draining development.pdf - Khazar University

338 Draining Development?AbstractOnly limited research has been carried out on the links between taxhavens and developing countries. This chapter provides a brief, criticalsurvey of the state of knowledge on the impact of tax havens on developmentand then uses existing data to extend that knowledge by examiningbilateral trade and financial flows between havens and developing countriesto identify the exposure of developing countries of different types.Three key results emerge. First, the chapter shows that the exposure ofdeveloping countries to tax havens is on a par with, if not more severethan, that of high-income countries of the Organisation for EconomicCo-operation and Development (OECD). This supports efforts toensure that developing countries benefit from initiatives to requiregreater transparency, particularly in terms of international tax cooperation.Second, the differences in developing-country exposure across differentincome groups of countries and regions are substantial, and recognitionof this must lead to more detailed and careful study and, overtime, appropriate policy responses. Finally, the research has been repeatedlyblocked by a lack of high-quality, internationally comparable data.An agenda for research and for data collation and dissemination is proposedthat would allow greater certainty of the scale of the impact of taxhavens on development.IntroductionIn the wake of the financial crisis, a consensus emerged that internationalmeasures were required to limit the damage caused by tax havensecrecy and that developing countries must be included to ensure thatthese countries also benefit.Research demonstrating the damage caused by havens, especially todeveloping countries, remains limited, however. If international policyefforts are to be well directed and, ultimately, to be effective in removingobstacles to development, then further work is needed. It is regrettable thatpolicy research at multilateral institutions has almost completely neglectedthese issues until now. The research that has been carried out, at least untilrecently, when these issues began moving rapidly up the policy agenda, haslargely been conducted by academics and civil society researchers.