draining development.pdf - Khazar University

350 Draining Development?that underpinned the crisis, a successful and sensible attempt to quantifythe role of tax havens is difficult to imagine. Yet, without such a quantification,a credible estimate of the cost of tax havens to developing countriesthrough increased systemic financial risk is also unlikely. It does notfollow, however, that this channel of impact should be ignored.Tax systemsThe most high-profile and clearly quantified claims made about thedamage done by tax havens to developing countries relate to theundermining of tax systems, both in the ability of these systems todeliver the revenues needed for the provision of public services and forgrowth-enhancing investment in, for example, infrastructure andhigh-quality administration and in their ability to meet social preferencesfor redistribution.The importance of tax systems for development is becoming morewidely recognized in policy-making circles, although much remainsto be done. Ultimately, tax can make a great contribution to the fourRs: most obviously, revenues and redistribution, but also the repricingof economic and social “bads” and political representation (Cobham2005b; on the important links between taxation and governance, seeBräutigam, Fjeldstad, and Moore 2008).There are multiple reasons why tax systems in developing countriesfail to deliver these contributions, as follows:• A damaging tax consensus pushed by donors and the IMF, in particular(Heady 2004; Cobham 2007)• Lack of capacity in domestic tax administrations• Lack of engagement by civil society to hold governments to accountfor tax policies and practices• The opacity of corporate accounting (on the scale of profit shiftingwithin Europe, see Huizinga and Laeven 2008; on the scale of trademispricing and revenue losses in the developing world, see ChristianAid 2009; on a key policy option, see Richard Murphy’s contribution,chapter 9, to this volume)• The opacity of secrecy jurisdictions in facilitating profit shifting,but also in facilitating the underdeclaration of income or assets byindividuals 13