Oxford researchers highlight 'shortcomings' but civil society groups were forced to produce estimates in the absence of research by international institutions, say campaigners
Information regarding revenue losses in developing countries caused by tax evasion and avoidance is very limited, partly due to a lack of data and partly due to "methodological shortcomings of existing studies," according to new research.
Clemens Fuest and Nadine Riedel of the Oxford University Centre for Business Taxation prepared the report – entitled Tax evasion, tax avoidance and tax expenditures in developing countries: A review of the existing literature – for the UK's Department for International Development (DFID).
The report's publication came as the UK Treasury was reported to be preparing to voice support for country-by-country reporting. Christian Aid has been lobbying the big four accounting firms to use their influence at the International Accounting Standards Board to argue for the reform. The charity has estimated that tax revenue lost by developing countries due to "trade mispricing" by multinationals amounts to US $160bn a year.
Fuest and Riedel concluded that some of the existing estimates of revenue losses due to tax avoidance and evasion by firms – in particular, some studies on corporate profit shifting – "systematically overestimate the losses".
They added: "Other studies are based on assumptions which are so restrictive that the results are difficult to interpret. Overall, it is fair to conclude that most existing estimates of tax revenue losses in developing countries due to evasion and avoidance are not based on reliable methods and data.
The report recommended a number of possible directions for further research to "improve our understanding of tax avoidance and evasion and the implications of these activities for revenue mobilisation in developing countries".
The Tax Justice Network's research was among the papers reviewed in the Oxford report. Responding to the report, the TJN pointed out on its blog that "in the absence of any useful research emanating from the IMF, World Bank, and indeed academic bodies far better funded than we are, almost all of the literature under review here originates from civil society organisations".The TJN had been “forced” to produce estimates based on whatever datasets become available “in order to challenge those institutions which should be taking these issues seriously to produce estimates of their own,” it said.
The current issue of Tolley's Practical Tax newsletter (3 July) has more on this and other very recent developments including:
- Private residence relief claimants under fire – but HMRC guidance spells out how longstanding exemption written into tax law saves capital gains tax
- Finance Bill progress
- HMRC has 'serious problems' with online trust returns
- 'Vodcast' shatters accountant stereotype, claims ACCA
- New SAYE bonus rates offer 'almost no return'
