"We’ve seen and felt the cost of underestimating the financial bubble. Let’s not ignore the climate bubble," writes Henry Paulson former US Secretary of the Treasury in George W Bush’s administration.
Coincidentally, I’m reading his 22 June op-ed published in The New York Times’ Sunday Review on board the plane that will take me to Minneapolis, where I’m attending the annual conference of the US Institute of Management Accountants.
In his article Paulson is calling for a tax on carbon emissions, ahead of the publication of a report that forthcoming week, which analyses the concrete effects of climate change on the US economy.
The idea of course isn’t new. The polluters-pay principle has inspired public policies and legislation far and wide. What’s more remarkable is to see a member of the US Republican Party in favour of levying a tax, possibly one of the most onerous forms of government intervention.
Paulson foresees the concerns of his peers in the Republican Party and argues that a carbon tax would actually reduce the role of government, mitigating the costs of helping communities affected by "climate-related disasters like floods, drought-related crop failures and extreme weather".
Taxes aren’t an issue you can fool around with. A tax on tea was the last straw for the American colonies’ patriots who dunked into the Boston Harbour a whole cargo of tea taxed by their British rulers in 1773. The rest is history. That episode, the Boston Tea Party, was the spark that ignited the American War of Independence in 1775.
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By GlobalDataThe revolutionaries were also putting in practice their principle of "No taxation without representation". Common sense, in a nutshell: I would only pay the taxes levied by the parliament in which I’m represented and I’ve voted for.
On my way back from the conference I read a story in the Chicago Tribune about how the largest US drugstore chain, Walgreen, has plans to move its headquarters to a tax haven. The strategy it would use is called corporate inversion, whereby the company reincorporates abroad, becoming a subsidiary of a foreign parent company.
According to Ameet Sachdev’s article, the inversion would cost US taxpayers $2.35bn in the first three years, which would "give ammunition to critics who claim the company is renouncing its US citizenship".
But the most worrying issue, if the Chicago Tribune has it right, is that some of Walgreen’s investors have pressured to go ahead with this strategy. That poses the question: can we rely exclusively on investors, or markets, to drive change and promote best corporate social responsibility practices?
Walgreen takes pride in the fact that 75% of Americans, it says, live around five miles from one of its drugstores…well, that might not include its headquarters, which in the future could be located in places such as the Cayman Islands, Bermuda, Ireland or any other tax haven. "No taxation without representation", the patriots used to say. It now seems the way to go is just "no taxation".
Carlos Martin Tornero
carlos.tornero@uk.timetric.com
