January 24, 2012

Vibrancy

A reader sends me this from NBER:
Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States 
by Jason M. DeBacker, Bradley T. Heim, Anh Tran  
Abstract: 
This paper studies how cultural norms and enforcement policies influence illicit corporate activities.  Using confidential IRS audit data, we show that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the U.S. This effect is strong for small corporations and decreases as the size of the corporation increases.  In the mid-2000s, the United States implemented several enforcement measures which significantly increased tax compliance.  However, we find that these enforcement efforts were less effective in reducing tax evasion by corporations whose owners are from countries with higher corruption norms. This suggests that cultural norms can be a challenge to legal enforcement. 

42 comments:

Anonymous said...

It's not the laws and 'propositions' that make a nation. It's the nationals.
Gilbert Pinfold

dearieme said...

Don't forget that there exist countries who view the USA itself as a fount of corruption.

LemmusLemmus said...

Haven't read it yet, but here's an ungated version of the paper:

http://www.econ.yale.edu/conference/neudc11/papers/paper_144.pdf

Ed said...

This may also be evident that the world is developing a sort of transnational elite, the now fabled "1%", and they've taken to the norms of the most decadent, backward, countries available.

spandrell said...

Starve the beast! hah. Can't blame'em.

RKU said...

Dearieme: Don't forget that there exist countries who view the USA itself as a fount of corruption.

Exactly! Offhand, I'd say that today's America is by far the most corrupt country on earth, at least in terms of implemented corruption rather than attempted corruption.

For example, it wouldn't surprise me if every single individual in Nigeria was corrupt, and would steal if you gave them money. But everyone knows that, so it's rare that people send all their bank account information as those emails always request.

By contrast, due to its historical tradition, America has a reputation for relative honesty and lack of corruption, meaning that people give our elites their money and our elites steal it. Just consider all those Europeans who lost billions in the Madoff swindle and who lost tens of billions or more in the Mortgage Meltdown. Having a reputation for honesty and good governance is a very useful asset for total crooks.

What makes America confusing and usual in corruption analysis is that more ordinary day-to-day life in America is not corrupt, nor are most ordinary Americans. That's what keeps us looking good in the Transparency International tables. But I'd say our elites are about the most corrupt on earth, though since they control the MSM, people don't realize this.

A good model would be if a clan of Sicilian Mafiosa seized control of the Swedish government. The nature and the degree of the resulting corruption would be similarly unusual.

Robert Holmgren said...

So you're saying,"Keep an eye on anyone from Chicago".

Luke Lea said...

Dual citizens pouring millions of dollars into US political campaigns? I find that disturbing.

Anonymous said...

The USA is founded on the slavery and dispossession of People of Color.

We have no right to complain.

Diversity is Strength Police said...

These attempts at enforcing greater compliance (or even measuring differing rates of corruption by culture) sound like thinly veiled ethnic profiling.

But it's OK to be racists against whites (eg Armenians) and Asians (eg Indians & Chinese), so I'm confused.

I'm calling Eric Holdner's DOJ for clarification.

And remember all you racists here, the truth is no defense.

Anonymous said...

There's that V word again! Whole ideologies depend on it! Don't leave your mind home without it.

Linda Seebach said...

I recall there was a study of which cointries' UN diplomats had accumulated the most unpaid traffic citations, with similar results.

Anonymous said...

There is a huge underground economy in the SF Bay Area Chinese and Asian community. Not just restaurants, who perpetually evade taxes, but big time in the construction trades of all kinds. Chinese contractors are about 40% cheaper. I've watched them dole out cash for paychecks. so no doiubt the same happens with corporations. We are the United Nations not the United States. It's done and over with. PS the IRS pretty much leaves these folks alone becasue of diversity.

Some one said...

In a multi-cultural nation people will have to learn to accept the negative side of other peoples culture if left to their on devices.

Lee Kuan Yew in Singapore as quite successful diminishing the Malay and Tamil pathologies by spreading their population through the Chinese majority, using Gurkhas and brutal laws to intimidate any transgression and creating a busy economy for employment.

Justin said...

God bless 'em. That supposed "corruption" means resistance to governement. I'd say we need more people who are not so ready to cave to government demands. Land of the Free, hahaha, how bout Land of the Conformist.

peterike said...

To be filed under: "The bloody obvious."

Spread Eagle said...

Makes sense doesn't it?

Kylie said...

'Don't forget that there exist countries who view the USA itself as a fount of corruption."

I'm sure that's a large part of the reason why the USA is also the first country of choice for people wishing to emigrate.

Sheila said...

You mean the Patels' motel monopoly and Mohammed's convenience store aren't paying their fair share? I'm SHOCKED, absolutely shocked, I tell you.

Jack Aubrey said...

I'm increasingly of the opinion that just about anyone doing business in cash is doing a lot of their business off the books. My barber takes only cash - no checks, no credit cards - and he seems to take a hell of a lot of vacations for a barber. He's American and religious. His children aren't particularly successful, so I know they're not paying for the trips.

For small businessmen in immigrant communities, cash transactions are a larger share of their business than the norm, since immigrants are less frequent users of credit and debit cards. Convenience stores, restaurants, hotels, lawn care - lots of immigrants in those businesses, lots of cash transactions.

For larger businesses, though, the motivations are different. Those corporations don't want local employees skimming money off the top, and so they have to mind their books and end up keeping the sort of records that can be used both against local managers and employees and by the IRS.

So what the difference may come down to, in part, is that immigrants from low-trust cultures are more likely to be running small businesses that do a disproportionate amount of business in cash.

Anonymous said...

Steve, here's another recent story - on a completely different topic - which almost certainly has something to do with a sea-change in demographics:


Low attendance forces Duke Athletics to sell student seats
By Chris Cusack
January 24, 2012
dukechronicle.com

Once regularly an asylum for 1,200 Crazies, Section 17 at Cameron Indoor Stadium now rarely plays host to a student-only crowd.

Student attendance at men’s basketball games has fallen consistently over the last five years, even dropping after Duke won its fourth national championship in 2010. This season, approximately 650 undergraduates have attended each game, 150 fewer than during the 2008-09 season. As a result, Duke Athletics has begun to sell an increasing number of general admission tickets in the student section on a regular basis...



I keep seeing these sorts of stories all over the place - colleges can't seem to pay students to give a damn about school spirit and boosterism and actually showing up to cheer for their classmates in the revenue sports.

I don't know how to categorize it:

1) Introverted Asian undergrads don't give a darn about sports?

2) Real men skip college nowadays leaving only the panty-waists and the chicks in the undergraduate student body?

3) Fratty-baggers too busy downloading pr0n off the innert00bz to get off their lazy posteriors and ask a girl to go out on a date with them to a real, live sporting event?

4) [PACE WHISKEY] White kidz from the suburbs with 1550+ SATs just can't relate to inner-city utes with sports scholarships and 875 SATs?

5) Bowling alone?

Whatever it is, it amounts to a really PROFOUND change in the kinds of personalities who are being edumakated in our top-tier institutions, and the kinds of experiences they undergo while passing through those institutions.

Heck, as recently as about 1963, Trent Lott was a cheerleader at Ole Miss, and as recently as about 1964, Dubya was the head cheerleader at Andover, and those two guys went on to become Senate Majority Leader and POTUS respectively.

Anonymous said...

"Don't forget that there exist countries who view the USA itself as a fount of corruption."

People believe all sorts of stupid things. Doesn't make them true.

beowulf said...

Then again, big corporations run by American-born MBA/JDs will slide past an IRS audit (or prevent one by lobbying Congress to change a tax provision) far more easily than an immigrant entrepreneur.

There's no Danny Here said...

Then again, big corporations run by American-born MBA/JDs will slide past an IRS audit (or prevent one by lobbying Congress to change a tax provision) far more easily than an immigrant entrepreneur.

According to friend who heads up investigations in the IRS Chicago office, not true.

To consistently pull of meaningful tax fraud at the non-super elite level, you need a danny - a whole network of dannies*. Close ethnic network, especially from countries with cultures of corruption or tax evasion trump an individual American machinations.

For example, he has been chasing his tail around the immigrant Korean small business community trying to track down undeclared income. When he confronts a Korean businessman about his cash flow, there are always outflows to match any declared income. Those outflows go to a network of other Korean businessmen.

Naturally, there is no paper trail. There's just a complex web of Koreans who all verbally support whatever alibi is needed at the moment by the man under investigation.

* When discussing ways to launder money, Skyler advises that Walt buy the Car Wash that he worked at for four years and not a Laser Tag establishment, and Walt agrees. Saul does not, however. "There's no Danny here," someone who can be trusted completely because of his own illicit dealings

Anonymous said...

BTW, that Duke hoops team was ranked top-5 in the country for most of the season, and even though they just lost to FSU, they are still #8 in the AP poll, #6 in the Coach's poll, #14 in KenPom, and #10 in Sagarin.

Plus they have one of the highest-ranked freshman classes [coming out of the high school class of 2011].

That the Duke administration can't convince the students to show up for the games as the "Cameron Crazies" is simply NUTS!!!

Something is really profoundly wrong here.

MC said...

Equally blown away by that Duke attendance article.

as said...

spandrell said...

Starve the beast! hah. Can't blame'em.


No! Immigrants and immigrant cultures don't value institutional honesty. They (we) should be blamed.

Hunsdon said...

The real Steve might have tagged this with his "Men in gold chains" tag.

Difference Maker said...

The USA is founded on the slavery and dispossession of People of Color.

We have no right to complain.


No one else's hands are clean, and almost all would do far worse and far more evil were they in our position, which they are not in because of their failings and weakness.

We have done far greater good and are a far greater people, and I intend to see that that continues.

Difference Maker said...

There is a huge underground economy in the SF Bay Area Chinese and Asian community. Not just restaurants, who perpetually evade taxes, but big time in the construction trades of all kinds. Chinese contractors are about 40% cheaper. I've watched them dole out cash for paychecks.

And so many on Medicaid. I've even seen big Medicaid recruiting vans with smiling pictures, come on in for free money ROFL

JSM said...

"Just consider all those Europeans who lost billions in the Madoff swindle and who lost tens of billions or more in the Mortgage Meltdown. Having a reputation for honesty and good governance is a very useful asset for total crooks."

This is true.
Which is why the MF Global shenanigans is so awesome.

Brokers are now ADMITTING the commodities exchanges system is broken, the Money Powers are corrupt, and the Rule of Law in America is dead.

idealart said...

"Don't forget that there exist countries who view the USA itself as a fount of corruption."

I used to swallow that until I lived in China and India.

You have no idea what you are talking about, dear.

Anonymous said...

As if we hadn't all guessed this. Now here's the proof.

Anonymous said...

Well, I have to ask about all the recent Indian insider trading I'm reading about. Why now, all of the sudden?

Gold Bond Medicated Cream said...

re: Duke Basketball

2) Real men skip college nowadays leaving only the panty-waists and the chicks in the undergraduate student body?


Who cares about Basketball? It's become a self-parody of itself in showcasing bottom-class dysfunction both on and off the court.

The lack of rule enforcement like traveling and fouls, esp for whiny NBA stars, has turned a team sport into a vehicle for narcissistic showboats. The motivation seems to be to create more ESPN highlights and social justice.

I've obviously lost all interest like many others. No doubt fathers of my generation are spending little time passing on the love of the game to our kids. There are many better sports to get involved in these days.

Basketball is hardly the he-man sport this jock-sniffing fanboy thinks it is. Many young men 18-34 who abandoned basketball, baseball and boxing have gravitated to the more primal sport of mixed martial arts (MMA).

Given that declines of basketball and baseball relative to the rise in football, MMA, hockey, etc - it seems male sports fans are using sports to rebel against our feminized modern culture.

Anonymous said...

Brokers are now ADMITTING the commodities exchanges system is broken, the Money Powers are corrupt, and the Rule of Law in America is dead.

Ann Barnhardt interviewed by Jim Puplava (interesting mention of Cloward Piven Strategy at 23:20):

http://www.financialsense.com/financial-sense-newshour/guest-expert/2011/12/30/ann-barnhardt/the-futures-options-market-destroyed-by-the-mf-global-collapse

In a more recent followup with Puplava, she states that China recognizes the need for and value of honest financial markets, and with its willingness to put bullets into the heads of all types of criminals, may displace the U.S. as the best location for safe and honest financial activity if they emphasize enforcement, etc. Not sure I'd go that far, but interesting idea.

Whiskey said...

Olympus anyone? They hid losses for decades, with the connivance of both 3 generations of senior management and auditors. Repo 105 that Lehman used to hide junk bonds on the balance sheet, counting them as sales instead of financing, with the connivance of their auditor which IIRC was Deloitte.

John Seiler said...

The way to end tax corruption is to get rid of the taxes.

Eric said...

For example, he has been chasing his tail around the immigrant Korean small business community trying to track down undeclared income.

I was just going to mention Koreans. Even among ethnic groups these guys are insular, to the point where they can depend on ethnic solidarity from other Koreans they've never even met.

Eric said...

In a more recent followup with Puplava, she states that China recognizes the need for and value of honest financial markets, and with its willingness to put bullets into the heads of all types of criminals, may displace the U.S. as the best location for safe and honest financial activity if they emphasize enforcement, etc.

China has a long, long way to go before corruption at all levels is only as bad as the US.

Lugash said...

I am Lugash.

Lehman's auditors were Ernst & Young.

I am Lugash.

Svigor said...

PS the IRS pretty much leaves these folks alone becasue of diversity.

Anarcho-Tyranny. "Diversity" is their favorite excuse.

The USA is founded on the slavery and dispossession of People of Color.

We have no right to complain.


No, you have no right to complain. Or resist. You just said so ("we," remember?). The rest of us can still keep our property with a clear conscience.

God bless 'em. That supposed "corruption" means resistance to governement. I'd say we need more people who are not so ready to cave to government demands. Land of the Free, hahaha, how bout Land of the Conformist.

East Asians are remarkably conformist, but (at least in the case of the Chinese) they conform to a standard of corruption and distrust of gov't. Now, I'm on the same page with you when it comes to distrust of gov't; it's a good idea as a matter of principle, to say nothing of its merits when your gov't is selling you down the river. But their corruption and their distrust of gov't go hand in hand, and a corrupt society is not the kind of society people of western European descent create for themselves, or want to live in.

I think it's much more accurate to say that said western Euros are naive, rather than conformist.

I was just going to mention Koreans. Even among ethnic groups these guys are insular, to the point where they can depend on ethnic solidarity from other Koreans they've never even met.

They didn't survive China by accident.