First-ever OECD complaint on tax avoidance filed against Chevron’s shell companies
In a ground-breaking development, the first ever OECD Guidelines case on corporate tax avoidance was filed against the Dutch shell companies of American oil giant Chevron. The complaint highlights Chevron’s use of Dutch letterbox companies to avoid paying taxes owed in Nigeria, Argentina, and Venezuela. The case was filed with the Dutch NCP by Dutch union FNV and global unions Public Services International (PSI), International Transport Workers’ Federation (ITF), and IndustriALL. At the request of FNV, SOMO and Oxfam Novib assisted the unions with preparing the complaint.
The complaint targets the Dutch subsidiaries and related companies of Chevron Corporation, highlighting these Dutch companies’ role in the multinational’s fierce concealment of its tax-related information, including its use of myriad letterbox companies to facilitate its tax avoidance schemes, and the amount of tax revenue Chevron annually avoids paying to governments around the world. By filing this complaint against Chevron’s Dutch affiliates, the complainants seek to call attention to Chevron’s harmful tax avoidance practices and demand a cessation of such strategies that deprive workers and communities of critical public services.
Tax avoidance – the legal avoidance or minimisation of tax payments – is a serious problem worldwide. Still commonly practiced by most multinational enterprises, companies’ “tax planning” activities were once accepted as standard, smart business. But the financial turmoil of the past decade helped cause a major shift in public awareness and attitude on tax avoidance schemes. Now regarded as a leading cause of global inequality and poverty, tax avoidance is routinely criticized by governments, international organizations, civil society, and the public. By directly limiting states’ ability to fund essential services such as health care, education, and infrastructure, tax minimisation unduly elevates the power of corporations vis-à-vis workers and governments. In 2015, the Independent Commission for the Reform of International Corporate Taxation estimated that corporate profit-shifting costs developing countries $100bn per year.
Chevron has been active in protecting the opacity of its tax practices. When most corporations participating in the Extractive Industries Transparency Initiative began committing to greater transparency in their payments to governments, Chevron refused. The oil giant has also been the respondent in several court challenges by governments seeking accountability for the corporation’s tax minimisation schemes.
Chevron’s actions on tax avoidance are exemplary of its conduct in other areas. For years the oil company has been trying to evade responsibility for its role in the severe pollution of the Ecuadorian Amazon. In 2011, the company was convicted by an Ecuadorian court of poisoning vast swaths of land in a judgment upheld by higher courts. However, Chevron proposed an international arbitration with a view to revert the sentence, and indeed, in September 2018, the Permanent Court of Arbitration rejected the Ecuadorian court judgment.
Chevron’s actions, and the difficulty of obtaining accountability for them under current national and international law, underscore the urgent need for an international binding treaty to regulate the conduct of transnational corporations and enable penalty and the enforcement thereof for human rights and environmental abuses committed.
The text of the complaint is available here.