Dangerous Ideas in Development
Why are Aid Donors Frightened of Taxation?
John Christensen
Director
Reasons to be fearful: part three



taxNEWSPEAK: The art of obfuscation
challenges to national sovereignty in an era
of transnational trade and investment
economic confusions
 role of tax incentives
 defining capital flight
 “tax efficiency” – a good thing, or bad?

legal confusions
 evasion v avoidance


don’t mess with corruption
dirty deeds in secret places: romantic notions
about small islands, and the problem of case
studies
whose job is it anyway?

international tax cooperation is obscure
and “Tax
generally
under-developed
competition is the only

an alphabet
soup
of international
agent
of
productivity
for
institutions and initiatives:
governments – it is the only
OECD / IMF / FATF / ECOSOC / UNCAC
competition
/ ONODCP
/ FSF /they
IASB have.”

there is no tax equivalent to the WTO – so
who do we Jacques
lobby? deA Saussure
global parliament?
(Monbiot, The
Guardian
24Cie
April 2007)
partnet,
Pictet, &

Companies and rich people exert a useful
Quotedon
in The
Economist,
24 FEB 2007
‘discipline’
high-tax
high-spend
governments: discuss
legal barriers

duties of directors and professional
advisers

much tax planning happens in the grey
space between national legal systems

the legal basis for much tax avoidance
could be overthrown by a general antiavoidance principle

who can exert control over the tax
havens?
economic confusions

if tax competition can be harmful (as the
OECD tells us it can), in what
circumstances can it be benign?

capital flight – poorly defined and underresearched

tax avoidance – a director’s duty? Or
the trump card in the corporate social
responsibility debate?

tax incidence – a contested area!!
confused thinking on corruption
 flawed definitions plus biased
perceptions result in a skewed
geography
 ‘phase two’ of the corruption
debate needs to focus on the
Enablers
extreme tax – new agendas

Finance for Development – the Road to Doha

trade negotiations

debt relief

corporate responsibility and accountability

global governance

anti-corruption initiatives
www.taxjustice.net
taxNEWSPEAK – some examples
 tax efficiency
 proactive asset protection
 tax advantaged products
 mitigating tax risks
The Problem
The deliberate and
illicit disguised
expatriation of money
by those resident or
taxable within the
country of origin. Tax
evasion is often the
motive for capital
flight.
Who owes what to whom?
Despite the massive debt incurred in
the past, Sub-Saharan Africa is a net
creditor to the rest of the world in
the sense that external assets (i.e.
the stock of flight capital) exceeds
external liabilities (i.e. external
debt).
The stock of capital flight from SSA
(estimated at $274 billion including
interest earnings) was equivalent to
145 per cent of the total debt owed
by the countries in the mid-1990s.
Boyce, J.K. and Ndikumana, L. (2005)
“Tax is a cost of doing business so, naturally,
a good manager will try to manage this cost
risks associated with it. This is an
essential part of good corporate
and the
governance.”
Re-thinking corruption
Re-examine prevailing definition:
the misuse of entrusted power for
private gains -- to take account of all
actions which undermine public
confidence in the integrity of the
systems of laws and institutions which
structure economic and social
transactions.
the geography of corruption
Transparency International’s Corruption Perceptions Index: 2006
Country
rank
African
countries
2006 CPI
score
Country
rank
Tax haven
countries
2006 CPI
score
5
Singapore
9.4
156
Chad / DCR / Sudan
2.0
7
Switzerland
9.1
155
Cote d’Ivoire /
Equatorial Guinea
2.1
9
Netherlands
8.7
142
Angola / Congo
Kenya /Nigeria /
Sierra Leone
2.2
11
Luxembourg / UK
8.6
15
Hong Kong
8.3
138
Cameroon / Niger
2.3
16
Germany
8.0
130
Burundi / CAR /
Ethiopia / Togo
2.4
18
Ireland
7.4
20
Belgium / USA
7.3
24
Barbados
6.7
26
Macau
6.6
28
Malta
6.4
31
U.A.E.(Bahrain/Dub
ai/RAS)
6.2