Billions and Trillions

Tax avoidance, tax evasion, illicit financial flows, trade misinvoicing:  they are all real issues, but often they are attached to interchangeable headline numbers which can be confusing and misleading.

Commonly cited figures are $1 trillion from developing countries, $50 billion from Africa, $200 billion from developing countries. Rough estimates can be a good starting point for shining a light on issues, but often the presentation of these numbers is overhyped, and they can be misunderstood.

Over the past few years I have written a series of blog posts, articles and reports, which explore the basis for these  numbers  – this page is a compilation of things I have written on different aspects of the ‘big numbers’ (and some of the public responses).

International Tax, Transparency, and Finance for Development: A Short Guide for the Perplexed  (CGD Brief, 2016 – 8 pages) — This is a good place to start, with definitions and a field guide to existing best estimates.

Multinational Corporations and Tax

Can Stopping ‘Tax Dodging’ by Multinational Enterprises Close the Gap in Development Finance? (CGD Policy Paper, 2015 – 59 pages) — this is a bit more involved, it goes into the big numbers and beyond.

How Big is the Transfer Pricing Price for Development? (blogpost, 2017) – some more recent studies

Making Sense of the Cost of Tax Avoidance (Tax Journal Article, 2016 – 3 pages)

Illicit financial flows/ Trade misinvoicing

Illicit Flows and Trade Misinvoicing: Are we looking under the wrong lamppost? (CMI Insights Paper, 2016, 8 pages) – An introduction to the definition and measurement issues related to estimates of illicit financial flows.

Misinvoicing or misunderstanding? (blogpost, 2016) – That time when UNCTAD looked at UN Trade data and thought it had uncovered a massive gold heist from South Africa.

The Great Gold Heist That Never Was (blogpost, 2016) – Tracking the ensuing debate about the UNCTAD report

Gaps in Trade Data ≠ Criminal Money Laundering (blogpost, 2016) – Learning lessons from the UNCTAD report.

Illicit Financial Flows and Trade Misinvoicing: Time to Reassess (blogpost, 2017) – UNCTAD still sticking to its guns, but the Chamber of Mines isn’t letting it lie. GFI adjusts its estimates downwards

Zambia Copper

Swissploitation? (blogpost, 2014) “If Zambia had received the price for its copper that Switzerland declared on re-exporting the exact same copper, then Zambia’s GDP would have nearly doubled” No. (also see response from Alex Cobham below)

Zambia Copper Again (blogpost, 2016) “Zambia is losing $3 billion a year from corporate tax avoidance.” Still no. 

Stop Spreading the Myth: Zambia Is Not Losing $3 Billion to Tax (CGD blogpost, 2017) Avoidance. The number is still nonsense. Its still being quoted. I’m still writing about it.

Where does that number come from?

Understanding the methodologies behind some recent estimates

Does corporate tax avoidance in Europe cost €160-190? (Blogpost, 2016)

$190bn and counting – measuring offshore tax losses (Blogpost with Iain Campbell, 2016)

Nonsense numbers

Misunderstandings and exaggerations

38.4 billion is a very big number – but what does it mean? (blogpost, 2013)

Three Times More than Aid? (COVI, Blogpost)

If no one thinks that country-by-country reporting can raise a trillion Euros, why pretend it can? (blogpost, 2016)

Why Do People Think Nigeria Might Be Losing $1 Trillion to Corporate Tax Evasion? (blogpost, 2017)

On Inequality, Redistribution, and Wishful Thinking (blogpost, 2017)

Aid in Reverse: Facts or Fantasy? (blogpost/ Guardian article, 2017)

What is Wrong with ‘Honest Accounts’ (blogpost, 2017)

Some responses

UNCTAD welcomes discussion, transparency on commodities and misinvoicing (UNCTAD, 2016)

Comment to CMI insight number 5: Illicit Flows and Trade Misinvoicing: Are we looking under the wrong lamppost? (Mathew Salomon, GFI, 2016)

Did NGOs invent a pot of gold? (No.) (Alex Cobham, 2015)

Tax justice is not about big numbers (Richard Murphy, 2015)

Those big tax justice numbers, again (Richard Murphy, 2015)

Response by Thomas Pogge (Thomas Pogge, 2015)

How Much Are Developing Countries Losing from Commodity Mispricing Really? (Alex Cobham, 2014)

Why write about these numbers?

I have not written about these numbers to be pedantic, to attack NGOs or to suggest that the issues don’t matter. I have written about them because taxation, customs fraud and financial crime do matter (but they are not the same thing),  and because once you start noticing these numbers being used and misused you cannot un-notice them. I’ve written about them so that  other people might not fall into repeating them, and in the hope that if people on different sides of these debates  develop more shared understanding they could more effectively learn, and develop and test workable solutions.

Big numbers can do big damage

There can be real damage from inflated expectations. Natural resource rich countries, in particular  are notoriously vulnerable to ‘the natural resource curse’ where revenues from oil and mining lead not to prosperity but to conflict, authoritarianism and economic instability. Inflated perceptions of tax avoidance raise risks for investors further, and are likely to drive countries towards greater instability and less constructive relationships between industry, government and citizens (see Acacia Mining in Tanzania)

The paradox of all this is that these big numbers are often being used to make the case for greater transparency with the hope that informed and empowered citizens can hold governments and the powerful to account. For this transparency-and-accountability approach to work depends on the organisations that people trust being willing and able to help them to make sense of complex issues and numbers.

WAGS: What’s the Harm (Global Anti Corruption Blog, 2016)

Are the big numbers on illicit financial flows misleading, and does it matter? in Lifting the Veil of Secrecy: Perspectives on Capital Flight from Africa (Eds Odd-Helge Fjeldstad,  Sigrid Klæboe Jacobsen, Peter Henriksen Ringstad and Honest Prosper Ngowi)