This is a guest blog from Meesha Nehru of the Global Alliance for Tax Justice, which I am pleased to support. Estimates are those of the GATJ:
Growing inequality within and among countries has become a defining issue of our age.
Every week brings another damning report about the harmful consequences of this pervasive problem.
Recently, Credit Suisse reported that one per cent of the world's population possesses nearly half of its wealth. The combined assets of more than 3.5 billion people don't equal what is owned by that elite group. And that's not the whole story. Most estimates of inequality discount money and assets hidden away in secretive offshore locations.
It is the time-worn story of the rich getting ever richer while the poor become even poorer. his is a global crisis with a devastating impact. Inequality is denying populations across the developed and developing world access to the services required to meet their basic needs. This is troubling news not just for human rights now, but also for our collective future. Without adequate financing, we cannot achieve our long-term development goals or begin to face issues such as climate change.
But it doesn't have to be this way. The Global Alliance for Tax Justice works for a world where prosperity is fairly shared. Tax is a powerful tool to achieve that goal. But for people to receive their fair share, everybody has to pay their fair share. This is not happening. Mainly rich individuals and multinational corporations are refusing to contribute to the society that made them wealthy in the first place. They exploit legal loopholes and avoid paying billions in tax.
Each year Africa loses at least $60 billion in revenue because of the current system. That is more than it receives in aid. Yet more is lost in North and Latin America, Europe and Asia.
Just think of the schools that could be built, the healthcare provided and the opportunities that could be generated if democratic governments had access to this cash.
Representing a coming together of people and organisations all over the world, the Global Alliance for Tax Justice aims to end once and for all the damage being caused by such extreme inequality.
We work to:
End financial secrecy
There are some $21-32 trillion in financial assets hidden in offshore secrecy jurisdictions or tax havens as they are more commonly known. As it is hard for governments to trace the ownership of this wealth, it goes largely untaxed, hugely increasing inequality within and between countries. At the same time, current accounting rules allow large corporations to get away with hiding where their true profits are made, meaning any tax avoidance can occur unnoticed. Whilst a movement towards greater transparency has begun, there is still much work to do to shine a light on how money really moves and where it is stashed.
Promote progressive national taxation
Within countries, elected governments have a choice about how to collect tax. They tend to choose a mixture of different taxes, some regressive, some progressive. Regressive taxes hit the poorest hardest, significantly reducing their total income relative to the impact it has on wealthier individuals. Examples of these include flat rate taxes or indirect taxes such as VAT. On the other hand, progressive taxes increase on those with more ability to pay, thus helping to share out some of the wealth accumulated at the top so that the whole of society benefits.
Create a fairer global system
In a highly globalised world dominated by large multinational corporations, it is essential to ensure that taxes are paid where the true economic activity occurs. Under current global rules, this is often not the case, and companies are able to shift profits around the globe to places where they will be taxed less. This has a particularly devastating impact on developing countries. To combat the problem, we need to develop a new set of rules and to ensure that all countries' voices are heard during the process.
The Global Alliance believes that tax justice has to be a central part of any inequality-focused agenda. In 2015, we will be working on this issue via our global campaign to make multinationals pay their fair share. We urge all others working on inequality to sign up, and help us to take forward the discussion of how tax justice can support social justice for all.
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Recently wrote this on my blog:
When the austerity measures began in 2010, political commentators of all persuasions were surprised by the ratio of cuts to tax being in the region of 80:20, and Miliband needs to have the courage to say that his party will change it dramatically. Rawnsley mentioned some of the obvious ways a future Labour government would “raise extra revenues from tax rises targeted at the wealthy”, but there is intellectual and economic support for more. Piketty has shown the Laffer curve to be economic nonsense, and recommends that high-earners in the United States should pay 80% tax, so Labour has the ready-made theoretical justification for an all-out attack on inequality. Even the IMF has admitted the rich in Britain can afford to pay more! Labour has already unveiled plans for a 10% starting tax, and could develop this further with a sliding scale for income tax, so that by the time earnings reached between £65K and £150K the rate would be 45%. From £150K to £200K, it would rise to 50%, increasing incrementally, and stopping at 80%. Would that appear unreasonable to the majority of people in this country, where the number of food banks has increased exponentially under this government, and where average earnings are around £26K, an amount earned in two and a half days by the FTSE 100 bosses? Working full time on the current minimum wage yields the disgraceful annual gross income of around £13000. Parties which do not pledge to change drastically this situation, in the 7th richest country in the world, do not deserve anyone`s vote!
A 50% income tax on those earning £100,000 and a 60% income tax on those earning £300,000 would be more like it.
I’d think the first thing to do is remove the powers of banks to create money from nowhere and supply it to us at interest. Increasing amounts of the wealth we generate get given to them under this system, instead of staying within and enriching the communities which create it. What you’re talking about is letting this continue but redressing that imbalance by taxing money back to the people. Better surely to replace the system which makes such taxation necessary in the first place.
I was literally astounded when a terrestrial main UK news channel news item on the Credit Suisse focused much on the ‘good news! This ‘good news’ was supposedly that Britain had got so much more wealthy. The harsh reality of the top 1% was a latter add-on to the piece =- and the health and wellbeing costs of this ever more contracted material wealth focus was disregarded entirely.
That incident reminded me of the arguments of the inestimable Danny Dorling. In his her details how it is not just the system and the structure of things like taxation that generates and embeds inequality – it’s also those fellow-travelllers in the world of academia, public services the media and even the public sector who actually ‘buy’ the elitism-is-good argument of those at the very top.
As to whether Labour is the party to change any of this, I have real reservations. During the Scottish Independence Referendum campaign some enabled heads ran a twitter hashtag #LaourLords. That, incidental but telling, item alone raises questions about Labour’s claim to be about delivering fundamental change in our UK society of inequality.
Meesha
I agree with you that effective and progressive taxation systems are critical for development. And I agree that we in richer countries have a responsibility through our own tax systems & treaties, the pressure we can put on multinational corporations and through aid, to support, and not undermine developing country’s tax collection systems.
But I think that the tax justice movement is in danger of falling into the trap of thinking ‘its is all about us’, and getting fixated on multinational corporations rather than starting from a serious analysis of the tax situation of developing country and their priorities.
Discussions on tax and development are often underpinned by large headline numbers which give the impression that there is a huge pot of development gold (‘more than they receive in aid’ etc…) associated with tax avoidance by multinational companies in developing countries.
When you look closely at these figures they turn out to be a combination of misunderstanding, misleading presentation or just plain nonsense (I have written about them here: http://hiyamaya.wordpress.com/2014/10/14/corporate-tax-and-development-opening-pandoras-box/ )
Your figure that ‘each year Africa loses $60 billion in revenue’ was one that got away.
I think it comes from the report Honest Accounts which came out earlier this year, right? (http://www.healthpovertyaction.org/wp-content/uploads/downloads/2014/08/Honest-Accounts-report-web-FINAL.pdf
http://www.taxjustice.net/2014/07/16/honest-accounts-true-story-africas-billion-dollar-losses/))
The $60 billion figure which has been used as a headline is a bit random – it is the sum of two estimates – one for illicit flows ($35.3 billion, from Boyce & Ndikumana) and the other for climate change mitigation costs ($26 billion, from the African Development Bank).
These numbers, both together and seperately:
– Are not an estimated revenue loss to government
– Are not an estimate of tax avoidance or evasion
– Are not specifically related to multinational companies
You may as well have just made up a random large number. Imagining that this number can then be translated into education and healthcare spending is fanciful
I remain shocked at the lack of serious analysis given to this topic – this report was signed off by 13 organisations, including TJN!
For NGOs to be a credible and useful voice in global tax reform (and I really think they should be) you have to find a way to get beyond these implausible numbers.
Maya
I think you ignore some fact
First we have begun to change the world with these numbers. That’s a fact
Second, I have shown a loss of $160bn from developing countries is plausible ( which is not the same as it happens) in work for the World Bank
Third, that there are losses is undeniable
Fourth, estimates are by definition wrong
Fifth, if you’re shocked there is no serious analysis of this issue then your focus of criticism is wholly inappropriate. It is only because NGOs looked at this issue we even know it exists – which is undeniable. With research budgets of tiny proprtion we have proved that and the real issue is why has no one else come into the space. Why isn’t that your question instead of saying we have got it wrong?
Sixth, the evidence is that when other bodies begin to look at these issues they tend to find our scales of magnitude plausible e.g. official estimates of offshore funds have risen steadily towards ours. But there will always be ranges.
Now all this being said there is no readon to confuse illicit flows with tax losses and I will candidly say I now have real doubts about some past estimates. I simply do not think there is reinvoicing on the scale GFI suggest and enhanced data shows that some work by Simon Pak likely overstated things, but that’s what a learning process involves.
So I share your desire to enhance research, but am not sure your approach is very helpful right now.
Happy to discuss though
Richard
Hello Richard,
I accept all of the facts you state. Still I think that the extent to which clearly misunderstood, overstated and outright nonsensical numbers are used (and ignored) within the tax justice and transparency movement is worrying.
Tax is a hugely technical subject, and it is not obvious what the right policies are. So, as a non-expert I have to trust that you and your colleagues are advocating policies that are well-considered on the basis of the facts and uncertainties.
Of course there are political differences and differences of opinion as well as divergent vested interests, but it seems to me that the best way to mediate between these is on the basis of the clearest possible understanding of the evidence.
When I see basic mistakes and misunderstandings being repeated it is hard to be confident that behind closed doors the evidence is being treated robustly.
(I would say the same of a group of, say, medical charities with an aim that I broadly agree with, if they played fast and loose with presenting data to the public)
I know that research budgets are limited and all estimates are uncertain, but this is no excuse for an organisation adding two completely unrelated numbers and presenting them as an estimate of something else entirely (as GATJ do here). Basic peer review with a wider group of experts would eliminate these kinds of gaffs with little expense.
The common practice of generating a large estimate of potential tax gains related mainly to fast growing emerging economies and applying this number to the financial needs of much poorer countries, is not the uncertainty of estimation, but is pure spin.
To me it is shocking and unethical.If there is one thing I expect of development organisations it is that they should be robust in what they say about poor people and poor countries, and not misrepresent the potential impacts of a policy on those with the least voice in order to win some other battle.
I am saddened that you say it is ‘unhelpful’ to question these numbers when such stark mistakes are being made, repeated, and not challenged.
When a transparency movement tells people not to worry their pretty heads with looking at the data something is wrong.
Maya
I am sorry: I do not think people are deliberately mis-stating numbers and I think you are simply wrong to say so.
I have already noted better estimates are needed.
I wholly agree with that suggestion, although I have not noted your trying to do anything in this area even though you have presumably been aware of it for a decade and could have intervened at any time with about the same budget available to you as us (i.e. not a lot)
And yes, very clearly methodologies used some time ago could and should now be revised, and wisely so. I do exactly that (and then get shot for it, but that’s another issue – and if you honestly think referencing Worstall will ever help your case on such matters you really are wrong – there is not a serious commentator in the world who takes him seriously, so why you are defeats me).
But what I took exception to the fact that you suggest there us something unethical here. I also strongly object to your suggestion of sexism. I am not aware of either being true.
The fact is that because no one else would address this issue a very small number of us had to do so using shoe string budgets and against the outright hostility of most academics. Yes, some estimates will have been wrong (all estimates are wrong, be definition). But to start throwing allegations of unethical behaviour and what appears to be sexism is, as I said, wholly unhelpful and candidly unbecoming.
Alex Cobham responded very favourably to your comments and so have I to their substance, but to say your tone is unhelpful remains totally fair and appropriate comment.
If we can restart the debate using a more appropriate tone it would help. And if you want to suggest how you would do the work, please let me know. I’d be happy to share it, and even comment, positively
Richard
Dear Richard
I really did not mean to imply any sexism on your part.
Nor do I want to become involved in the personal animosity between you and Worstall. I do not know either of you, and I am not out to cause offence. Please do note I have not referenced him at all in looking at these numbers. What I have referenced are the reports in question themselves, and their source material; and this is what I think needs to be talked about.
I think it is good news that the issue of tax has become more prominent in international development in no small part thanks to the efforts of the NGOs including yourself.
Nevertheless there is a problem with the treatment of evidence in this area, which I believe should not continue to go unaddressed – both because of the principle that truth matters, and because it is a barrier to learning, collaboration and sound policy development. I have laid out my concerns about this on my blog in what i hope is a constructive and clear manner. It is open for comments and responses (as well as offline discussions).
None of the estimates and claims it covers come from you, and I understand that you have stepped back from working on the international development related campaigns. I was however pleased when, as one of the longstanding opinion formers of the Tax Justice Movement, you said via twitter that the piece was good, and that we have to acknowledge and reconsider implausible estimates.
I really don’t want to argue with you about Worstall, sexism or tone.What I want to talk about is data and organisations and responsibility:
Organisations that work in the public interest have a responsibility to be clear and robust with the data they present. They are not doing that in this area, and this is a problem that is systemic and ongoing (whether intentional or not) — I say this as someone who wants the NGO community to continue to play a productive ongoing role on this issue.
I actually came on here to respond to Meesha Nehru of the Global Tax Justice Alliance about their $60 tax avoidance in Africa statement (NB not related to Christian Aid’s $160 billion) and I do hope she responds on that. There are two many zombie facts going around already.
OK, thanks, and let’s move on
We agree there is a need for new data
And I also would agree that old data that is now questionable because of increased understanding should be dropped from use now
I also suggest being open about methodology, which I do. It’s hassle but it should increase rigour
Richard, Maya is one of the few people who is looking in some detail and with rigour at the way the oft-quoted figures have been put together who cannot possibly be tagged (even wrongly) as an apologist for the world of big business. She has, both above and in her blog, given a forensic analysis, to which you have replied with generalities.
You seem to be taking the same line as Christian Aid does for still repeating the $160 bn figure – we know there is a loss and it is significant, this figure has been very useful for getting people to concentrate on the issue, so we’re going to go on using it even though the methodology has been comprehensively debunked (for new readers, one of the reports that came to this figure uses an out of date, not very relevant, and non-quantitatively researched guesstimate, the other misuses the US “safe harbour” transfer pricing model in a way which will inevitably categorise 25% of ordinary price movement as transfer mispricing).
Instead, can I commend to you the approach Alex Cobham (that well-known neo-liberal running dog lackey of the ruling classes…) took when Maya critiqued his work, which was to take it seriously, look at the analysis point by point, and recognise where his research needed more work:
http://international.cgdev.org/blog/how-much-are-developing-countries-losing-commodity-mispricing-really
Mike
I plan a more detailed reply to this, but do think your comment disproportionate.
First, I have said I think some estimates need revisiting
Second, I said $160 bn was in a plausible range, not right – and the World Bank did peer review that finding, for the record
Third, I have said Simon Pak’s work may have overstated estimates (albeit inadvertently, but I now think they could be improved) but whatever you do Mike don’t go into statistics because I think you will find your own interpretation of this includes a massive error based on a totally flawed assumption of how inter-quartile ranges worked in this case (the range related to prices, not volume of transactions (as I recall, but correct me if I’m wrong)) so your conclusion is very much further wide of the mark of anything anyone has ever estimated – somewhat undermining the authoritative tone you’re adopting.
Fourth, I have clearly shown my own willingness to go back and revise and improve my own work and would always encourage others to do the same
Fifth, my comment about tone is important: this is an area where studies were completely unknown and data was incredibly hard to secure when a number of us began to work on this issue. To suggest there was something immoral about the approaches used is what I have taken exception to, and will continue to do, especially when no alternative methodology has been offered as yet. It’s that particular aspect that I considered unhelpful, but I also happen to think the call to update these numbers is appropriate and as someone who has done no real work on them since about 2010 I am a little surprised that so many early days figures are still in circulation (but also know how hard it is to get funding for work of this sort)(and also know my 2008 tax avoidance data for the UK is still used by many – and that it is also well out of date).
In summary then, your suggestion that I am defending the $160bn number for the sake of it is just wrong – because if you’d only properly read my comments you’d have seen that I was not doing so.
Maybe I should not have accepted this paper without reworking every number, but I made clear it was a guest blog and I did not do that. Please accept my apologies, but I think you need to make sure of your own facts too, and have been too willing on occasion to jump your own gun based on a little knowledge – as you are here with regard to Simon Pak’s work, I think
You’re right that I didn’t give enough weight to your comments at the end about Pak’s work, and that is very welcome. I did feel that Maya had posted specifics which you had responded to in generalities, but had I posted my comment after the whole of your exchange rather than the first round I would probably have written differently.
And I have to admit that there was probably a bit of transference going on, because I was at the same time talking on email with Christian Aid about the inclusion, yet again, of the $160 bn figure in a press release about a theological paper saying there was a moral duty ion companies to pay more tax than the legal minimum. A fortiori, there must be a moral duty on faith-based charities in particular not to practice the black arts of PR by playing fast and loose with the figures. Although Christian Aid now have an explanation on their website of why they continue to use the figure, it makes reference to the controversy over the methodology, but never explains the specific criticisms behind it:
http://www.christianaid.org.uk/pressoffice/pressreleases/comment/the-price-of-tax-dodging-in-the-developing-world.aspx
I understand Christian Aid intend to continue using the $160 bn figure, albeit with some minor acknowledgement of the dispute. Unless they are prepared to defend the specific criticisms of the methodology, that seems to me to be fundamentally unethical.
One way to justify the estimate may well be to show why the criticism is wrong, and I am certainly no statistician so I may well have made an error. I’d be interested in “further and better particulars”… But I think it is indisputable that using an interquartile range to determine whether transfers have been mispriced will always throw up false positives if the price has moved. My recollection is that the simple comparison I did (which I agree was back of an envelope stuff) gave a credible justification for saying that the supposed large increase in transfer mispricing on oil from one year to the next was primarily due to a much more volatile oil price in that year. But I’d be interested to go back and look at that if you think I was wrong.
“But to start throwing allegations of unethical behaviour and what appears to be sexism”
Sorry, where was the allegation of sexism? Did I miss that?
I definitely did not suggest anyone should not worry their ‘pretty head’ and I really doubt anyone else did either and felt the suggestion quite inappropriate
“First we have begun to change the world with these numbers. That’s a fact”
So it’s acceptable to use made up numbers if they “change the world”?
No one ever made up a number
It has been realised they could be improved
That, if you’re not aware of it, is how knowledge advances
Hi Richard,
Yes I agree there is a need for new data. But also more robustness in the way that existing and new data is used and communicated.
I think the $160billion estimate was fair enough as an initial guesstimate on an issue few were talking about at the time, and I agree we need to learn and advance knowledge iteratively.
But the issue is not just about old data which now needs to be mothballed in light of newer understanding. Meesha’s $60 billion is based on a report that came out in July this year. ONE’s 3.6 million deaths that could be averted estimate came out about a month ago. The Swissploitation report and Oxfam’s Business Among Friends report came out last year.
I think the mistakes I mention are made because people believe that ”developing countries lose more than three times more money to tax havens than they receive in aid’ (or some other multiple) is meaningful in a real sense, as it has been used as the justification for policy and therefore that it must be true at the continent level (Africa…) and at the level of economic groupings (the poorest countries…) and individual countries.
So serious attempts at estimates which don’t fit with this narrative don’t get much attention – e.g. GFI looked at Ghana, Kenya, Mozambique and Tanzania and Uganda and estimated tax revenue losses of around $1.5 billion a year related to trade misinvoicing (http://www.gfintegrity.org/press-release/african-countries-lose-billions-through-misinvoiced-trade/ ) – that is around 4% of aid received (http://www.openaiddata.org/recipient_countries/)
Constructively (and cheaply) peer review of reports by a more diverse group of experts would help.
Fair comment
And the reality is there are not enough good economists in aid agencies
I have already expressed my concerns with the GFI data. In 2008 I bought it. I am not zone in just not believing there is enough non intra-group trade to support this now and re-invoicing does not happen in groups. So I now really doubt the approach as a result, but it is an IMF recognised technique, perversely
Thanks Richard.
I agree more good economic research is always needed!
But I don’t think that lack of good economists (or the financial realities of limited organisational budgets) has been the problem here. The issues with the data that I’ve found are not complex economic ones but quite basic (otherwise I wouldn’t have been able to find them!)
For example looking at the $160 bn estimate, my rough calculation is that the amount relating to a low income country like Kenya is equivalent to maybe 20% of the value of international aid- but averaging this together with countries like Malaysia and China that gives the headline figure of ‘1 and a half times aid’ or ‘3 times aid’ which gives an inflated idea of the development impacts…. as we know even the OECD has run with this figure, and they have no lack of highly paid economists!
I think the problem has been the assumption that it doesn’t matter if the figures are a bit off if they support the greater good, ‘3 times aid’ is a much more compelling figure than 20% of aid. I think we should be careful of this – the history of outside observers viewing Africa as a canvas for painting our own perceptions and prejudices on is not a good one, so what little data there is on tax avoidance should be used carefully.
I do recognise that this is not ‘your problem’ personally (or your figure in this case). I think is an issue of organisational accountability and learning for the organisations working on this, including through the GATJ. Is Meesha going to come back and comment, or make a correction on the $60 billion?
I think you are simplifying
From experience data is not easy to find or use and what is now available wasn’t only a little while ago
And I still think you are implying wilful unethical behaviour and I think that is profoundly and deeply unethical of you – because I am well aware I have never encountered this
Debate on this basis is simply not possible. I am not surprised if Meesha chooses not to respond. When you learn to engage on a basis that does not start from an assumption that those you are dealing with are inherently corrupt you might make more progress. Right now you simply seem intent on alienating people and that is a great shame and a matter of regret as you clearly have something useful to say, but won’t be heard if you continue in this way.
Sorry Richard I don’t think it works like that.
Meesha made the statement that governments in Africa lose$60 billion a year through rich individuals and MNCs exploiting legal loopholes…. more than it receives in aid etc…
I agree that loopholes should be closed & MNCs should pay taxes, and we all agree that more and better data is needed (i.e. these numbers matter)
I think this figure is a simple mistake made in good faith (but part of pattern in which I think that these mistakes are made too often and corrected too infrequently). And I have said where I think the mistake comes from (a misreading of the climate change mitigation & illicit flows figures in the Honest Accounts report).
I may be wrong and Meesha’s figure may be a real estimate from somewhere else (in which case it suggests a significantly larger scale than for example Action Aid’s recent serious $104 billion estimate of the developing country tax gap http://www.actionaid.org.uk/sites/default/files/doc_lib/post_2015_-_tax.pdf, and i would be interested to understand the basis )
Or it is a mistake, which suggests that GATJ’s understanding of the issue could be improved here.
Either way choosing not to clarify the point just leaves another zombie number out there.
Let me be clear: you have quoted a report about which I have reservations, which is why I had never referred to it. So I re-read itand then wrote to ActionAid for details of how they got to their tax gap, which they invited enquirers to do
Unfortunately the response was they were no longer sure as the people who did the work had left. They did, however, know that the four countries on which the corporation tax gap was based were the US, UK, Sweden and Mexico, and that it involved taking total tax gap figures from these countries, then estimating a corporate tax gap using some ratio of corporate tax receipts and corporate tax rates for Africa.
There are major problems with that methodology. First none of these countries do tax gaps well and the UK does it very badly indeed.
Second, there is no reason to think the error rate in these countries will be the same as an under-resourced developing country.
Third, rates in developing countries tend to be notional due to negotiated reliefs.
Fourth, rates of incorporation are lower in these countries by and large
But, fifth, the openness may be higher.
Sixth, I see no reason for considering the CT gap alone. On many developing countries any such gap will be intimately linked to a tariff or royalty gap as well/ Why consider one and not the other?
Seventh, even in developing countries CT is only about 20% of receipts. Illicit flows may be more heavily related to income tax, by far, which can be tackled with automatic information exchange.
Eighth, assuming that a tax gap can be closed is just wrong and yet AA do that. I think any estimate of reduction above 30% from a starting start has to be optimistic
You’re by now realising that I think this estimate is seriously flawed and may be both widely under and over-estimated because of failure to link tax inter-actions and failure to understand how tax admin can work. That’s not criticism. There just are only a tiny number of people working on this issue who have worked across taxes, tax systems, accountancy and economics plus the political economy of this issue.
AA have acted in good faith. I do not place much credibility on their estimate, but you did. Overall I think it likely to be far too low, but that’s because they should not have looked at CT alone – because tax systems just don’t work in that siloed way
So where does that leave us?
Simply with people doing their best, as I have said.
That’s fair; it’s all they can do
And it leaves us with estimates, which is all we will ever get
So is there still a problem? Of course there is
And who is best able to assess it? I’d argue TJN is (because most recognise it has greatest expertise across disciplines), but it needs new money to do it. Any suggestions as to where to go?
Hi Richard (and Meesha)
Thank-you again for responding. I really do appreciate the time you are taking, and your helpful points on Action Aid’s $104 billion estimate (I did not know any of this)
I will respond in two parts, because I don’t want to muddy the waters.
My primary question on responding to Meesha’s guest blog here was about where the $60 billion tax avoidance estimate for Africa comes from – is it a new estimate, is there a reference, or is it a misreading of Honest Accounts?
This question still stands.
You do not know, and that is fair enough, but I think Meesha has a responsibility to respond (…Meesha are you out there?…)
Hi Richard (part 2)
Thanks for your points on the ActionAid report. I also wrote to them for details of their tax gap calculations (which the report said were available ‘on request’) – my email did not even get a reply.
I had some similar thoughts to you on the estimate, and wondered why the methodology and data was not published, and why no experts seemed to think it was worth commenting on or examining (I had not noticed that TJN did not sign on to the IF Campaign).
I do think it is a problem (and the problem is not lack of money) that these kinds of technical questions are not discussed or made clear. Yes I am sure the estimate was made in good faith too, but it illustrates several organisational habits and community norms which contribute to confusion and prevent learning:
-the habit of not publishing enough methodological details for anyone to judge or understand the assumptions behind an estimate
-the habit of not publishing the underlying data and calculations, and of not even retaining them internally, so that if a staff member leaves all that information and knowledge is lost.
-the habit of not peer reviewing with a wide group
-the community norm that those who subsequently read the estimate and have concerns and questions do not write them up and share them publicly
-the habit of assuming that anyone who does question them publicly must be a ringer for Big Tax Avoidance
-the habit of dismissing technical criticisms from those of an opposing political persuasion out of hand.
This is in part a reflection of tension between the ideal culture of research where no idea is sacred and evidence is paramount, and the ideal culture of the battleground where allegiance to the group trumps ideas, and loyalty trumps evidence. To be effective NGOs need to find a tread a difficult line between the two.
Solving these problems would not be expensive, it requires a recognition of the problem, the will to do it and the challenging of some group norms. None of it requires fancy publishing costs (Blogs, google spreadsheets etc.. make sharing this data virtually free, and can be used to invite comments etc…). I don’t think we can just shrug our shoulders anymore and say it is fair enough not to do these things (CGD has a good policy: http://www.cgdev.org/blog/cgds-new-data-code-transparency-policy )
Being more open to testing and understanding the basis of these assumptions would not have to be combative or break up into the People’s Front of Judea, it would raise the quality of research and engagement, and would mobilise more pro-bono expertise than is possible with a closed-research approach and an attack/defence stance.
As to new funders, the Transparency and Accountability Initiative [declaration: i’ve done work for these folks] which includes a number of funders that are already funding work on transparency of public budgets, aid, natural resource governance and policy making and are looking to provide new funds to advance knowledge and action on tax and development http://www.transparency-initiative.org/reports/upcoming-report-launch-tax-and-development-a-scoping-study-of-funding-opportunities
Perhaps even more importantly than whatever funds they might provide is that they are committed to an approach based on transparency, openness and learning and I hope will contribute some of this culture and discipline to this area.
I agree on publising data etc
I do try to always do just that
It makes for long reports – and people say no one reads them
Candidly that is not an excuse: a good exec summary overcomes that
I have been asked to post this comment by Natalie Sharples from Health Policy Action who prepared the report making the $60 billion estimate:
Dear Maya,
I’ve just been alerted to your comments here, so my response is somewhat late. I‘m one of the authors of the Honest Accounts report whose figures you critique. I would like to clarify a couple of points, as your concerns about the $60 billion are based on a misreading of the report.
The $60 billion figure is not a combination of illicit flows and climate mitigation. It is the net figure from 10 different outflows and 9 inflows to sub- Saharan Africa. Those are summarised in the executive summary, and the full table detailed on p 32-34 of the report.
To address your other point of concern, we don’t claim that the figures are estimates of tax avoidance or evasion specifically related to multinational companies. In the section of the report dealing with IFFs we note the GFI estimate that 60-65% of IFFs are profits of commercial tax evasion. The report deals with a wide range of resource flows to and from to sub-Saharan Africa, tax is just one of them.
Your critique is based on a misreading of the report.
Best
Natalie