Lobbyists help smooth the way for
Diageo's jumbo-sized tax breaks
The deal will mean Diageo saves many
millions more dollars in rebates
Source: The Independent
by Jim Armitage
Friday 11 January 2013
Global Outlook All that fiscal cliff
business had investors reaching for the drinks cabinet over the new year. But
when the bill was passed, one British corporate giant had more reason to
celebrate than most. For, believe it or not, thanks to the weird world of
United States lobbying, the Smirnoff-to-Guinness giant Diageo emerged as one of
the biggest beneficiaries.
While we naive observers in the rest of
the globe thought the legislation was all about saving the US from economic collapse,
in fact, for a small but powerful Washington lobbying elite, it was more about
driving through a few jumbo-sized special-interest-group tax breaks.
The rest of the world, and US
taxpayers, focused on the deep public spending cuts and tax rises for the
wealthy presaged by the bill, but President Barack Obama shoehorned in a host
of completely unrelated "pork barrel" tax breaks for big business.
One of them was a two-year extension to
the tax break mainly benefiting Diageo's Captain Morgan rum distillery in the
US Virgin Islands.
The deal will mean Diageo saves many
millions more dollars in rebates, which rivals argue makes it hard for the
company ever to lose money on the liquor.
It's impossible to state exactly how
much Diageo will save as the break is based on how much rum the company manages
to shift from its shiny new distillery in the US territory. Some reports have
put the annual benefit at around $50m (£31m).
You could argue that's not much for a
multi-billion dollar operation like Diageo, but it's a whole lot more than the
company paid the Washington lobbyists Trent Lott and John Breaux to push for
the change. Data obtainable through the OpenSecrets.org website suggest Diageo
paid the pair's firm only $120,000 last year.
Perhaps the duo, a former Republican
and Democrat senator, should up their rates. They may need to, since another
client, the Lance Armstrong Foundation, may not be paying its $100,000-$250,000
annual lobbying dues for much longer.
As a Brit, whose pension is, I presume,
partly invested in the world's biggest drinks company, it's hard not to have
mixed feelings. On the one hand, you have to admire Diageo for its political
nous in hiring two of the most effective lobbyists in Washington to do its
bidding so well. The way the White House jingoistically abused BP after the
Deepwater Horizon disaster highlighted how British firms don't always play the
game with such elan.
But this kind of lobbying in foreign
climes is reputationally risky. As the US media focused on the Armageddon Averted
fiscal cliff story, the tale of Diageo's nice little earner didn't cause much
of a stink. But think about it: "hard-pressed American taxpayers bail out
Limey booze peddlers," could have played pretty big in other
circumstances.
Incidentally, Diageo, which did not
comment on my queries about this story, managed to get tax incentives worth
some $2.7bn when it moved its Captain Morgan distillery from impoverished
Puerto Rico to the US Virgin Islands.
I just could not let this article pass in all good conscience. Enough of my "soap box" orations and back to the issue at hand, good rum. ;o)
