Alex Cobham Tax Factor Missing Millions
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Transcript of Alex Cobham Tax Factor Missing Millions
The Tax Factor:Why that special ‘something’ is missing from development
Alex Cobham ([email protected])
‘The Missing Millions’, Edinburgh7 October 2009
Outlinei. Background: impact of the crisis
ii. The Tax Factor: why it matters
iii. Missing Millions: how much is lost
iv. A silver lining? Exploiting the crisis
i. Background: impact of the crisis
Collapse in development finance■ foreign private capital flows (falling by
more than half) ■ trade (double-digit falls) ■ remittances (slightly more resilient)■ aid (under pressure)
i. Background: impact of the crisis
Economic impact
i. Background: impact of the crisis
Human impact – some estimates■ World Bank: 55 million more people will
live on less than $1.25 a day (LICs to miss MDG1)
■ FAO: world hunger will reach historic high in 2009 with 1,020 million people going hungry every day (growing 11%).
■ World Bank: an extra 30,00-50,000 infant deaths in sub-Saharan Africa
A NOTE – marginal v absolute
[warning – marketing pitch imminent]
Christian Aid has launched Poverty Over – join ushttp://povertyover.christianaid.org.uk
i. Background: impact of the crisis
Conclusion■ Significant human costs of financial crisis
for which developing countries and their citizens bear no responsibility
■ Underlying problem so much larger that we can’t just try to address these immediate costs
■ [role of tax havens in causing the crisis: see The Morning After the Night Before on our website]
ii. The Tax Factor: why it matters
Tax is at the heart of development ■The only sustainable source of revenue
• As vs aid, natural resources?■The key to democratic accountability
• Magna Carta to panel regressions■The underpinning of economic progress
• Level playing fields, the missing middle
iii. Missing Millions: how much is lost
The global picture■ What’s lost■ How
Countries supported by Scottish gov’t■ Estimates of losses■ Wider impact
iii. Missing Millions: how much is lost
Illicit outflows driven by commercial tax evasion:
$300 - $520 billion
Criminal proceeds:$150 – $280 billion
Corruption of public officials: $15-24 billion
Aid: $50 - $80 billion
INFLOWS OUTFLOWS
Christian Aid estimate of tax revenue loss to developing
countries: $160 billion/year
(Death and Taxes, False Profits)
iii. Missing Millions: how much is lost
iii. Missing Millions: how much is lost
Zambia - life without tax“we have empty medicine cabinets.”
Bolivia – tax works!“if we didn’t have our state pension, how would we survive?’
iv. A silver lining? Exploiting the crisis
Obstacles to effective taxation■Domestic: capacity, capacity■ International: opacity, rapacity
Solutions?■Domestic■International
■Corporate transparency■Jurisdictional transparency
A brief window at the G20 Tax information exchange
■ Multilateral, automatic
Corporate reporting■ Country-by-country accounting standard
What’s lacking? ■ You! ■ Political pressure
The Tax Factor
No taxation without representation?Those who pay taxes have a perception of having a
stake in the government, particularly democratic government – so taxation fosters representation
Result 1: Higher tax relative to government expenditures (not to incomes) “tend to make states more democratic” Ross (2004)Result 2: Higher share of direct taxation is key (Mahon 2005) to process of democratisationFull literature: see The Morning After
Tax/GDP ratios: EU-15 SSA
0
5
10
15
20
25
30
35
1970-79 1980-89 1990-99
Direct tax Sales taxTrade tax Other tax
0
5
10
15
20
25
30
35
1970-79 1980-89 1990-99
Direct tax Sales taxTrade tax Other tax
Opportunities for change?
"There's a building in the Cayman Islands that houses supposedly 12,000 US-based corporations. That's either the biggest building in the world or the biggest tax scam in the world."
“we must have a new Bretton Woods - building a new international financial architecture for the years
ahead"