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US$160bn - the price of tax dodging in developing world

Updated August 2014 - Christian Aid’s 2008 estimate that $160bn is lost annually to the developing world from tax evasion by multinationals and other businesses engaged in international trade seeking to minimise their tax liability has been questioned of late. The following statement is intended to clarify matters, and explain why we continue to use the figure.

At no time has Christian Aid claimed that $160bn is anything other than an estimate. Indeed, as we have made clear in the past, we would welcome robust research aimed at arriving at a more exact tally, along with more concerted effort to tackle the abuses that lead to developing countries losing so much revenue.

Until then, however, we are satisfied that the figure is a credible indication of the scale of a scandal that has been allowed to fester for far too long.

The controversy was understandable when Christian Aid, in its 2008 report Death and Taxes, first tried to put a figure on the amount lost to developing countries every year through tax evasion by trade mispricing and false invoicing by multinationals and other businesses trading across borders.[1]

Our estimate of $160bn a year was the first time that anyone had attempted to quantify the problem. Everything that has happened since in the explosion of research and policy-maker focus has confirmed that the broad scale of that estimate is correct.

Indeed, those focusing on critiquing this figure, rather than the structures and policies that allow tax dodging to occur, risk looking as though they want to detract attention from the consensus which has since emerged globally – confirmed by both the G8 and the OECD last year – that tax dodging, including by multinationals, on international trade is hugely damaging to developing countries.[2]

We have been asked why we did not include the $160bn figure in our submission last year to Parliament’s business, innovation and skills committee inquiry into the UK extractives industry sector.[3]

The explanation is simple. We have already explained twice in oral evidence to Parliament’s international development committee how we arrived at the figure, and were conscious that we were not able to separate out how much of the $160bn could be directly attributed to the extractives industry, let alone to companies based in the UK.[4]

We also referred to the figure in April 2013 when giving written evidence to the House of Lords economic affairs select committee which was investigating whether a new approach was needed to taxing corporations in a global economy.[5]

Our figure is based on estimates of illicit capital movement made by Raymond Baker, president of US research and advocacy organisation Global Financial Integrity and a member of the High Level Panel on Illicit Financial Flows from Africa. We combined his work on the subject, which has been quoted extensively by the World Bank, with data on the total trade of developing countries taken from the bank’s World Development Indicators, to arrive at an estimate of illicit capital movement through developing countries. Data on corporate tax rates from the same indicators was then used to estimate the implied tax revenue loss.[6]

When the figure was first published, we pointed out that it was more than one and half times the combined aid budgets of rich countries. Writing later in 2008 on the Guardian website, OECD secretary general Angel Gurría said ‘Developing countries are estimated to lose to tax havens almost three times what they get from developed countries in aid.’[7]

In 2009 another Christian Aid report, False Profits, using a completely different methodology – an analysis of EU and US trade data to estimate the amount of capital shifted out of non-EU countries into the EU, US, UK and Ireland – also arrived at figures consistent with the US$160bn.[8]

That same year, our methodology was discussed at a conference at the World Bank, where there was some general agreement that it would have been difficult to have done much better with the data that was available.[9]

The World Bank published a collection of peer reviewed papers in 2012 that developed the papers submitted for this 2009 conference. These papers contained a range of views including a highlighting of the difficulty of being able to obtain sufficient data, and establish an agreed methodology, for estimating the tax loss to developing countries through trade mispricing.

One paper did specifically seek to test the plausibility of the magnitude of Christian Aid’s estimate of $160bn of lost tax revenue, and using an alternative approach found $160bn to be a valid estimate.[10]

In 2010 an OECD background information brief, ‘Promoting Transparency and Exchange of Information for Tax Purposes, while warning that data on revenues lost by developing countries from offshore non-compliance was unreliable, added: ‘ Most estimates, however, exceed by some distance the level of aid received by developing countries—around USD 100 billion annually.’[11]

A report by Global Finance Integrity that same year into trade mispricing said: ‘Our study well supports the work of Christian Aid.’[12]

The following year, leading accountants PwC in a report for the European Commission, European Aid – Implementing the Tax and Policy Agenda, appeared to support the suggestion that there is substantial revenue to be obtained from tackling trade mispricing in developing countries. Indeed for three of the four counties in this study, the estimated potential gains were in excess of those identified in Christian Aid’s False Profits report.[13]

Christian Aid remains committed to highlighting the tax abuses that cost developing countries so dearly in lost revenue. And we are satisfied that, at present, while accepting the research is some years old, $160bn is a reasonable estimate of the scale of those abuses.


1. Death and Taxes: The True Toll of Tax Dodging, Christian Aid, 2008

2. G8 Lough Erne Declaration, 2013 Lough Erne Summit, Northern Ireland, United Kingdom, June 18, 2013  

Declaration on Base Erosion and Profit Shifting, Adopted on 29 May 2013, Meeting of the OECD Council at Ministerial Level, Paris, 29-30 May 2013

3. Written evidence to Business, Innovation and Skills Committee on the Extractive Industries Sector 
Further evidence

4. Aid Under Pressure: Support for Development Assistance in a Global Economic Downturn - International Development Committee, Examination of Witnesses 4 March 2009, Dr David McNair, Senior Economic Justice Adviser, Christian Aid

Tax in Developing Countries: Increasing Resources for Development International Development Committee - Fourth Report,  Examination of Witnesses 28 February 2012, Joseph Stead, Senior Economic Justice Adviser, Christian Aid

International Development Committee Supplementary written evidence submitted by Christian Aid, 29 May 2012

5. Taxing corporations in a global economy: is a new approach needed? House of Lords Select Committee on Economic Affairs. Oral and Written Evidence. P165.

6. Aid Under Pressure: Support for Development Assistance in a Global Economic Downturn - International Development Committee, Examination of Witnesses 4 March 2009, Dr David McNair, Senior Economic Justice Adviser, Christian Aid

7. The global dodgers: Commitment to aid flows must be combined with a crackdown on tax havens, and Britain can do more.Angel Gurría, Guardian Development , Thursday 27 November 2008

8. False Profits: robbing the poor to keep the rich tax-free Christian Aid, March 2009

9. The Dynamics of Illicit Flows from Developing Countries, World Bank 9/14/2009 - 9/15/2009

10. Draining Development: Controlling flows of illicit funds from developing countries. Chapter 9, P283, Accounting for the Missing Billions, by Richard Murphy

11. Promoting Transparency and Exchange of Information for Tax Purposes, A Background Information Brief, OECD, 19 January 2010. P6. 

12. The Implied Tax Revenue Loss from Trade Mispricing Ann Hollingshead, Global Financial Integrity, February 2010

13. Transfer pricing and developing countries, EuropeAid – Implementing the Tax and Development policy agenda Final report. Commissioned by EC and implemented by PwC



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