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TRANSFER PRICING:A CORPORATE SHELL GAME

By by Joseph P. Horgan, Project Director, Tax Justice Network – USA  Posted by Joseph Horgan (about the submitter)       (Page 1 of 2 pages)     Permalink    (# of views)   No comments

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A carny will at least tell you up front that he's running a shell game. —the Senator Peter Fitzgerald (R-IL) to Ken Lay, disgraced CEO of Enron.1


The shell game is as old as money and is played the world over. Corporations loyal to no nation are now operators in a version of the shell game. And, like any shell game, a bettor can only win if the operators want you to win.

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Here's how corporations play:


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First, corporations establish an overseas buyer for its product.


Next, they establish a shell company in a tax haven jurisdiction. At the height of its grand deception, Enron had over 440 shell companies on the tiny Cayman Islands.


Rather than sell the product direct to the buyer at a price that will cover the costs of production plus profit, the corporation sells it at a loss to their shell company, deducting the "loss" from their taxes.


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Then, the shell company sells it at the price it maintains for the product when it's not selling to a shell company to the overseas buyer.


The company, through its shell company, makes a profit from the sale and by deducting the money it “lost” selling to its shell company.

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Joseph is the Project Director, Tax Justice Network - USA, a project of the Fund for Constitutional Government. Prior to his work with TJN-USA, he worked for 20 years for the Teamsters Union, most recently as the strategic analyst for the Union's (more...)
 

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