draining development.pdf - Khazar University

278 Draining Development?Table 9.3. Summary Data: Tax Rate on Foreign Source Income,Selected Secrecy Jurisdiction Locations, 2008percentDescriptionRateNotional simple average of corporate tax rates 18.48Corporate tax rate weighted by GDP 20.70Corporate tax rate weighted by population 27.20Source: Author compilation based on data of Jurisdiction Centre (database), OCRA Worldwide,Isle of Man, United Kingdom, http://www.ocra.com/jurisdictions/index.asp; TaxTools and Resources (database), KPMG, Zug, Switzerland, http://www.kpmg.com/Global/en/WhatWeDo/Tax/tax-tools-and-resources/Pages/default.aspx; World DevelopmentIndicators (database), World Bank, Washington, DC, http://data.worldbank.org/data-catalog/world-development-indicators/ (for GDP).the number of jurisdictions based on the notional tax rates of all jurisdictionsthat are not secrecy jurisdictions. Ring-fences increase the numberof jurisdictions offering low tax rates. In combination with theweighted and secrecy jurisdiction data, this understanding adds a newapproach to analyzing these data.The developing-country perspectiveA final dimension to this issue needs to be noted. The KPMG datainclude some transition countries, but few developing countries, andAfrica is, for example, seriously underrepresented. Keen and Mansour(2009) provide some data to correct this omission, although only ingraphical form, as shown in figure 9.3.The statutory corporate income tax rate plot relating to tax rates isrelevant here. Simple averaging of the tax rates in Africa (with all theinherent faults in this process, which is used here, as elsewhere in mosteconomic literature on this issue) shows that corporate income taxrates in Africa fell from 44.0 percent, on average, in 1990 to 33.2 percentin 2005. The rate of 33.2 percent might compare favorably (onlybarely) with the weighted average rate noted above, but it does notcompare well with any other. The reality is that, on the basis of simpleweighted averages, Africa has high corporate tax rates on profits, atleast 5 percent above the KPMG simple weighted average for the sameyear and much higher than the weighted average, including secrecyjurisdictions, in 2008.