On why being tough on unproven claims is both smart and right

David – the OECD’s HQ in Paris

We always appreciate the opportunity to discuss our research work since constructive criticism allows us to improve and clarify our views.

This is the case with a couple of recent blogs by Mick Moore of the International Centre for Tax and Development (ICTD) on 18 July, one entitled “Tax Justice Campaigning: Is Tough Always Smart?”, and the other entitled “Tax justice campaigners should stop picking on the OECD” in which he took to task our recent report on developing countries and automatic information exchange, quite critical of the OECD.  We had been irked by comments from the OECD’s tax boss that

“Most (developing countries) are not yet ready and most of them don’t want [automatic information exchange.]”

Basically, Moore didn’t like the conclusions we drew from the evidence available to us, while also saying some very nice things about us too.

Goliath – TJN’s HQ in Chesham

We understand that some of the disagreements with our paper boil down to a differing assessment of the evidence presented, and to a differing interpretation of facts and data.   We do, however, strongly disagree with Mick’s assertion that our evidence is “almost worthless” and “obviously has no value.” He says our report “will be widely seen as a personal attack on Pascal Saint-Amans”. We disagree, and we had absolutely no such intention.

As a starting point, when we refer to the OECD, we are not suggesting that individual OECD staff members are responsible for the output of that organisation. Instead, it is obvious to us (and we hope to most interested parties), that every international organisation is constrained by its membership, and by the relative power of each member and their representatives. In the case of the OECD’s work on international tax matters, this representative role is largely performed by Ministry of Finance officials, with the United States enjoying an extraordinary level of power and influence. Therefore, our criticisms of the OECD’s processes and decision-making is primarily a criticism of the uses and abuses of the de facto powers enjoyed by its membership and their representatives.

Our report under review is titled “Automatic Information Exchange: an opportunity for developing countries to tackle tax evasion and corruption”. The first half seeks to explain in easy language the importance of AIE within exchange of information mechanisms, and its legal bases. The second half  provides evidence to test that claim by OECD’s tax boss Pascal Saint-Amans and Global Forum officials that most developing countries are neither interested in, or aware of, AIE.

By collecting evidence for and against this hypothesis, TJN has engaged in a basic enquiry to test an explicit falsifiable hypothesis (in the tradition of the epistemology of Karl Popper and Thomas Kuhn). We were unable to find evidence to support the claims of OECD and Global Forum officials, but we did find evidence that contradicted the OECD’s claims.  To label our enquiry as seeming like a personal attack is unfortunate: by this token, any scientific enquiry into the validity of a hypothesis could amount to personal attacks on those articulating the hypothesis.

It is also surprising to read the claim in the blog that in our survey “there were no questions about the potential cost, relative priority, or potential timing of participation.”  While it is true that in our survey we did not ask directly about estimates on the costs of implementing AIE, cost considerations were suggested as possible answers to choose from (questions 3 and 13, on pages 53 and 55, respectively).

As for the relative priority and timing of participation, in our question 13 (page 55) or graph 5.2.6 (page 36) we explicitly asked whether respondents preferred to have ‘upon request’ information exchange implemented before engaging in AIE, or whether they might be implemented simultaneously. That is a clear question of both timing (sequence) and of relative priority.  [For the record,TJN has been a long-term critic of the ‘on request’ information exchange model, which we regard as hopelessly inadequate – see here and here.]

While it is true that we did not have open questions on the preferred timing of introduction of AIE or on the relative priority of AIE among a broad range of unrelated tax issues, we think that our framing of the questions was far more relevant for detecting priorities than open questions. This is because the OECD and Global Forum have set out to demand upon request information exchange from most jurisdictions. Therefore, for most jurisdictions it is no longer an option but a matter of fact that they are obliged to participate in upon request information exchange since the OECD had (wrongly in our view) elevated this approach as the international standard. To ask for priorities between the two is therefore a legitimate and reasonable means of testing priorities in the context of a paper whose remit is on (automatic) tax information exchange. This is not to forestall or demean the relevance of additional research to detect priorities of tax administrations in developing countries in far broader terms.

This qualification as personal attack is even more surprising since our provision of empirical evidence stands in stark contrast to the OECD’s performance on this subject. We have provided details about, and made explicit the nature and limitations of our evidence. The OECD and Global Forum officials, in contrast, have failed to provide any evidence to support their public claims. As limited as the value of our evidence may be in the eyes of some, in this way TJN has added value by contributing any empirical evidence to what otherwise are mere assertions. In our view, it is better to make transparent the empirical basis of assertions, even if imperfect, than to simply assert without publication of the factual basis.

If the OECD has evidence to support the claim that most developing countries are not interested in, or aware of, AIE, we request it be published now.   Absent such evidence, the hypothesis is proven false, not only by our survey findings but by the OECD’s own list of countries endorsing AIE, which includes many developing countries.

As for the validity and robustness of our survey findings, obviously it would have been preferable to have received replies from all 37 developing countries whose views we attempted to sample. But exactly what is Mick Moore seeking to imply when he states: “They received eight replies. Three of those eight replies were from people who explicitly stated that they were replying in their personal capacities, and not representing their governments. These responses were however considered ‘valid proxies for the official view.’”. If these are not valid proxies, what alternative and better proxies for the official view can Mick suggest?  And does he have evidence that the OECD based their original assertions on formal replies sanctioned by governments?  If so, where is this evidence?

In addition to the usual difficulty of obtaining cooperation on surveys on international cooperation on tax matters, our research was further complicated by the fact that the Global Forum’s Working Group on AIE apparently advised jurisdictions to not respond to our survey. To describe the resulting evidence as “almost worthless” thus appears to be the result of a strange conception of what constitutes “valid evidence”.

Among the surveyed developing countries we did find evidence of interest in automatic information exchange, and this is what we stated in our report.  Had we neglected the basis of our assertions, or misrepresented the results, the criticisms might have stuck. However, we have clarified even in our Executive Summary the limitations of our claims (e.g. by statements such as “88% of the surveyed developing countries consider that…”, “all of the responding developing countries believe…”, etc.).

We believe that the information we received from our respondents was valuable. It has provided useful insights, for example into how some developing countries view matters relating to on a multilateral competent authority agreement, and what information not covered by the CRS they would be interested in receiving, etc.

Finally, our report was published before the OECD’s CFA meeting at which the CRS Commentaries were decided. We had hoped to be able to influence the decision to include important provisions in favour of developing countries (non-reciprocity, a multilateral Competent Authority Agreement, etc.), because we believe that developing countries should benefit and engage in AIE from the outset– we disagree with Mick’s suggestion that it should initially be only for rich countries, and developing countries should later “apply or be admitted”.

Unfortunately, the Standard (including the CRS and its commentaries) published on July 21st, showed the opposite: non-reciprocity was awarded not for developing countries but for tax havens (jurisdictions without income tax not interested in receiving information), a multilateral competent authority agreement was not the default option nor does it guarantee that developing countries will be part of it, and even references to developing countries’ benefits, inclusion and commitments of capacity building were eliminated from the “background” section.  All of which is disappointing but somehow not surprising to us and our partners in developing countries (see here, for example).

In summary, our research was triggered by an assertion made by the OECD’s Pascal Saint-Amans that “Most (developing countries) are not yet ready and most of them don’t want [automatic information exchange].”  We have been provided with no evidence to support this assertion, and we’d be surprised if Mick Moore has seen any such evidence.  If he has, we’d love to see it.  Our survey to test the veracity of Pascal’s assertion produced evidence to the contrary.  We consider this a useful and important exercise in its own right.

We stand by our report, which can be accessed here. See also Mick Moore’s article in The Conversation.

Our notes and responses to specific concerns raised by the ICTD blog can be accessed here.

As an endnote, we should also add that Moore paid us two of the best compliments that could be paid in this area: firstly, he described us as “the leading tax justice campaigning organisation”, and adding:

“The campaigners’ record is mostly very good. Without them, a bunch of powerful international organisations – the G8 and the G20, the OECD, the IMF, the European Union – would not be committed, as they currently are, to design and implement some rather progressive reforms to international corporate tax.”

Thanks Prof. Moore – and may the debates continue.