Baker and Murphy: The Political Economy of ‘Tax Spillover’

A seminar on the use of tax spillover analyses created using the methodology described by Professor Andrew Baker and Professor Richard Murphy of City, University of London in a paper in Global Policy, published in March 2019, was discussed at a seminar at City, University of London on 5 September 2019.

The seminar was attended from members of the academic community from a number of universities; a range of NGOs working in international tax issues including Oxfam, ActionAid and the Tax Justice Network; economic think tanks such as Demos and the Institute for Public Policy Research; the press, including The Financial Times and International Tax Review; and representatives from the OECD and the IMF and World Bank funded Global Initiative for Financial Transparency, based in Washington DC.

The seminar was split into two parts. In the first part the issue of tax spillovers was discussed in general. Tax spillovers are defined as the positive or negative impacts that one part of a tax system has on the effectiveness of another part of the same tax system or the tax system of another jurisdiction. They have achieved much greater attention since the publication of a seminal IMF paper on the issue in 2014. The desirability of undertaking reviews of these impacts and the ways that they might be managed was the focus of this session. It was widely agreed that the issue was worth pursuing because of the significant, and largely unknown or unappraised risk of  tax spillovers in many jurisdictions’ tax systems.

A discussion of what might be called the Baker-Murphy approach was the focus of the second part of the seminar. The detailed nature of the qualitative methodology used was discussed: it contrasts with the qualitative approach used by the IMF in 2014. In addition, the ability of the system to generate positive recommendations for change was highlighted: the focus of this system is to assist and empower regulators in the course of their work.

Discussion as to how the methodology might be developed, and most importantly put to use, was lively and encouraging. A number of parties present agreed to cooperate on this issue with Professors Baker and Murphy.

Written By coffers