Dirty Secrets by Richard Murphy

Author:Richard Murphy
Language: eng
Format: epub
Publisher: Verso Books

CHAPTER 5

The Cost of Tax Havens

According to the Tax Justice Network, the scale of tax abuse is difficult to quantify: ‘Measuring the size of the offshore economy is an exercise in night vision. It is hard to define it; it is fragmented and messy, and it is swathed in secrecy. Official international efforts to measure the various aspects of the phenomenon have been inadequate.’1

As someone who has been involved in the work of the Tax Justice Network, as well as a number of other projects on estimating tax abuse more generally, I have to agree. Precisely because the whole intention of offshore activity is to provide secrecy, those hoping to estimate the costs that offshore impose upon the rest the world are left measuring shadows.

This may also explain why no one attempted any such exercise until 2000. In that year, the UK branch of Oxfam, the international development charity, published what was in hindsight a seminal, if largely unnoticed, report. Entitled ‘Tax Havens: Releasing the Hidden Billions for Poverty Eradication’, this report set out to estimate the cost to developing countries resulting from the abuse of their economies by tax haven–located activity. As was noted in the introduction to the report,

Secrecy, electronic commerce and the growing mobility of capital have left all governments facing problems in revenue collection. The borderline between tax evasion and tax avoidance is becoming increasingly blurred. But at a conservative estimate, tax havens have contributed to revenue losses for developing countries of at least US$50 billion a year. To put this figure in context, it is roughly equivalent to annual aid flows to developing countries. We stress that the estimate is a conservative one. It is derived from the effects of tax competition and the non-payment of tax on flight capital. It does not take into account outright tax evasion, corporate practices such as transfer pricing, or the use of havens to under-report profit.2

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