Estimating tax avoidance: New findings, new questions
There are now a range of estimates of the global scale of tax avoidance. These include:
- the $600 billion annual tax loss estimated by IMF researchers Crivelli et al. (2015; 2016), which divides roughly into $400 billion of OECD losses and $200 billion elsewhere;
- the $100 billion annual tax losses that UNCTAD’s World Investment Report 2015 estimated for developing countries due only to conduit FDI investment through ‘tax havens’;
- the $100 billion to $240 billion globally that OECD researchers estimate;
- the $130 billion globally that we have estimated as annual losses due to avoidance by US multinationals only; and so on.
A new research report published today looks at the current state and future prospects of a global public database of corporate accounts. We are cross posting this OpenDemocracy article written by Jonathan Gray, with permission from our partners on the open data for tax justice project at Open Knowledge International. You can read more about that about in our blog here.
The multinational corporation has become one of the most powerful and influential forms of economic organisation in the modern world. Emerging at the bleeding edge of colonial expansion in the seventeenth century, entities such as the Dutch and British East India Companies required novel kinds of legal, political, economic and administrative work to hold their sprawling networks of people, objects, resources, activities and information together across borders.
How much tax do multinational companies pay in your country? Leading tax justice campaigners (including the Tax Justice Network) and open data specialists are working on helping you find out with their open data for tax justice project. Today they’re publishing a white paper entitled What Do They Pay? which sets out a roadmap for the creation of a global public database on the tax contributions and economic activities of multinational companies. More details about the project can be found at datafortaxjustice.net. Hashtag for following developments on social media is as you see it on the right #od4tj
Over the years, we’ve chronicled the tax haven denial of many secrecy jurisdictions, even building a partial list of those who have publicly claimed “We are not a tax haven!” Now, at the prompting of tax twitter (notably Mary Cosgrove and Stephanie Johnston, with honourable mentions to Aisling Donoghue, Toby Quantrill and Richard Smith), we thought we’d have a go at crowdsourcing a more full listing.
This is being done as part of the Open Data for Tax Justice project which TJN and our partners at Open Knowledge International have set up with Omidyar Network support, to which new members are always welcome (our major focus at the moment is on the creation of a public database of country-by-country reporting – on which your views are sought).
TJN has, since its establishment in 2003, led the way in developing and promoting the idea of public country-by-country reporting (CBCR) for multinational companies. Open Knowledge International, who partnered with TJN in establishing Open Data for Tax Justice (#OD4TJ), are pioneers in using open data to achieve tangible policy results and human progress. The Financial Transparency Coalition (FTC) has championed public CBCR since its inception, as have many of our fellow FTC members including Christian Aid and Tax Justice Network-Africa.
There are now multiple requirements for CBCR from multinational companies, depending on the jurisdiction and industry sector, some fully public, and an OECD standard has been introduced which will require all multinationals of a certain scale to report privately to the tax authority in their headquarters country. It is critical that this data is used effectively, and seen to be so used. The next 2-3 years provide a window in which to confirm the value of CBCR; to move policymakers towards a global consensus on requiring public CBCR; and to establish a single format for reporting, to ensure lower compliance costs for business and more effective use of the data by civil society, media and tax authorities alike.
As leading organisations in this field, we now propose to establish an open database, to include all publicly available CBCR data; to provide a venue for multinationals that wish to lead in transparency by publishing their data voluntarily; and to make the data, and core tools and risk measures, accessible to a wider audience.
It’s important that we have a wide range of views and voices feeding in to the process, to ensure the design meets the key user needs. To that end we are working on a range of channels. First among these is an international survey that we would urge as many people and organisations from around the world as possible to fill in.
Next week we will convene an international expert group meeting, to be followed in the coming months by data sprint/s and additional collaborative work to bring together open data, accounting and tax justice experts with the aim of delivering clear progress in four key areas:
- First, a common format nesting all of the existing CBCR standards will be created.
- This will be used to construct, second, an open, online database into which researchers can enter new CBCR data as it becomes available, and which has the potential to become the main repository for public CBCR data, and the main source for future research and policy analysis.
- Third, we will create a number of tools and indicators of the misalignment of declared, taxable profit with the location of real economic activity; and the ability quickly to rank and compare across companies and across jurisdictions in order to identify priorities for further scrutiny.
- Finally, the aim is to ensure the database is fully linked in with related projects including, crucially, to establish relationships with the increasing volume of beneficial ownership data available, including through potential partners such as OpenCorporates and Open Contracting.
The intention is to obtain over time significant backing from a range of users including investor groups, reporting companies, civil society groups, tax authorities and policymakers. Please get in touch if you would like to be involved in any way, via Open Data for Tax Justice – and please do fill in the survey!