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BEYOND ‘THE BIG NUMBERS’ ON TAX, ILLICIT FLOWS & CORRUPTION MAYA FORSTATER VISITING FELLOW, CENTER FOR GLOBAL DEVELOPMENT PRESEENTATION AT CMI, BERGEN NOVEMBER 2016
PUBLIC UNDERSTANDING MATTERS
THE BIG PICTURE
INDIVIDUAL CASES
“Only after journalists and
NGOS told the story of BEPS in ways
that were understandable by people other than tax specialists did
sufficient public interest arise to motivate action.”
Michael Durst,
former Director, IRS APA Program
“Transparency in public contracting not only permits citizens to know where their dollars are being spent, it also makes good business sense.”
Michael
Bloomberg, Former Mayor New York City
“What
everyone knows”
Campaigns, media
What the experts know
What is inaccessible or secret
WHAT ‘EVERYONE KNOWS’… HUGE AMOUNTS
BIG PICTURE
INDIV. CASES
A USEFUL BASIC FRAMEWORK? THE PANAMA FILLING CABINETS
INDIVIDUALS & THEIR CORPORATE
VEHICLES
MULTINATIONAL CORPORATIONS
(PLCs/ SOEs)
https://hiyamaya.wordpress.com/2016/04/20/the-panama-filing-cabinets/
SECRETS & LIES
LEGITIMATE BUT COMPLEX
Tax evasion Corruption Fraud
Collective investment vehicles Tax planning Offshore for security
Corporate corruption Sanctions busting
Tax planning Negotiation of contracts/ concessions
BEPS
https://hiyamaya.wordpress.com/2016/04/20/the-panama-filing-cabinets/
INDIVIDUALS & THEIR CORPORATE
VEHICLES
MULTINATIONAL CORPORATIONS
(PLCs/ SOEs)
SECRETS & LIES = ILLICIT FLOWS
LEGITIMATE BUT COMPLEX
James Ibori Arlette Ricci
David Cameron’s Dad
Petrobras BNP Paribas
Amazon/Google/Starbucks SABMiller Tullow/Heritage Paladin
‘TAX & ILLICIT FLOWS’: UNPACKING THE ISSUES
CORPORATE TAX: WHAT THE EXPERTS KNOW
Tax as a % of GDP
0
5
10
15
20
25
30
35
Internationaltradetaxes
Taxesongoodsandservices
Corporateincometax
Personalincometax
Estimates of corporate profit shifting in the $100-200 bn range for developing countries
ILLICIT FLOWS: WHAT THE EXPERTS KNOW
“illicit financial flows”
Motivations Proceeds of crime
Proceeds of corruption Tax evasion
Bribery Financing of terrorism and conflict
Sanctions busting Evading capital controls
Means Bank-transfers
Money transfer services Cash carried across borders Transfers of financial assets
Transfer of property Informal IOUs/ Halawa
Payments using cryptocurrencies
Ordinary international
transfers
Domestic financial flows linked to illegal activities
Secrecy, deceit, abuse of power
Money crossing borders
Aggregating IFFs makes for great headlines, but understanding them depends on disaggregation
MIND THE GAP!
“What
everyone knows”
What the experts know
What is inaccessible or secret
SOURCES OF CONFUSION
‘DEVELOPING COUNTRIES’ =/= ‘AFRICA’
$100 billion is not as much as it sounds… $20 per person per year
‘MISINVOICING’ =/= MNC TAX AVOIDANCE
Thabo Mbeki on the UNECA High Level Panel on Illicit Financial Flows
972.98
50p
RED HERRINGS IN THE TRADE DATA
50/kg
In 2007 over 60 million refrigerator-freezer units were imported from China at a cost of under 50p each. This resulted in €8.08 billion (£5.53bn) being shifted out of China
South Africa – UK (US$mn) Zambia- Italy (US$mn)
Authors calculation, based on DOTS and COMTRADE with 10% CIF/FOB allowance
0
50
100
150
200
250
300
2001 2003 2005 2007 2009 2011 2013
DOTS 'misinvoicing' Copper only
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2001 2003 2005 2007 2009 2011 2013
DOTS 'misinvoicing' Gold only
GAPS IN THE TRADE DATA =/= “MISINVOICING”
INDIVIDUAL CASES RAISE EXPECTATIONS
“$404 million is considerably more than the government of Uganda’s entire annual health budget.”
“Zambia’s government estimates that it is losing $2bn annually as a result of tax avoidance and transfer pricing by foreign companies on its turf – equivalent to 10 per cent of gross domestic product.”
KAYELEKERA MINE, MALAWI - PALADIN
2013 - Norwegian Church Aid 2013 - Afrodad 2015 – Action Aid
The mine is currently on care and maintenance as uneconomic to operate
Reports and responses: http://www.paladinenergy.com.au/
GoM gets a 15% carried interest + infrastructure projects • Corporate tax rate reduced
from 30% to 27.5%. • Resource rent tax of 10%
reduced to zero. • Reduced royalty rate from
5% to 1.5% (years 1-3) and 3% (years 3 plus).
• No import VAT (17.5%) or import duty
• Accelerated depreciation • Debt: equity ratio of 80:20. • Stability period of 10 years
Key question: Is that a reasonable deal?
DON’T WORRY AS LONG AS THE SHAMPOO WORKS?
REALLY?
Civil society
Academia
Practitioners Policy makers
FROM OPEN DATA TO OPEN KNOWLEDGE
“What
everyone knows”
Campaigners, media
What the experts know
What is inaccessible or secret
Media
“Mor
e da
ta!”
“More Understanding”
What do we know? What do we need to learn? What can we teach each other?
