Alex Cobham

The ICTD Government Revenue Dataset

A major obstacle to cross-country research on the role of revenue and taxation in development has been the weakness of available data. This paper presents a new Government Revenue Dataset (GRD), developed through the International Centre for Tax and Development (ICTD). The dataset meticulously combines data from several major international databases, as well as drawing on data compiled from all available International Monetary Fund (IMF) Article IV reports. It achieves marked improvements in data coverage and accuracy, including a standardised approach to revenue from natural resources, and holds the promise of significant improvement in the credibility and robustness of research in this area. This paper sets out the issues with existing sources and explains the process of creating the new dataset, including a discussion of remaining limitations. It then presents data on tax and revenue trends over the past two decades, while a concluding section briefly considers potential strategies for, and barriers to, more effective data collection in future.

The Financial Secrecy Index: Shedding New Light on the Geography of Secrecy: The Financial Secrecy Index

Both academic research and public policy debate around tax havens and offshore finance typically suffer from a lack of definitional consistency. Unsurprisingly then, there is little agreement about which jurisdictions ought to be considered as tax havens—or which policy measures would result in their not being so considered. In this article we explore and make operational an alternative concept, that of a secrecy jurisdiction and present the findings of the resulting Financial Secrecy Index (FSI). The FSI ranks countries and jurisdictions according to their contribution to opacity in global financial flows, revealing a quite different geography of financial secrecy from the image of small island tax havens that may still dominate popular perceptions and some of the literature on offshore finance. Some major (secrecy-supplying) economies now come into focus. Instead of a binary division between tax havens and others, the results show a secrecy spectrum, on which all jurisdictions can be situated, and that adjustment for the scale of business is necessary in order to compare impact propensity. This approach has the potential to support more precise and granular research findings and policy recommendations.

Is It All About the Tails? The Palma Measure of Income Inequality

The “Palma” is the ratio of national income shares of the top 10 percent of households to the bottom 40 percent, reflecting Gabriel Palma’s observation of the stability of the “middle” 50 percent share of income across countries so that distribution is largely a question of the tails. In this paper we explore the Palma and corroborate the findings that the middle does indeed hold over time and through various stages of tax and transfers. Further, we find that the Gini is almost completely “explained” by only two points of the distribution: the same income shares which determine the Palma. It thus appears that both the Gini and the Palma, in practice, summarize the same information about the income distribution: but only in the case of the Palma is this explicit. This, we argue, makes the Palma a more useful (and intuitive) measure of inequality for policymakers and citizens to track.

The effect of illicit financial flows on time to reach the fourth Millennium Development Goal in Sub-Saharan Africa: a quantitative analysis

Objectives This paper sets out to estimate the cost of illicit financial flows (IFF) in terms of the amount of time it could take to reach the fourth Millennium Development Goal (MDG) in 34 African countries. Design We have calculated the percentage increase in gross domestic product (GDP) if IFFs were curtailed using IFF/GDP ratios. We applied the income (GDP) elasticity of child mortality to the increase in GDP to estimate the reduction in time to reach the fourth MDG in 34 African countries. Participants children aged under five years. Settings 34 countries in SSA. Main outcome measures Reduction in time to reach the first indicator of the fourth MDG, under-five mortality rate in the absence of IFF. Results We found that in the 34 SSA countries, six countries will achieve their fourth MDG target at the current rates of decline. In the absence of IFF, 16 countries would reach their fourth MDG target by 2015 and there would be large reductions for all other countries. Conclusions This drain on development is facilitated by financial secrecy in other jurisdictions. Rich and poor countries alike must stem the haemorrhage of IFF by taking decisive steps towards improving financial transparency.

International Distribution of the Corporate Tax Base: Implications of Different Apportionment Factors under Unitary Taxation

corporate tax reform; multinational taxation; formula apportionment; unitary taxation; base erosion; profit shifting; BEPS.

Measuring Misalignment: the Location of US Multinationals’ Economic Activity Versus the Location of their Profits

multinational tax avoidance; corporate tax reform; formula apportionment; unitary taxation; base erosion; profit shifting; BEPS.

Inequality and the Tails: the Palma Proposition and Ratio

The Palma Proposition is that changes in income or consumption inequality are (almost) exclusively due to changes in the share of the richest 10 per cent and poorest 40 per cent because the ‘middle’ group between the richest and poorest tend to capture approximately 50 per cent of gross national income (GNI). The Palma Ratio is a measure of income or consumption concentration based on the above-mentioned proposition and calculated as the GNI capture of the richest 10 per cent divided by that of the poorest 40 per cent. In this paper we revisit the empirical basis of the Palma Proposition (the relative stability of the ‘middle’) with a new and expanded data set across and within developing and developed countries. We find the data reaffirms the Palma Proposition and that the proposition is getting stronger over time.

Hidden Inequality: How Much Difference Would Adjustment for Illicit Financial Flows Make to National Income Distributions?

Abstract A recent innovation in measuring inequality is the incorporation of adjustments to top incomes using data from tax authorities, revealing higher inequality. The thesis of this paper is that the incorporation of estimates of income from illicit financial flows (IFF), reflecting untaxed capital, may be as significant to national inequality – but with greater variation across countries. We propose a method of adjusting national inequality data for illicit flows, and present preliminary results. These estimates suggest that untaxed illicit flows could be as important as (taxed) top incomes to estimates of inequality – highlighting the importance of improving estimates of underlying illicit flows.