More from Hansard and the debate on tax avoidance yesterday, from Tony Baldry MP:
[I]n none of the briefings that I have been sent have I seen evidence supporting the suggestion that developing countries are losing huge amounts of revenue each year through commercial tax evasion. Not a single article in the Library pack gives any statistics or evidence in support of that suggestion. I am not saying that it is incorrect, but I am bemused. If we are not careful, this will become an article of faith, and the danger of such articles of faith is that they can be used as alibis in other ways.
This was a staggering claim. Thankfully Vince Cable was on hand to address it:
Is the hon. Gentleman aware that he is suggesting that there is a lack of evidence on the subject of revenue loss from tax avoidance in developing countries? Is he aware of the Christian Aid report on death and taxes that seems, on first sight, to be a very serious piece of econometric work? It suggests that somewhere between 10 and 15 per cent. of the revenue of developing countries, and medium and low-income countries, has been lost as a result of systematic manipulation of prices and, therefore, the revenue deriving from them?
Quite so.
And there’s much more besides.Global Financial Integrity have proved this. The OECD have accepted that the link exists, and is as destructive as claim.
In that case this appears to be wilful blindness by the Member in question, indicative of the Tory silence on the whole issue of tax havens.
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There is a lot of tax evasion in developing countries. Take India for instance. Estimates of underground economy range from a minimum of 20% of GDP up to a staggering 50% of GDP. According to Global Financial Integrity’s report “Illicit Financial Flows from Developing Countries: 2002-2006”, of which I am the principal author, illicit outflows from India amounted to between $22.7-$27.3 billion annually during that five-year period; these outflows represent about 3 % of GDP.
It should not be surprising to find illicit outflows from India to amount to just 3% of GDP given that its underground economy is at least 20% of GDP. And the underground economy has its own currency–its called black money in that part of the world. And black money is by its very nature, undeclared–the holder has not paid taxes on them.
Dr. Dev Kar
Lead Economist
Global Financial Integrity
Washington DC 20036