draining development.pdf - Khazar University

Tax Havens and Illicit Flows 353sions on poverty away from unhelpfully narrow GDP per capita measuresand toward a broader and more human-level analysis. A similarargument may apply to Oxfam’s seminal 2000 report. The value of thereport in drawing attention to the issue is certain, not least by catalyzingthe emergence of the Tax Justice Network, which has played a centralrole in raising awareness among policy makers, civil society, and thepublic.A number of potential approaches to quantifying the scale of revenuelosses on a country-specific basis are worth consideration, although theysuffer from certain weaknesses also. One approach would involve pursuingthe Huizinga and Laeven method (2008) using data from multinationalcompanies on the performance of their subsidiaries to estimatethe extent of profit shifting on a global basis, rather than only in Europe.The data have been questioned by those more familiar with corporateaccounting (see, for example, Richard Murphy’s contribution in this volume,in chapter 9), but are standard in the corporate finance literature;so, they may at least provide some benchmark estimate of the revenuelosses occurring specifically because of the behavior of multinationalcompanies.The other avenue available is to use data on the financial positions ofsecrecy jurisdictions with regard to specific developing countries and,given the relative secrecy and administrative capacity of each, to makeestimates about the likely extent of returns and income declarations.Current political processes through the G-20 and bilaterally mean thatmore data will become publicly available about the secrecy jurisdictionlocation of hidden assets and income streams (of richer economies atleast) and, importantly, about the actual forgone tax yields. These datawill provide a practical backstop to ensure that estimates for developingcountryrevenue losses are demonstrably anchored in reality.Neither approach seems entirely satisfactory from an academic standpoint.However, as long as secrecy is the issue under study, any impactassessment will be subject to considerable margins of error.In the longer term, a more promising avenue may be to work towarda better understanding of the nature of the problem, rather than specificquantifications of the scale in revenue terms alone. In particular, if aconsistent indicator is available to capture the secrecy of jurisdictions,then it will be possible to use panel data regression analysis to estimate