PHM-Exch> World Bank Must Stop Encouraging Harmful Tax Competition

[Claudio Schuftan]

phm-exchange was down for a week so excuse me if this is being posted
twice. Vlaudio

On Fri, Oct 13, 2017 at 10:44 PM, Claudio Schuftan <schuftan at gmail.com>
wrote:

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> From: Jomo <jomoks at yahoo.com>
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> World Bank Must Stop Encouraging Harmful Tax Competition
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> Jomo Kwame Sundaram, Anis Chowdhury
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> SYDNEY and KUALA LUMPUR, Oct 10 (IPS)  - One of the 11 areas that the World
> Bank's Doing Business (DB) report includes in ranking a country's business
> environment is paying taxes. The background study for DB 2017, Paying Taxes
> 2016 claims that its emphasis is "on efficient tax compliance and
> straightforward tax regimes".
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> Its ostensible aim is to aid developing countries in enhancing the
> administrative capacities of tax authorities as well as reducing informal
> economic activities and corruption, while promoting growth and investment.
> All well and good, until we get into the details.
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> Tax less
> First, the Report advocates not only administrative efficiency, but also
> lower tax rates. Any country that reduces tax rates, or raises the
> threshold for taxable income, or provides exemptions, gets approval.
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> Second, it exaggerates the tax burden by including, for example, employees'
> health insurance and pensions and charges for public services like waste
> collection and infrastructure or environmental levies that the businesses
> must pay. The IMF's Government Financial Statistics Manual correctly treats
> these separately from general tax revenues.
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> Third, by favourably viewing countries that lower corporate tax rates (or
> increase threshold and exemptions) and negatively considering those that
> introduce new taxes, DB is essentially encouraging tax competition among
> developing countries.
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> Thus, the Bank is ignoring research at the OECD and IMF which has not found
> any convincing evidence that lower corporate tax rates or other fiscal
> concessions have any positive impact on foreign direct investment.
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> Instead, they found net adverse impacts of tax concessions and fiscal
> incentives on government revenues. According to the research, factors such
> as the availability and quality of infrastructure and human resources were
> more important for investment decisions than taxes.
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> Moreover, the World Bank's Enterprise Surveys do not find paying taxes to
> be high on the list of factors that enterprise owners perceive as important
> barriers to investment. For example, the Enterprise Survey for the Middle
> East and North Africa found political instability, corruption, unreliable
> electricity supply, and inadequate access to finance to be important
> considerations; paying taxes or tax rates were not.
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> Yet, the World Bank has been promoting tax cuts and tax competition as
> magic bullets to boost investment. Not surprisingly, thanks to its still
> considerable influence, tax revenues in developing countries are not rising
> enough, or worse, continue to fall. According to some estimates, between
> 1990 and 2001, reduction in corporate taxes lowered countries' tax revenue
> by nearly 20%.
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> Instead of encouraging tax competition, therefore, the World Bank should
> help developing countries improve tax administration to enhance collection
> and compliance, and to reduce evasion and avoidance. According to OECD
> Secretary-General Angel Gurria, "developing countries are estimated to lose
> to tax havens almost three times what they get from developed countries in
> aid".
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> Global Financial Integrity has estimated that illicit financial flows of
> potentially taxable resources out of developing countries was US$7.85
> trillion during 2004-2013 and US$1.1 trillion in 2013 alone!
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> Conflicts of interest
> But the Bank's Paying Taxes and DB reports do little to strengthen
> developing countries' tax revenues. This should come as no surprise as its
> partner for the former study is Pricewaterhouse Cooper (PwC), one of the
> ‘Big Four' leading international accounting and consultancy firms. PwC
> competes with KPMG, Ernst & Young and Deloitte for the lucrative business
> of helping clients minimize their tax liabilities. PwC assisted its clients
> in obtaining at least 548 ta
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