the “Blue Lagoon,” says around midday, pointing to his nearly empty cash register and the two customers in the shop. “We wanted to refurbish and upgrade the place but we postponed.”

The Dutch economy is set to be the third-worst performer in the 18-member euro area this year, with growth of 0.2 percent, according to the commission. Ireland, Portugal, Spain, even Greece -- four countries saved from financial ruin partly by Dutch aid, grudgingly granted -- will do better.

“When the party is going on, you don’t want to take away the fun,” says Arnoud Boot, a professor of corporate finance and financial markets at the University of Amsterdam. “As long as house prices were going up, there was no problem. The political process was not good at dealing with these things.” 

Note EU-Digest: whatever way you turn it the fact remains that there is a global economic crises going on all over the world - and - if the Netherlands would not have been part of the EU Eurozone the economic crises would have probably hit the country even harder than it did now. 

Where there is a major problem is that the Dutch Government is doing an extremely poor job at communicating the benefits of the EU, Eurozone and EURO. As a result  opportunist radical populist politicians like Geert Wilders are gaining traction with what in essence is total unfounded nonsense. 

Read more: Dutch Confront Euro’s Just Desserts as EU Appetite Ebbs - Businessweek

US Economy: The Super Bowl, one of America’s greatest pop-culture sports phenomena - by Michelle Flor Cruz

Stadium beer: $9. Last-minute ticket to the game: $3,000. Super Bowl XLVIII T-shirt: $25. The Super Bowl experience in New York/New Jersey: $600 million?

There’s no doubt the public will be paying inflated prices if you have any plans of attending the Super Bowl this year, but do the numbers really add up to as much as the NFL claims?

The Super Bowl, one of America’s greatest pop-culturesport phenomena, has transformed from just a football game into a major economic event. This year’s Super Bowl XLVII -- to be held this evening February 2 at the MetLife Stadium in East Rutherford, N.J., will be no different, drawing attention and dollars from all corners of the country. 

Read more: Show Me The Money: What Super Bowl Economics Means From Coast To Coast By International Business Times

International Labour Organization: GLOBAL EMPLOYMENT TRENDS 2014 - by Raymond Torres

South Asia  farrner plowing rice field

Global unemployment increased by 5 million people in 2013

The global labour market situation remains uneven and fragile. True, there are encouraging signs of economic recovery in those advanced economies most affected by the global financial crisis which erupted in 2008.

Also, a number of emerging and developing countries − including: in the Sub-Saharan Africa − are enjoying relatively robust economic growth. The world economy may thus be growing somewhat faster than over the past three years.

However, the report finds that those economic improvements will not be sufficient to absorb the major labour market imbalances that built up in recent years. First, over the fore seeable future, the world economy will probably grow less than was the case before the global crisis. This complicates the task of generating the over 42 million jobs that are needed every year in order to meet the growing number of new entrants in the labour market.

Second, and more fundamentally, the root causes of the global crisis have not been prop erly tackled. The financial system remains the Achilles heel of the world economy.

The state of many banks is such that many sustainable enterprises, notably small ones, have limited access to credit, thereby affecting productive investment and job creation. Significant financial bubbles have re-appeared in a number of advanced and emerging economies, adding new uncertainties and affecting hiring decisions.

Also, global labour incomes continue to increase at a slower pace than justified by observed productivity gains, thus affecting aggregate demand.

Third; and this is an important new finding in view of the post-2015 development debate  −  little progress is being made in reducing working poverty and vulnerable forms of employment such as informal jobs and undeclared work. If confirmed, this trend would unambiguously delay the achievement of development goals.

To ensure lasting job recovery, the report highlights the role of a strategy that combines short-term measures (job-friendly macroeconomic and labour market policies) with further action to tackle long-standing imbalances.

Such a strategy would strengthen the economic recovery and pave the way for more and better jobs.

Read more wcms_233953.pdf