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.
After 13 years, our founding executive director John Christensen is stepping down. We’re delighted that John will stay on and become our new board chair. And I (Alex Cobham) am honoured to accept the role of chief executive at TJN.
Since I took up the post of Director of Research at the start of last year, I’ve had the chance to look back and think about the achievements so far of John and the network. In changing the political weather on these issues, those achievements are nothing short of extraordinary.
Behind the success of this radical agenda has been the use of high quality research and excellent communications to take clear, innovative solutions into the policy mainstream. The piece below sets out some of the dramatic changes that have taken place, some of the ways that John and TJN have achieved this, and a hint of the work that’s to come. (John would never be so immodest, incidentally – but please forgive me, because the achievements are far from modest.)
The Methodist Tax Justice Network, the Global Alliance for Tax Justice and one of our senior advisors Professor Sol Picciotto have just published a very useful up-to-date account of where the OECD and G20 have got to on tax reform, along with a useful explanation of the Unitary Taxation alternatives which you can download here.
Back in July the G20 club of powerful countries issued a communiqué in which they enthused about “the benefits of tax certainty to promote investment and trade,” and they mandated the OECD and the IMF “to continue working on the issues of pro-growth tax policies and tax certainty.”
It’s taken as a given that something called ‘tax certainty’ is a wholesome thing. Here’s the Association of Chartered Certified Accountants (ACCA) giving it the old motherhood-and-apple-pie:
“Certainty, along with simplicity and stability, is one of the cornerstones of a good tax system: but why is it important? How can policymakers encourage certainty?”
Update: here’s our research director Alex Cobham’s interview with Share Radio which goes through the key points.
On this quiet August day, the US Treasury has fired the first shots of a tax war with Europe. And while it’s wrapped up in a claim to defend international tax cooperation, it looks more like an attempt to prevent an effective measure against international tax-dodging – carried out, not least, by US companies. At the same time, the US continues as the leading hold-out against the automatic exchange of individuals’ financial information; and to resist the growing tide of public registers of the beneficial ownership of companies. The stage is set for a prolonged battle.
By publishing a white paper titled ‘THE EUROPEAN COMMISSION’S RECENT STATE AID INVESTIGATIONS OF TRANSFER PRICING RULINGS’ (h/t @RichardRubinDC), the US has signalled an end to a period of quiet tension. This long post considers why this matters; then sets out the main contents of the white paper; before concluding with an assessment of what is possible in the ensuing hostilities.
We explore the white paper’s main points below, but note first its significance. For one thing, it confirms just how bad relationships between the US and the Commission have become on the subject of corporate tax. The white paper is the opposite of gentle diplomacy – and quite close, in parts, to an outright threat.