draining development.pdf - Khazar University

352 Draining Development?opacity shields both the likely motivations and the actual portfoliochoices of those holding assets in secrecy jurisdictions. Criticisms of thisnature have not, however, been made, in general, by scholars offeringsuperior alternative approaches.The second major criticism of these approaches is that no reasonablecounterfactual is put forward. Imagine, for example, that there are twomain channels for illicitly reducing tax liabilities in developing countries.If the second is, say, 95 percent as effective as the first, then shuttingdown the first is likely to yield only a small revenue benefit. In a worldwith multiple channels of illicitly reducing tax liabilities, it is unrealisticto expect a definition of an appropriate counterfactual to estimate thebenefit of closing down any particular channel. In effect, however, thiscriticism applies not to the quantification approaches, but to a popularinterpretation that the resulting estimates represent readily availablerevenues.In addition, such assessments of the impact of secrecy jurisdictionsdo not do justice to the impact on tax compliance more broadly. Theexperimental economics literature strongly suggests that compliance isheavily influenced by the perceptions of the compliance of others, sothat high-profile noncompliance—fueling, for example, the perceptionthat all rich citizens or multinational companies are hiding their incomesand profits in havens—is likely to have substantial multiplier effects oncompliance and revenue throughout a whole economy and over the longterm, given how slowly compliance is observed to shift in practice (Boscoand Mittone 1997; Mittone 2006).While refinements in these approaches can be envisaged, the key contributionof the literature on revenue losses has been to establish thatthere exists an obstacle to the development of sufficient scale in estimatesto warrant serious attention from civil society and from policymakers. It is not immediately clear at this stage what additional valuecould be offered to the policy debate by alternative estimates of globalscale; more nuanced work, as suggested in the sections below, may bemore valuable now.Few would argue that the United Nations Development Programme’shuman development index is a truly appropriate measure of humandevelopment in all its complexity. The index has, however, undeniablebenefits in shifting the emphasis in media reporting and policy discus-