Biased misinformation – the PWC Total Tax Contribution 2007

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PWC have published their second report on what they call "the total tax contribution" of business. I've commented on this before. More than once. It's illiterate in accounting terms. I'll explain why in another post. It's flawed in economic terms. It's biased. And it fails to consider the impact of its findings. Apart from that, it's a profound waste of the World Bank's money.

I offer this in evidence from the executive summary:

The results show that tax reform is widespread. This year 31 countries improved their tax system and 65 have done so over the past three years.
• Reducing corporate income tax was the most popular reform.
• However, many countries have made changes to reduce the compliance burden by simplifying or eliminating other business taxes.
• Total tax rates have been in a downward trend during the period in which Paying Taxes data has been collected.

Since when was it assumed that a cut in tax rates was a reform? Or that it was popular? Or that it was, necessarily, an improvement?

And since when was eliminating tax on business by definition an improvement in the tax system?

And why is a fall in business tax rates necessarily a good thing?

Th reality is this:

The major purpose of the dirty money structure that we in the West have created is the movement of money from poor to rich-out of the hands of the poor, into the hands of the rich; out of the countries where 80 percent of the world's population lives, into the countries where 20 percent of the world's population lives.

That is by Raymond Baker, the world's foremost expert on dirty money flows. The World Bank now uses his data. And let's be clear, of the $500 billion a year that he estimates flows out of developing countries to developed ones the split is as follows:

a) 3% Bribery and related issues

b) One third criminal conduct

c) 65% transfer mispricing and related tax fraud by multinational corporations in pursuit of lower profit.

That figure may be 70%. It may be 60%. That's open to debate. It will remain the majority. But whatever the right percentage is these companies strip the developing world of over $300 billion a year.

Total aid flows are about $100 billion right now.

The tax practices of multinational businesses are costing the developing world three times total aid flows. That's the reality.

And in the UK according to John Hills in his book Inequality and the State the effective rate of tax on the lowest decile of income earners in the UK is 53%. That's the highest rate. The top decile pay 33%, the second lowest rate. That top decile own the businesses PWC is monitoring. A cut in business tax rates is a cut in their effective tax rate. So money flows from poorest to richest within and between countries.

Does either set of unambiguous evidence make business tax cuts right then? Or ethical? Or just? Or desirable? Let alone a cause for celebratory comment? I don't think so.

I want to Make Poverty History.

PWC seem to want to Make Poverty Reality.

It's their choice. And I stress, it is a choice. A moral choice. One they have made. One they must be able to defend. One that must rest on their conscience.

And it's my right to point that out. Because I think their decision unjustifiable.

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