draining development.pdf - Khazar University

Accounting for the Missing Billions 279Figure 9.3. Corporate Income Tax, Africa, 1980–2005% of GDP1098765432101980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004CIT Revenue (left axis)CIT Base (left axis)Statutory CIT rate (right axis)50454035302520151050percentSource: Author compilation based on Keen and Mansour (2009) and data of International Bureau for Fiscal Documentationand International Monetary Fund.Note: CIT = corporate income tax. Revenue excludes oil, gas, and mining companies.These findings are important. It is likely that the incentive to avoidtaxes through transfer pricing is based on two considerations. The first isthe differential between the tax rates of the countries through whichownership of the goods might pass as part of the transfer pricing supplychain. The greater the differential in tax rates across jurisdictions in theintragroup supply chain, it may be suggested, the greater the prospectthat a group of companies will profit from transfer mispricing. The secondconsideration likely to feature significantly in the decision processon mispricing is the chance that the activity may take place without discoverywithin the intragroup supply chain. The first issue is consideredhere; the second, in later parts of this chapter.The literature that finds evidence for substantial IFFs relating totransfer mispricing also finds evidence that this process is facilitated bythe existence of secrecy jurisdictions, most or all of which offer no taxationon foreign source income (Baker 2005; Christian Aid 2008; and soon). As the data noted above show, this 0 rate tax offering has, over time,had a slightly diminishing impact as simple weighted average tax rateshave fallen, but, with the rates still hovering at around 27 percent inmany of the measures noted, the differential remains large.