Sep 28 2011

Can’t get accurate data? Then ignore the problem!

Posted by: Nick Shaxson in: Thoughts

It’s incredibly hard to get accurate numbers on tax haven issues, not least because you’re trying to measure secret stuff. An assets/liabilities discrepancy noted by the IMF for the Cayman Islands ($2.2 trillion vs. $768 bn) is just a case in point.

What needs to be (and is) done, in the face of all this uncertainty, is to conduct in-depth research, publish the best numbers that can be obtained, then see if anyone can come up with better ones.

Many of the numbers out there, including some in Treasure Islands, should as I explain be treated as ballpark figures, rather than sharply accurate estimates, of course. For example, research by Global Financial Integrity (GFI) research highlighting over $1.2 trillion in illicit financial flows out of developing countries in 2008 (that is, for every dollar of aid in, ten dollars flows out under the table) is as the report’s authors freely admit, subject to a considerable margin of error (in Treasure Islands, my own investigations in Angola suggest to me that theirs may well be an under-estimate, not an over-estimate.) GFI have an open challenge to the World Bank and others to come up with better numbers.

On this subject of data, I’ve recently had a bit of an email back and forth with someone from the Cayman Islands. A slightly tidied-up version of the exchange went like this:

Cay Man: I have always wondered how the tax gap figures can be quanitified. . . . speculative figures reduce credibility.

Me: The old ‘absence of reliable figures’ problem. Can’t measure it, so let’s ignore it’? We take a different view: get figures as good as you possibly can, then challenge others to shoot ’em down. Ours, by and large, are still standing . . .

Cay Man: I would prefer a serious effort to improve the accuracy of the numbers. Making things up is journalism not serious research.

Me: There is a huge difference between:

“I would welcome a serious effort to improve the accuracy of the numbers.”


“I would prefer a serious effort to improve the accuracy of the numbers.”

The first is infinitely better! It means you do your best, then strive to improve it. The second means ‘you ignore it until you can get accurate numbers’. Which you may well never get.

Oh, and P.S., nobody has made anything up.

Cay Man: Ok…..point taken. I am dead keen on getting accurate numbers.

So we kind of reached agreement in the end, on my terms I think.

Now please turn to this short blog (which I wrote) back in 2009. I mention it in Treasure Islands (p28 of the UK edition), and it’s an important one.

The challenge to the World Bank and others to produce better data remains open. They have done nothing. Why? I don’t know. I will merely remind readers of the recent remarks of the economist James K. Galbraith:

“[what] you cannot get – not at a meeting sponsored by the International Monetary Fund, not from the participants at the Institute for New Economic Thinking – is any serious discussion of contract law and fraud. I’ve tried, repeatedly. No one will deny, in response to the question, the role that fraud played in the financial debacle. How could they? But they won’t discuss it either.”

Can’t measure it? Then ignore it. And the dirt just keeps spewing out.

one comment

ic 9th September, 2011 11.06 am

Coke complaining about having to pay tax when repatriating funds back into US

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