Wal-Mart and the Chinese Earthquake: Cheap Help for A Cheap-Labor Country

This article was originally published on Dirt Diggers Digest.

Wal-Mart Stores has put out a press release patting itself on the back for promising the equivalent of about $430,000 for disaster relief and reconstruction for the area of China hit by a massive earthquake this week. The gesture was laudable but the amount was less than impressive.

After all, the giant retailer would be nowhere today without the countless Chinese workers who toil in sweatshops so that American consumers can be offered the cheap goods that are at the core of the company’s business model. Last year those largely Chinese-made goods brought Wal-Mart profits of $12.7 billion, or about $1.4 million every hour of every day. The $430,000 contribution thus represents less than 20 minutes of profit.

Wal-Mart also profits from Chinese consumers. The company operates more than 200 stores in China (through joint ventures and minority-owned subsidiaries), several of which have been shut down because of the tremblor. Wal-Mart was so eager to operate stores in China that it agreed to let its employees there be represented by unions (though of the government-dominated variety).

Wal-Mart has a history of using relatively inexpensive amounts of disaster relief to boost its reputation. After Hurricane Katrina hit the U.S. Gulf Coast in 2005, Wal-Mart maneuvered to get maximum exposure for its prompt delivery of relief supplies. A fairly routine operation for a company possessing the most advanced logistics infrastructure was seen as nearly miraculous, given the ineptitude of federal and state public officials.

The company made an initial faux pas (quickly reversed) in announcing that employees at its stores shut down by the storm would be paid for only three days. It also started out offering a measly $2 million in relief but soon overcame its parsimonious instincts and upped the figure by $15 million, thereby winning wide praise. The wave of favorable coverage went on for several months, thanks at least in part to the efforts of its army of p.r. operatives from Edelman and a conservative blogger who was paid to tout Wal-Mart’s hurricane work in the blogosphere.

Wal-Mart may have to part with more than $430,000 to get a similar public relations bonanza from China’s suffering.

Posted by Philip Mattera on Thursday, May 15, 2008

COMMENTS

/12/08-Daily Telegraph,U.K.:~~~~~"The director of Christian Aid, Dr Daleep Mukarji, said: “We predict that illegal trade-related tax evasion alone will be responsible for the deaths of 5.6 million children under the age of five between 2000 and 2015. That’s almost 1,000 a day”. Christian Aid believes that up to $11 trillion of funds may be stashed away in tax havens.

The report notes the conventional distinction drawn between tax planning and tax avoidance, which are legal, and tax evasion, which is not, but says that avoidance is part of a “sliding scale of legitimacy”, in which ever more ingenious and complex methods are used to get around the rules and shelter corporate profits, notably through the use of tax havens, places where extreme secrecy in turn encourages a more general criminality.

It says: “The inescapable fact is that there are only four reasons for banking ‘offshore’: to avoid tax, to evade tax, to function in secret, to sidestep regulations controlling financial services or monopolistic practices. In each scenario, the pursuit of profit outweighs all other considerations, including good citizenship and social responsibility.

The widespread use of holding companies in tax havens to hold profits, licences and intellectual property, all to reduce tax bills, is also condemned: “Every transnational corporation uses holding companies”, it said, and listed BP, Wal-Mart, Royal Dutch Shell, ExxonMobil and Ford Motor Company’s reinsurance group as benefiting from offshore holdings.

Christian Aid’s strongest words are reserved for the companies and firms of accountants who save billions through such activities as manipulating invoicing and cost structures to avoid paying taxes. ~~~~~~~~~~~~~~

ddrb in
Thursday, May 15 at 01:12 PM

“The inescapable fact is that there are only four reasons for banking ‘offshore’: to avoid tax, to evade tax, to function in secret, to sidestep regulations controlling financial services or monopolistic practices. But how about a multi-national compnay who has legid offshore operation? Will they not need an offshore bank account to operate in that contry?

Offshore Banking in
Tuesday, May 27 at 11:53 PM

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