Taxing multinationals: A research agenda for #FFD3

There have been substantial advances over recent years in both policy and research on taxing multinationals, especially in developing countries, so with the Financing for Development conference gearing up in Addis, it’s a good time to step back and think what current priorities for the research agenda might include.

Arguably, we understand more now than we have ever done about the revenue losses of developing countries in particular; but there’s much more to be done in relation to not only the scale but also the distribution and impact of those losses, and more besides. Here are a few ideas in three areas that stand out: scale; practical success; and national-level data.

Scale and impact

There have been important new contributions to the literature which estimates revenue lost due to profit being recorded elsewhere than the location of the economic activity giving rise to it. But there remains a great deal more to do, both to identify the scale and pattern of revenue losses, and to prioritise policy responses for individual African countries and at regional and continental level.

The aim of the Base Erosion and Profit Shifting (BEPS) initiative – the major international effort led by the OECD over 2013-2015, at the behest of the G8 and G20 groups of countries – is to reduce the ‘misalignment’ between profits and real activity, in order to ensure tax is paid in the right place.

A significant problem for the BEPS process relates to Action Point 11, which requires the collation of data in order to establish a baseline for the extent of profit ‘misalignment’, and the tracking of progress over time. As the most recent BEPS 11 output highlights, currently available data – whether from corporate balance sheet databases (see e.g. Cobham & Loretz, 2014), or from FDI data – is not sufficient for the purpose.

Within the limitations of existing data, however, this year has seen two important new studies of the extent of profit ‘misalignment’. First, UNCTAD’s World Investment Report 2015 includes a study on the effect on reported taxable profits in developing countries of investments being channelled through ‘tax haven’ or ‘SPE’ jurisdictions. They put the total revenue loss at around $100 billion a year (see also the critique which suggests this may be substantially understated). Second, researchers in the IMF’s Fiscal Affairs Department have looked at the broader issue of BEPS and find a long-run annual revenue loss for developing countries of $212 billion.


  1. Extending current work. In neither case have the estimated revenue losses for individual countries been published. As such, a valuable piece of policy research would be to take the two studies, replicate the results and strengthen them where possible, and then to assess the country-level findings in order to support the potential prioritisation of counter-efforts. Further extension could involve strengthening the current, tentative results on the linkages between tax revenues (of different types), and important development outcome (e.g. health).
  2. FDI surveys. An additional approach using existing data would be to use the national-level survey data compiled by a number of countries (including the USA, Germany and Japan). One such study with US data is currently underway at the Tax Justice Network.

Practical success

A second area in which there is substantial scope for research with clear policy value is in the analysis of practical success in taxing multinational companies. Research on the scale of the problem, as discussed in the previous section, has the potential to identify the relative intensity of revenue losses and therefore the countries which should prioritise some form of response – but may not point more precisely at solutions than, for example, to blacklist certain jurisdictions as inward investment conduits.

Three types of study offer the potential for more specific policy recommendations.


  1. Identification study. A useful first step would be to take the ICTD Government Revenue Dataset (the ICTD GRD, the best available international source), and to identify those country-periods in which significant progress has occurred in raising corporate income tax revenues; along with any major common features.
  2. Survey. The second step would then be to conduct a survey of revenue authorities, exploring the differences in tax policy, political support and administrative approaches, to identify systematic differences – or their absence – between those cases where significant progress was seen, and not.
  3. Event study. A further step would be to identify major policy changes – most obviously the introduction of a large taxpayer unit at the national revenue authority, or the provision of technical capacity-building measures from bilateral or multilateral donors, and any other features to emerge from the first two steps – and to explore whether there were systematic benefits in revenue-raising across the broad panel of GRD data.

National-level data

The third area in which research proposals could be taken forward can be grouped loosely according to the involvement of national-level data. Two specific proposals can be identified. In each case, such research might be best led by, or conducted in collaboration with, a regional tax body such as ATAF.


  1. Transaction-level trade analysis. Leading estimates of illicit financial flows (e.g. those of Ndikumana & Boyce, GFI and ECA) include a major component related to trade mispricing. However, these rely on national-level, or commodity-level trade data. Among other potential methodological issues, the bulk of estimated IFF are likely to relate not to multinational companies but others; although the exact proportions cannot be identified.

The gold standard is to use transaction-level data (e.g. the pioneering work of Simon Pak), and as a recent study for the Banque de France reveals, with identifying data on whether transactions are between related parties (i.e. they occur within a multinational group) or not, it is possible to identify the scale of mispricing attributable to multinationals (in the French case, causing an estimated $8 billion of revenue tax base loss each year).

Accessing such data from customs authorities would allow the equivalent assessment to be made for a range of countries, also allowing comparison across countries and potentially the combination of data to identify fraudulent mis-invoicing at each end of the same transactions. The Tax Justice Network, with Professor Pak, is currently in the initial process of such an analysis with one African revenue authority.

  1. Country-by-country reporting (CBCR). Since the fanfare of the G8 and G20 groups of countries calling for the OECD to develop a standard for CBCR by multinationals in 2013, the optimism about its value has faded. Sustained lobbying has removed not only the explicit intention of the original Tax Justice Network that the data be made public, but even that it be provided to host country tax authorities. Instead, it will be provided – if requested – to home country tax authorities, which may then provide it under information exchange agreements to host country authorities. However, the latest draft of the Financing for Development outcome document (7 July 2015) is explicit about the provision of this information directly to tax authorities in the locations where multinationals operate.

A requirement for publication is one possibility; another is for tax authorities to share the data privately amongst themselves, for example through an equivalent mechanism to the IATI registry of aid (a proposal developed in Cobham, 2014) in order to allow broader analysis and identification of revenue risks. This could happen at a regional level; but the latest noises from the OECD suggest that there will be no international collation, and hence it will be impossible to meet BEPS Action Point 11 and either to construct a broadly accurate baseline or to demonstrate the extent of progress.

Working with tax authorities, however, researchers could deliver basic results equivalent to those from CBCR. This would involve combining data reported to tax authorities through national accounts for members of a multinational group, with the global consolidated accounts of that group, in order to compare the relative shares of activity and taxable profit and hence to identify potential high revenue-risk operations.

  1. Investment data and vulnerabilities. There is substantial scope to improve both the reporting and use of bilateral investment stock and flow data, in order to pursue a range of types of studies. One particular opportunity, pioneered in the Mbeki report, is for the creation of measures of vulnerability to ‘tax haven’ secrecy in countries’ bilateral economic and financial relationships. Per the findings in the Mbeki report, present data are sufficient to allow significant analysis to be done, and it would be valuable to extend this to explore whether particular costs or benefits – in particular, in terms of tax revenues from multinational companies – are associated with the recorded vulnerabilities. (NB. This also points to a possible extension of the UNCTAD and IMF results in proposal 1 above.)

Tax Justice Research Bulletin 1(6)

June 2015. Surprising everyone by actually arriving within the stated month, here’s the sixth Tax Justice Research Bulletin – a monthly series dedicated to tracking the latest developments in policy-relevant research on national and international tax, available in full over at TJN.

This issue looks at a new paper in The Lancet on the potential links between direct taxation and health outcomes including child mortality; and at research on the suitability or otherwise of accounting data for tax purposes. The Spotlight falls on tobacco taxes, the shameful manipulation of economic arguments by Big Tobacco, and a paper entitled The Single Best Health Policy in the World: Tobacco Taxes. If this issue was any more health-y, you could put a vest on it and send it out to do a half-Iron Man with Owen Barder.

June’s tune, via Sarah Knott, is Jawad Ahmad’s ‘Bhola kya karey – Wo jiay ya marey’. 

The main research event  of the month, nay the year, is the TJN annual research workshop at City University, which you’ve either just attended (great to see you!) or just missed (boo).

This year’s thematic focus was on the flawed notion of “competition” between nation states, and there’s a cracking set of papers from a whole range of disciplines (from philosophy to accounting) and backgrounds (including practitioners, civil society researchers and academics from universities from Hong Kong to Barcelona); and touching on all sorts of tax and non-tax aspects of ‘competition’, with insights into everything from Guernsey’s dominant investment position in annexed Crimea, to the ‘voluntariness’ of migration; and from regulatory responses of commodity traders to the role of KPMG in systemic regulatory arbitrage.

The workshop ended with a really engaged discussion about the relative merits of taking on the entire logic of state competition, versus the practical value of keeping focus on tax.

There’s certainly an important challenge in reclaiming the word ‘competition’ in this context, which has been used almost as a synonym for ‘no government intervention’ – when ensuring competition may well require greater intervention, in order to prevent power abuses leading to further concentration. The creators of the ‘Global Competitiveness Index’, for example, probably don’t see themselves as advocates for a world regulatory body, preventing unfair competition between states…

Submissions for the Bulletin, including tax-related melodic suggestions, are most welcome.


Financing for Development: Tax revenues and health outcomes

From the Tax Justice Research Bulletin 1(6).

One of the striking differences between the Millennium Development Goals set in 2000, and the post-2015 Sustainable Development Goals, is the latter’s emphasis on domestic resource mobilisation – set against the aid-centricity of the former. While this is welcome (primarily because of the enhanced potential for domestic “ownership” of priorities, and the ensuing political benefits), it does raise a question.

Figure 1A new paper published in leading health journal, The Lancet, tackles this question. Reeves, Gourtsoyannis, Basu, McCoy, McKee and Stuckler construct a panel of revenue, expenditure and health data for 89 low- and middle-income countries, from 1995-2011, and use it to explore the relevance of different sources of financing.

They reach two main findings. First, as you’d expect, they uncover a fairly strong association between tax revenues and health spending (Figure 1 – click to enlarge): more tax revenue per capita… more public health spending per capita.

Reeves et al Lancet 2015 fig2In a simple model, an additional $100 of GDP per capita is associated with $1.86 of extra health spending; while an additional $100 of tax revenue per capita is associated with $9.86 of health spending. There is also (Figure 2) support for impact on health outcomes.

Second, the authors find that the association hinges on direct tax in particular. They find that $100 of direct tax revenue per capita is associated with $16 of public health spending; whereas consumption and other taxes appear to have a small negative association. Most strikingly (Figure 3) there is an association between consumption taxes (but not direct taxes) and mortality outcomes.

What should we make of these results? (Does VAT kill children?) The authors are cautious about the limitations of World Bank tax data, and about direct causal interpretations of the results. But perhaps still more caution is needed.

Reeves et al Lancet 2015 fig3

Broadly speaking, we expect direct taxes (on income, profits and capital gains) to be more progressive than taxes on consumption – since households with lower incomes inevitably consume more of their income. In addition, there is some evidence to suggest that direct taxes are the most powerful in driving governance improvements associated with greater reliance on tax revenues rather than say natural resources or aid – on which, see Mick Moore’s really useful, critical survey in this ebook. So if direct taxes are a progressive tool associated with better governance, should we expect also to see better public spending outcomes?

Perhaps, and maybe even probably; but let’s be careful. Correlation and causation again. If governments are more or less interested in progressive taxation, and more or less interested in universal service provision, we’d expect those to line up so that governments favouring progressive tax will generally also deliver more broad-based improvements in (e.g.) health. But that’s not the same as saying that if all governments increased direct taxes (by diktat, or from changes in international norms, or – say – improvements in the transparency of multinationals), that they would also all focus more on health improvements.

We know that there are strong correlations between GDP per capita and tax/GDP. We know, too, that this holds most strongly for direct taxes. In addition, the sample period covers what is probably the peak of the “tax consensus” which inter alia encouraged consumption taxes above all others, and the relative neglect of direct taxes. In general, such advice was most powerfully passed into policy in those countries with least capacity and least political space to resist.

By and large, then, we’d expect to see that countries with the lowest per capita incomes and the weakest states exhibit not only low public health spending and poor outcomes, but also low tax revenues and relatively high reliance on consumption tax rather than direct tax — without there necessarily being any link from tax choices to spending outcomes…

This paper is a thought-provoking contribution, but due both to data weaknesses and to the difficulties of establishing causality, it can’t be more than suggestive. The challenge for further research is to address, as far as possible, these two issues. We can’t show that specific tax policies necessarily deliver different spending policies or outcomes (these are separate policy choices); but we may be able to demonstrate the associations more strongly, not least by allowing more effectively for the causal roles of per capita GDP and state capacity, and/or by focusing on specific moments of policy change to understand the effects.

Immigrant life and death in Europe, uncounted

Just as immigrants to Europe are often undocumented, so too their deaths. The UK’s Institute of Race Relations has published a study looking at the known cases in recent years, and it makes for terrible reading from the title onwards: ‘Unwanted, unnoticed: An audit of 160 asylum and immigration-related deaths in Europe’.

Aside from the typically harrowing detail of each case, the study puts together an overview of the main patterns.

How can people be uncounted up to the point, even, of their death? Out of 160 cases, not even the cause of death is known for 32 people. Not. Even. For 43 people, even the basic information of nationality remains unknown.

Table 2 shows the main factors where these are known.

IRR uncounted migrant death 2015 tab2

These findings aren’t only important because, well, people died. As the authors put it:

If there is no publicly accessible record of deaths, how can states be held accountable?

The report calls to mind the CIPOLD review in the UK: the Confidential Inquiry into the premature deaths of people with learning disabilities. Through tracing individual stories of lives and deaths, the study created a set of baseline results that remain the best we have – including:

  • men with learning disabilities die, on average, 13 years younger than men in the general population; and
  • women with learning disabilities die, on average, 20 years younger than women in the general population. (Intersecting inequalities, anyone?)

These differences are not, to be clear, just a direct result of learning disabilities. They reflect society’s treatment of people who live with learning disabilities. The report finds, for example, that 37% of deaths would have been potentially avoidable if good quality healthcare had been provided (and see Chris Hatton’s powerful comment on discrimination by health specialists).

There’s an earlier post here on how the problem of being uncounted with learning disabilities hasn’t been addressed in the UK since CIPOLD, and despite various high-profile scandals.

Not always, but often, an important part of not counting is not caring. And all the more so when the uncounted is a particular group. The phenomenon of Uncounted is not a technical one, but a profoundly political one.

Back to migrants in Europe. Uncounted, from beginning:

IRR uncounted migrant death 2015 tab1To end:

IRR uncounted migrant death 2015 tab3

Link to the full study.

Transgender Reporting and Human Rights

I’m delighted to host this guest post from Fran Luke, full-time parent, un- and underemployed musician and teacher.

“Ignorance is the parent of fear.” Moby Dick, Herman Melville     

I am not a subject matter expert.  I do not pretend to be, nor have I ever had any intention of becoming one.  I would much prefer to be playing with my children, writing music, improving and performing on my instruments, or even working at a job that allows me to adequately care for my family.  That said, I have located and read as much reporting as I can find regarding Transgender Human Rights issues, globally.  I’ve read a good many other reports, as well, but this is personal.

After being advised by a member of an NGO advocating, I guess, for people ‘like me’ that the ‘time was not yet right’ to pursue Trans* rights at the UN level, I felt the need to learn more.

When our leadership spends more time speaking about the tie or dress they wore to a White House function, or how great it is our Trans* children can now die in endless war, it’s time to look elsewhere.

The argument for which group is the most marginalized should never be entered into.  It is pointless.  It’s always an issue of class and perceived degrees of humanity.

Transgender reporting

With regard to documentation, who is included or not, and policy, I’ll start with the UN.  It’s my understanding population data is provided at the national level.  This from a brief discussion with Anne-B Albrectsen at UNFPA, “We work to make sure that all countries disaggregate data as much as possible. Nationally owned data is best”.

Can data collected at the national level, perhaps the easiest way to get data into the system, accurately reflect conditions of marginalized sectors?  Would it not often be the policies of those in power that keep marginalized communities where they are?  The issues of the Rohingya and question of citizenship come first to mind.

There is not a great deal of reporting on the issues of Transgender human rights, but there is some.  Rather than begin by referencing reports from LGBTI advocacy organizations, I thought it more appropriate to start with recommendations and reports from agencies within the UN.


After being treated at times like an uncomfortable joke at some UN initiatives that invited civil society discourse, I thought I’d start with their own recommendations.  These recommendations never seem to make it to the mainstream discussions of Human Rights, or the General Assembly for that matter.

Here is a list of recommendations from the 2013 UNDP Discussion Paper, ‘Transgender Health and Human Rights’:

undp dec2013 trans rights recs

Some of the recommendations from the 2012 UNDP report ‘Transgender Persons, Human Rights and HIV vulnerability in Asia and the Pacific’ include; having Trans* people as research partners, documenting and understanding Trans* vulnerability, promoting transgender rights and culture, making equality legislation work better.

The first of eleven recommendations relates directly to counting:

undp dec2012 hiv trans rec1

UNDP’s 2010 Issues Brief, ‘Hijras/Transgender Women in India: HIV, Human Rights and Social Exclusion’, includes the following recommendations:

undp 2010 hijras recs5-8

Finally, these are the concluding thoughts from the UN-Women briefing paper, ‘The Transgender Question in India; Policy and Budgetary Priorities’:

unwomen trans india conc

Where next?

One question to consider is why this type of analysis has failed to penetrate more deeply into UN and national-level policy discussions.

Another is whether there are risks from being counted – whether invisibility does not sometimes provide a type of protection.   The discussion, and struggle for the realization of Universal Human Rights for any segment of society can never be put off for political expedience.  If the goal is truly a crosscutting, transformative human rights agenda, then we must start by recognizing our shared humanity.  The cost of silence is, and has been far too great.

Night is Another Country - culture of silence

[From The Night is Another Country,  RedLac Trans and the International HIV/AIDS Alliance.]

We know some information at least is there, provided as shown in these instances by the agencies or organizations that do not appear to bring it into the mainstream.  So, who does the counting and decides what to count?  I’ll end here with a quote from Dr. Martin Luther King: 

Cowardice asks the question – is it safe?
Expediency asks the question – is it politic?
Vanity asks the question – is it popular?
But conscience asks the question – is it right?
And there comes a time when one must take a position
that is neither safe, nor politic, nor popular;
but one must take it because it is right.


Selected Resources