draining development.pdf - Khazar University

272 Draining Development?3. Whether the jurisdiction was large or small (for these purposes, alarge jurisdiction has a population over 15 million, which splits thedata into two broadly equal parts)4. Whether the jurisdiction had a high or low GDP per head (for thesepurposes, a high GDP is above US$25,000 in 2009, which splits thedata into two roughly equivalent parts)5. Whether or not the jurisdiction had a high proportion of governmentspending in relation to GDP (in this case, 30 percent governmentspending as a proportion of GDP indicates high spending)The categories have been chosen broadly to reflect developed andless-developed nations (the developed nations are the OECD members)and large and small jurisdictions. Categorizing according to a high orlow tax spend also broadly reflects the effectiveness of the tax system inthe jurisdiction because it is likely that those jurisdictions with lowspending had ineffective tax collection systems given that this is commonplacein developing countries.The average data for each year have then been calculated for each ofthese groups. The resulting data set is reproduced in table 9A.2. 8Initial resultsThe initial results are best presented graphically. An overall summary ofthe data is shown in figure 9.1.There is a strong and, in almost all cases, persistent downward trendin nominal corporate tax rates over the period under review. This, however,does not reveal much of the subtlety inherent in what is happening,which greater exploration of the data reveals.First, with regard to the OECD countries (of which the EU15 are aneffective subset), there has been a significant decline in notional ratesthat has seen them converge with the rates offered by the other, non-OECD countries. Rather surprisingly, in 2008, OECD country rates fell,on average (weighted by the number of countries), below the averagerate of non-OECD countries. Given the substantial differential of morethan 6 percentage points in 1997, this is a remarkable change. The playingfield, much talked about in OECD circles over many years, appears tohave been leveled.