Greed, Corruption, and the Modern State

Greed, Corruption, and the Modern State

Essays in Political Economy

Edited by Susan Rose-Ackerman and Paul Lagunes

What makes the control of corruption so difficult and contested? Drawing on the insights of political science, economics and law, the expert contributors to this book offer diverse perspectives. One group of chapters explores the nature of corruption in democracies and autocracies, and “reforms” that are mere facades. Other contributions examine corruption in infrastructure, tax collection, cross-border trade, and military procurement. Case studies from various regions – such as China, Peru, South Africa and New York City – anchor the analysis with real-world situations. The book pays particular attention to corruption involving international business and the domestic regulation of foreign bribery.

Chapter 13: Tax avoidance, tax evasion, money laundering and the problem of ‘offshore’

Peter Alldridge

Subjects: economics and finance, economic crime and corruption, law - academic, corruption and economic crime, politics and public policy, public policy

Extract

Capital flight from developing nations to rich nations, frequently via (‘offshore’) secrecy jurisdictions, is said to be bad for the developing nations, because it erodes their tax base. It has a number of causes, including tax avoidance, tax evasion, corruption, fraud, plunder, money laundering, caprice and rational and irrational investment. It was facilitated by the end, in the late 1970s, of the Bretton Woods arrangements. Under the Exchange Controls Act 1947 it was a crime to take cash out of the UK whatever its provenance. There is much concern about the relationship between international capital movement and its lawfulness. In the literature on such flows the word ‘illicit’ is generally used. Another word frequently deployed is ‘laundering’. The purpose of this chapter is to untangle some of the arguments, and to examine the relationship between the respective crimes and non-crimes. What it will suggest is that so far as possible in the formation of international policy, arguments about laundering should be kept separate from those to do with corruption, tax evasion and tax avoidance. Corruption is the logically prior issue because, of the issues under consideration, only corruption strikes directly at the rule of law. If it is possible to bribe a judge, or a police officer or a tax inspector or somebody placing government contracts, then it does not matter what the rules are, because they will not be applied. In particular the rhetorical device of branding money ‘dirty’ or activity as ‘laundering’ should be avoided.

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