The Impact of Tax Havens on Development

The WIDER Development Conference on the role of domestic revenue mobilization in development took place in Oslo, Norway,  September 6th – 8th 2023. The conference brought together experts from research and policy networks from around the world to discuss and debate the findings and policy recommendations of UNU-WIDER’s Domestic Revenue Mobilization (DRM) research program, funded by the Norwegian Agency for Development Cooperation (NORAD). Pierre Bachas from the EU Tax Observatory and Professor Annette Alstadsæter from Skatteforsk – Centre for Tax Research participated under the second day’s tax-related panels.

Tax Evasion Panel

Day two of the WIDER Development Conference started with a plenary discussion focusing on the topic of tax evasion. The discussion was moderated by Arvinn Gadgil, the Director of the UNDP Oslo Governance Center, and included Toril-Iren Pedersen (NORAD), Gerard Ryle (International Consortium of Investigative Journalists), Alex Cobham (Tax Justice Network) and Pierre Bachas (EU Tax Observatory) as panelists.

The discussion’s starting point was the emerging challenge of having had 2 years of consecutive regression in human development, after more than 3 decades of progress. Tax evasion was highlighted as an impactful factor in that regression, leading to eroding societal trust in our social contract and depriving governments from the funds needed to invest in development. Central to the challenge of tax avoidance is the existence of hidden offshore financial wealth; something that has been estimated at 10% GDP and now analyzable at a country-by-country level through the Atlas of the Offshore World.

Pierre Bachas (EU Tax Observatory) reflected on what can be done to tackle this problem and encouraged policymakers to enable better coordination between researchers, tax administration and international bodies in order to increase the tax revenue collected form high net-worth individuals. The documentation of offshore wealth, and information exchange, were mentioned as fundamental tools to achieving increased revenue.

Hidden Wealth and the Dubai Leaks

Conference attendees had also the opportunity to dive deeper into the challenges posed by the lack of transparency in today’s financial architecture through a parallel session on Hidden Wealth. During this session, Professor Annette Alstadsæter (Skatteforsk – Centre for Tax Research) shared the experiences and findings of working with the Dubai leaks and how that work has given a unique insight into who owns properties in the tax haven of Dubai.

Professor Alstadsæter raised the issue of real estate as a major blind spot in the current efforts towards fighting international financial secrecy and presented the findings of the research paper “Who Owns Offshore Real Estate? Evidence from Dubai”. In that work, a unique dataset capturing ownership of about 800,000 properties in Dubai was analyzed and the researchers showed how several conflict-ridden countries and autocracies have large holdings in Dubai relative to the size of their economy, (equivalent to 5% – 10% of their GDP). In stark contrast to the size of the investments made in those same countries towards the achievement of the sustainable development goals.

Seeking to further increase the understanding of real estate as a medium for hiding wealth, the Atlas of the Offshore World provides new data estimates of offshore real estate owned in London, Paris, Côte d’Azur, Dubai, Singapore, and Oslo.