Well – I thought that after the recent demonstrations against Top Shops’  big boy – it was worth a  deeper delve into the mire of the tax haven. That quiet corner of the universe that swallows up huge chunks of cash that hasn’t been filtered via the tax-man first. That area of taxation where Generally Accepted Accounting Principles have no meaningful place in the world. I’m not just going to look at HMRC (that’s Her Majesty’s Revenue and Customs to the uninitiated) but also at what has been happening on a global scale. There’s lots of places to look because the world is becoming disgruntled – hence the demonstrations –  between those who have and those who don’t have. The mega-rich and the would-be-mega-rich will always attempt to cling onto their earnings (illicit or otherwise) by paying as little tax as they can get away with. Offshore means – what? Its’s the most convoluted and financially complex way of organising money that the world has, in order to divert it away from taxation.

Let’s start with the band U2 for instance. Bono, the lead singer, is always banging on about political freedom and ending global poverty. But when it comes down to his own wealth management – what does he do? Well, let’s see now………..End Tax Haven Secrecy has an opinion here http://www.endtaxhavensecrecy.org/en/2011/02/10/thank-you-bono-now-push-this-to-its-logical-conclusion/ and so does Bridge Over Troubled Waters, here: http://bridgeovertroubledwaters.wordpress.com/2009/02/26/bonos-tax-haven-is-robbing-the-poor/. This issue with U2 isn’t new and goes way back to 2005, when it was first highlighted that the band use offshore financial structures to avoid paying tax in Ireland where they are registered. Is this a case of do what I say and not what I do? Bono’s political rants are legendary, so he’s an easy target for criticism. Even if you do a quick search, there’s a lot of information out there. Another consideration to add to the mix, is that Ireland is a tax haven in its own right, so the Netherlands must be offering an added bonus for taking Bono’s wedge…………

You can check out the Global Financial Integrity web site here: http://www.gfip.org/index.php?option=com_content&task=view&id=189, but note that their copyright has not been updated to 2011 so err on the side of caution and back up any data that you might use by checking another source for accuracy.

One place I look regularly is on the Tax Justice Network http://www.taxjustice.net/cms/front_content.php?idcatart=2 and in particular their blogs, which are crammed full of really good information, that can be reliably sourced. I wrote about this web site last October.  http://taxjustice.blogspot.com/ The main web site provides access to global resources and they keep adding to the site with links to other areas and articles covering really interesting subjects such as withholding tax, extraction transparency, financial poverty, illicit flows of finance, country by country reporting and – of course – tax evasion across the world by corporations and individuals alike. There’s so much information that it’s really worth taking the time to have a delve if this is a subject area that interests you. There’a a financial Secrecy Index here:  http://news.financialsecrecyindex.com/Click on the resources tab for an subject index and don’t forget Transparency International’s Corruption Index web pages, which I have written about previously on this blog, and a related anomaly highlighted by TJN here: http://www.taxjustice.net/cms/front_content.php?idcat=100

Delaware or Isle of Man, Switzerland or Hong Kong? How many tax havens can you name off the top of your head without looking them all up? Actually, don’t bother – it’s all listed here for you: http://en.wikipedia.org/wiki/List_of_offshore_financial_centres and it’s from Wikipedia, so regular readers will know my opinion on Wikipedia. Beware and use it with care because you don’t know who has compiled the data. One reason I say this is because Wikipedia lists London instead of The City of London specifically as a tax haven, and there’s a very distinct difference.

The OECD also provides a list of “Uncooperative” Tax Havens here: http://www.oecd.org/document/57/0,3746,en_2649_201185_30578809_1_1_1_1,00.html and another page provides excellent data on tax and access to a tax database: http://www.oecd.org/topic/0,3699,en_2649_37427_1_1_1_1_37427,00.html. You can also check out the IMF and the G20 web sites.

So now let’s take a visit to another web site that I like. It’s called Tax-News.com http://www.tax-news.com/ and while it is a fee-based service, it’s the free stuff that I value. The journalists are prolific writers and incredibly knowledgeable, providing articles globally for the interested reader. The coverage isn’t just offshore tax; it covers a massive selection of related tax topics from free trade agreements, to alcohol and cigarette tax, shipping tax, secrecy, gaming legislation, special reports and much more. Each country page will point you at specific areas of taxation. Just dive in, because you will like what you find.

Let’s not forget the business press, such as Forbes: http://www.forbes.com/2007/03/15/havens-international-tax-forbeslife-cx_mw_ee_0315taxhavens.html. If you think laterally, there is a wealth of information (pun intended!) in the business press which will include lists such as who’s who offshore and table rankings. See what I mean, here: http://www.forbes.com/2004/04/15/cx_cv_0415feat.html.

The law firms who provide specialist advice on “asset protection arrangements” have lawyers who publish regular legal updates in this area. Look on the Firms’ web sites for free articles and legal updates for legislative changes, especially those who have corporate tax departments like Sullivan & Cromwell or Baker & McKenzie.

And finally, lets take a look at Vodafone in India. What a mess! Even the Bombay High Court can’t sort this one out. It’s related to Vodafone’s purchase of Huchison Whampoa of Hong Hong and the Indian tax authorities’ demand for £1.6bn in capital gains taxes, which it says is owed to them. However, the deal was struck offshore and Vodafone says it is now exempt from paying the tax. http://online.wsj.com/article/SB10001424052748704019604576131410598322674.html

Vodafone also set aside £2.2bn for it’s UK tax bill last year, but then struck a deal with HMRC and paid just £1.25bn in taxes. Of course this has caused outrage  and demonstrations, as reported in the FT: http://online.wsj.com/article/SB10001424052748704019604576131410598322674.html and as reported in many other press reports, including detailed coverage by Private Eye, who thought the bill should have been as much as £6bn.

And so, the world of the offshore tax haven continues to be shrouded in secrecy much as before, despite reports and their protestations that they are opening up to becoming more transparent and more regulated.

As always, your comments and feedback are always welcomed. I’ll be back again soon.

from epochtimes.com

This past week on Monday, I had the pleasure of listening to the Senior Fellow of Brookings Institute and former Director of the World Bank Institute Dr. Daniel Kaufmann.

Modest yet aristocratic in stature, Dr. Kaufmann has had a long distinguished career researching and fighting against the roots of corruption through the perspective of an economist. On Monday, he gave us a retrospective look at the evolution of corruption research and its results.

As an introduction, Dr. Kaufmann told us how he became enamored with the study of poverty and corruption. At a youthful age, he traveled to Cartagena, Colombia after graduating from Harvard. What he saw was surprising. The city of Cartagena was grand and populated, yet immediately next to it was a horrific slum inhabited by hobos and orphans. The stark contrast in wealth led Dr. Kaufmann to question substantially about the cause of inequality. He asked himself, “What causes wide inequality? Why is abject poverty so persistent?” Since that memorable episode in Cartagena, Dr. Kaufmann has dedicated his career to answering these two questions.

In the 1990′s World Bank did not permit the use of word “corruption” in any of its economic reports and analyses. The institution felt that the term “corruption” had political meaning which it, as an objective economic organization, should avoid. Under Dr. Kaufmann’s tenure as the World Bank Institute Director, the term gradually became permissible, as he and like-minded people realized that economics and politics cannot be treated in isolation. Especially in the case of economic inequality, Dr. Kaufmann discovered that government corruption played a large role.

In the mid-1980s, Dr. Kaufmann analyzed trade distortion, industry & foreign exchange regimes, and flow of foreign aids. He found that trade inefficiency, artificial exchange rates, and ineffectiveness of foreign aids were all caused at least in part by “misgovernance.”

To demonstrate, Dr. Kaufmann used a humorous anecdote during his time in Moscow in 1992. It was a period of turmoil in the Soviet Union. Once a unified superpower, USSR was breaking apart; the “flags were literally changing” while Dr. Kaufmann conducted his field research. The anecdote, however, did not focus on the Soviet’s collapse but rather Dr. Kaufmann’s experience with finding a hotel.

In 1992, Soviet Union did not have a market for hotels. Its Ministry of Real Estate managed facilities and reservations. A naive Dr. Kaufmann thus went to the officials of the Ministry to arrange his stay. Little did he expect that the officials there would ask him for “money” as a part of the favor for making his arrangement. So Dr. Kaufmann did what many Americans would do in a similar situation. He complained, and a year later Dr. Kaufmann heard from a friend in the Russian government that after his complaint, the minister and the president had a screaming match during which the president told the minister never to ask for money from the people of World Bank.

from wikipedia

Dr. Kaufmann’s personal incident reveals the wide-spread presence of corruption in a nation’s economic functions. He would later substantiate this claim with economic data and statistical study, but the core of his findings was this: economic inefficiency must not just be analyzed on the basis of economic models but also through political investigation. This is a maverick statement on the part of Dr. Kaufmann, for it spells huge implications for the field of economics which had always tried to stay objective and scientific. Dr. Kaufmann challenges his colleagues to merge politics with economics. It might be a scary picture for some, but on the practical end, this new attitude may lead to a better, more comprehensive understanding of persistent poverty and wide-spread inequality. In the end, the law of supply and demand does not dictate all that is in our lives. Our government does play a relevant role in the future of our living standards. This theme is never more apparent than now given the current crisis in Egypt.

A day later, I asked my Global Economy professor whether Dr. Kaufmann ultimately found the answer to the cause of his startling observation in Cartagena. My professor replied, “No.” According to him, Dr. Kaufmann has gathered a lot, but a complete answer to this immense question still remains unknown. Though, I have a slight suspicion as to why…

Thank you for taking the time to read this article. Before I go, I would like to update you that Henry Paulson, the previous Treasury Secretary of the United States, is going to visit my Global Economy class for a guest lecture. He will also be speaking at my university Columbia in the coming weeks. Of course, when all is done, I will share with you my experience and what I have learned.

Take care.

Rwanda, Ghana, Macedonia, Tunisia, Slovakia, Turkey, Namibia, Kuwait, Saudi Arabia, Oman, Costa Rica, Bhutan, Taiwan, Botswana, Qatar and many others.

Italy went from 51st place in 2008, to 63rd place in 2009, to 67th place in 2010.

A worker lays out copies of corruption watchdog Transparency International's annual Corruption Perceptions Index prior to a press conference upon the release of the document, Berlin, October 26. — Photo by AFP

BERLIN: Pakistan dropped to 34th from 42nd in the ranking of global corruption index, a Transparency International report showed.

Afghanistan remains the world’s second most corrupt country, and Iraq is not far behind. The annual report of TI found Somalia to be most corrupt country, followed by Afghanistan tied with Myanmar, and then Iraq.

Denmark, New Zealand and Singapore tied for first place as the most principled nations.

Of the 178 countries surveyed about public sector corruption, nearly three quarters fell below an index score of five on a scale where zero is the most corrupt and 10 is the least.

The group said Tuesday the overall results show that greater efforts must go into strengthening governance across the globe.

While the government cannot be directly blamed for some of the issues facing Guyanese, an obvious political directive in every sphere of life in Guyana plays a role in life’s determination. Examples of government involvement can be found in private deals, public deals, foreign investment, policing, judicial judgment and much more.

2011 is expected to be another election year – but we wonder if this and other political parties would be judged by their almost inactivity.

For the ruling PPP the Amnesty Internation Universal Periodic Report does not say much for governance among other critical issues facing Guyanese. Here are the
Recommendations to the government of Guyana:

The death penalty
- To immediately establish a moratorium on executions with a view to abolishing the death penalty as provided by UN General Assembly resolution 62/149, adopted on 18 December 2007 and resolution 63/168 adopted on 18 December 2008;
- To commute without delay all death sentences to terms of imprisonment;
- To immediately remove all provisions in national law which are in breach of international human rights law, in particular those that provide for mandatory death sentences,
- To ensure rigorous compliance in all death penalty cases with international standards for fair trial are respected.

Human rights, sexual orientation and gender identity
- To repeal all provisions allowing for the criminalization of same sex relations;
- Repeal all provisions, including Chapter 8.02 section 153 (1) (xlvii) of the Summary Jurisdiction (Offences) Act, which are used to discriminate against lesbian, gay, bisexual and transgender persons.

Violence against women
- To expedite passage and implementation of the Sexual Offences Bill;
- To ensure the coordinated implementation of the National Domestic Violence Policy.

HIV/AIDS and human rights
- To combat discrimination and stigma surrounding HIV/AIDS and particularly against members of the LGBT community.

Excessive use of force by the security forces and impunity for human rights violations
- To ensure that all complaints of human rights violations by the security forces are subject to immediate, thorough and independent investigation and, if state agents are charged with such crimes, that their cases are brought to trial in an expeditious manner;
- To conduct a fully independent investigation into human rights abuses allegedly committed by a ‘death squad’ between 2002-2006, and to ensure that those responsible are brought to justice and that witnesses and their families are offered effective protection in all these investigations;
- To ensure that members of the Guyana Police Force are adequately trained on the appropriate use of force and firearms in accordance with international standards, including the Basic Principles on the Use of Force and Firearms by Law enforcement officials.

Ratification of international human rights instruments
- To ratify the following international treaties: the Second Optional Protocol to the International Covenant on Civil and Political Rights (and to remove reservations to its First Optional Protocol); the Optional Protocol to the International Covenant on Economic, Social and Cultural Rights, the Optional Protocol to the Convention on the Elimination of All Forms of Discrimination against Women; the Optional Protocol to the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; the Optional Protocol to the Convention on the Rights of the Child on the sale of children, child prostitution and child pornography; and the International
Convention for the Protection of All Persons from Enforced Disappearance;
- To ratify the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families and the Convention on the Rights of Persons with Disabilities, both of which Guyana has already signed;
- To ratify the American Convention on Human Rights.

While the government cannot be directly blamed for some of the issues facing Guyanese, an obvious political directive in every sphere of life in Guyana plays a role in life’s determination. Examples of government involvement can be found in private deals, public deals, foreign investment, policing, judicial judgment and much more.

2011 is expected to be another election year – but we wonder if this and other political parties would be judged by their almost inactivity.

For the ruling PPP the Amnesty Internation Universal Periodic Report does not say much for governance among other critical issues facing Guyanese. Here are the
Recommendations to the government of Guyana:

The death penalty
- To immediately establish a moratorium on executions with a view to abolishing the death penalty as provided by UN General Assembly resolution 62/149, adopted on 18 December 2007 and resolution 63/168 adopted on 18 December 2008;
- To commute without delay all death sentences to terms of imprisonment;
- To immediately remove all provisions in national law which are in breach of international human rights law, in particular those that provide for mandatory death sentences,
- To ensure rigorous compliance in all death penalty cases with international standards for fair trial are respected.

Human rights, sexual orientation and gender identity
- To repeal all provisions allowing for the criminalization of same sex relations;
- Repeal all provisions, including Chapter 8.02 section 153 (1) (xlvii) of the Summary Jurisdiction (Offences) Act, which are used to discriminate against lesbian, gay, bisexual and transgender persons.

Violence against women
- To expedite passage and implementation of the Sexual Offences Bill;
- To ensure the coordinated implementation of the National Domestic Violence Policy.

HIV/AIDS and human rights
- To combat discrimination and stigma surrounding HIV/AIDS and particularly against members of the LGBT community.

Excessive use of force by the security forces and impunity for human rights violations
- To ensure that all complaints of human rights violations by the security forces are subject to immediate, thorough and independent investigation and, if state agents are charged with such crimes, that their cases are brought to trial in an expeditious manner;
- To conduct a fully independent investigation into human rights abuses allegedly committed by a ‘death squad’ between 2002-2006, and to ensure that those responsible are brought to justice and that witnesses and their families are offered effective protection in all these investigations;
- To ensure that members of the Guyana Police Force are adequately trained on the appropriate use of force and firearms in accordance with international standards, including the Basic Principles on the Use of Force and Firearms by Law enforcement officials.

Ratification of international human rights instruments
- To ratify the following international treaties: the Second Optional Protocol to the International Covenant on Civil and Political Rights (and to remove reservations to its First Optional Protocol); the Optional Protocol to the International Covenant on Economic, Social and Cultural Rights, the Optional Protocol to the Convention on the Elimination of All Forms of Discrimination against Women; the Optional Protocol to the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment; the Optional Protocol to the Convention on the Rights of the Child on the sale of children, child prostitution and child pornography; and the International
Convention for the Protection of All Persons from Enforced Disappearance;
- To ratify the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families and the Convention on the Rights of Persons with Disabilities, both of which Guyana has already signed;
- To ratify the American Convention on Human Rights.

“According to the compilation released this week, Haiti is placed at 147 on the overall list, with Guyana at 155 and scored 48.4, making its economy the 155th freest in the 2009 Index of 183 economies examined.” The Forum commented.

We quote extensively from the “2010 Index of economic Freedoms” as follows:

World Rank: 153 Regional Rank: 27 of 29 (Guyana)

Guyana’s economic freedom score is 48.4, making its economy the 153rd freest in the 2010 Index. Its overall score remains the same as last year because improvements in three of the 10 economic freedoms were offset by declines in investment freedom and property rights. Guyana is ranked 27th out of 29 countries in the South and Central America/Caribbean region, and its overall score is well below the world and regional averages.

Guyana does not perform well in any of the 10 economic freedoms and is slightly above the world average only in labor freedom and monetary freedom. Average economic growth over the past five years has been only about 3 percent, lagging behind other developing countries.

Long-standing constraints on overall economic freedom include property rights protected only erratically under the weak rule of law and widespread corruption in all areas of government. The biggest barrier to development is Guyana’s oversized government, with expenditures that often exceed half of GDP. Significant restrictions on foreign investment, combined with an inefficient bureaucracy, substantially depress the entrepreneurial environment.

Guyana is one of the poorest countries in the Western Hemisphere, and its state-dominated economy, dependent mainly on agriculture and mining, has been stagnant for many years. Violent crime and drug trafficking are serious concerns.

Business Freedom 63.4
Despite some progress, the overall freedom to conduct a business remains restricted by Guyana’s regulatory environment. Starting a business takes about the world average of 35 days. Obtaining a business license requires less than the world average of 18 procedures, but closing a business can be costly.

Trade Freedom 71.3
Guyana’s weighted average tariff rate was 6.9 percent in 2008. Import restrictions, import taxes, import-licensing requirements for a relatively large number of products, burdensome standards and regulations, inefficient customs administration, weak intellectual property rights enforcement, inadequate infrastructure, and corruption add to the cost of trade. Fifteen points were deducted from Guyana’s trade freedom score to account for non-tariff barriers.

Fiscal Freedom 55.9
Guyana has relatively high tax rates. The top income tax rate is 33.3 percent, and the top corporate tax rate is 45 percent. Other taxes include a property tax and a value-added tax (VAT). Excise taxes on fuel were temporarily suspended in 2008. In the most recent year, overall tax revenue as a percentage of GDP was 35.7 percent.

Government Spending 26.2
Total government expenditures, including consumption and transfer payments, are high. Privatization of state-owned enterprises has achieved mixed results. Poor management of public expenditures has led to persistent fiscal deficits. In the most recent year, government spending equaled 49.6 percent of GDP.

Investment Freedom 30.0
Guyana has been moving toward a more welcoming environment for foreign investors, but major foreign investments receive intense political scrutiny in an economy still dominated by the state.

Financial Freedom 40.0
Guyana’s underdeveloped financial system remains plagued by inefficiency and a poor institutional framework. High credit costs and scarce access to financing remain barriers to more dynamic entrepreneurial activity. The percentage of loans that are considered non-performing is a relatively high 14 percent.

Freedom From Corruption 26.0
There is extensive corruption at every level of law enforcement and government. Public officials are required to disclose their assets to an Integrity Commission before assuming office, but the commission had not been constituted as of mid-2009. Widespread corruption undermines poverty-reduction efforts by international aid donors and discourages foreign investors.

The CAF noted, “The size of the Jagdeo government was also slammed, being deemed the biggest barrier to development since expenditures exceed the gross domestic product (GDP).”

Of course the two doctors (Ashni and Jagdeo) can only spin doctor their way through his one. Expect full Prem-Misirable and Randyitis to be in the papers for the next weeks, doing articles for the non-selling chronicle and sending those articles as letters to the other media…spin! Spin Doctors.

“According to the compilation released this week, Haiti is placed at 147 on the overall list, with Guyana at 155 and scored 48.4, making its economy the 155th freest in the 2009 Index of 183 economies examined.” The Forum commented.

We quote extensively from the “2010 Index of economic Freedoms” as follows:

World Rank: 153 Regional Rank: 27 of 29 (Guyana)

Guyana’s economic freedom score is 48.4, making its economy the 153rd freest in the 2010 Index. Its overall score remains the same as last year because improvements in three of the 10 economic freedoms were offset by declines in investment freedom and property rights. Guyana is ranked 27th out of 29 countries in the South and Central America/Caribbean region, and its overall score is well below the world and regional averages.

Guyana does not perform well in any of the 10 economic freedoms and is slightly above the world average only in labor freedom and monetary freedom. Average economic growth over the past five years has been only about 3 percent, lagging behind other developing countries.

Long-standing constraints on overall economic freedom include property rights protected only erratically under the weak rule of law and widespread corruption in all areas of government. The biggest barrier to development is Guyana’s oversized government, with expenditures that often exceed half of GDP. Significant restrictions on foreign investment, combined with an inefficient bureaucracy, substantially depress the entrepreneurial environment.

Guyana is one of the poorest countries in the Western Hemisphere, and its state-dominated economy, dependent mainly on agriculture and mining, has been stagnant for many years. Violent crime and drug trafficking are serious concerns.

Business Freedom 63.4
Despite some progress, the overall freedom to conduct a business remains restricted by Guyana’s regulatory environment. Starting a business takes about the world average of 35 days. Obtaining a business license requires less than the world average of 18 procedures, but closing a business can be costly.

Trade Freedom 71.3
Guyana’s weighted average tariff rate was 6.9 percent in 2008. Import restrictions, import taxes, import-licensing requirements for a relatively large number of products, burdensome standards and regulations, inefficient customs administration, weak intellectual property rights enforcement, inadequate infrastructure, and corruption add to the cost of trade. Fifteen points were deducted from Guyana’s trade freedom score to account for non-tariff barriers.

Fiscal Freedom 55.9
Guyana has relatively high tax rates. The top income tax rate is 33.3 percent, and the top corporate tax rate is 45 percent. Other taxes include a property tax and a value-added tax (VAT). Excise taxes on fuel were temporarily suspended in 2008. In the most recent year, overall tax revenue as a percentage of GDP was 35.7 percent.

Government Spending 26.2
Total government expenditures, including consumption and transfer payments, are high. Privatization of state-owned enterprises has achieved mixed results. Poor management of public expenditures has led to persistent fiscal deficits. In the most recent year, government spending equaled 49.6 percent of GDP.

Investment Freedom 30.0
Guyana has been moving toward a more welcoming environment for foreign investors, but major foreign investments receive intense political scrutiny in an economy still dominated by the state.

Financial Freedom 40.0
Guyana’s underdeveloped financial system remains plagued by inefficiency and a poor institutional framework. High credit costs and scarce access to financing remain barriers to more dynamic entrepreneurial activity. The percentage of loans that are considered non-performing is a relatively high 14 percent.

Freedom From Corruption 26.0
There is extensive corruption at every level of law enforcement and government. Public officials are required to disclose their assets to an Integrity Commission before assuming office, but the commission had not been constituted as of mid-2009. Widespread corruption undermines poverty-reduction efforts by international aid donors and discourages foreign investors.

The CAF noted, “The size of the Jagdeo government was also slammed, being deemed the biggest barrier to development since expenditures exceed the gross domestic product (GDP).”

Of course the two doctors (Ashni and Jagdeo) can only spin doctor their way through his one. Expect full Prem-Misirable and Randyitis to be in the papers for the next weeks, doing articles for the non-selling chronicle and sending those articles as letters to the other media…spin! Spin Doctors.

“According to the compilation released this week, Haiti is placed at 147 on the overall list, with Guyana at 155 and scored 48.4, making its economy the 155th freest in the 2009 Index of 183 economies examined.” The Forum commented.

We quote extensively from the “2010 Index of economic Freedoms” as follows:

World Rank: 153 Regional Rank: 27 of 29 (Guyana)

Guyana’s economic freedom score is 48.4, making its economy the 153rd freest in the 2010 Index. Its overall score remains the same as last year because improvements in three of the 10 economic freedoms were offset by declines in investment freedom and property rights. Guyana is ranked 27th out of 29 countries in the South and Central America/Caribbean region, and its overall score is well below the world and regional averages.

Guyana does not perform well in any of the 10 economic freedoms and is slightly above the world average only in labor freedom and monetary freedom. Average economic growth over the past five years has been only about 3 percent, lagging behind other developing countries.

Long-standing constraints on overall economic freedom include property rights protected only erratically under the weak rule of law and widespread corruption in all areas of government. The biggest barrier to development is Guyana’s oversized government, with expenditures that often exceed half of GDP. Significant restrictions on foreign investment, combined with an inefficient bureaucracy, substantially depress the entrepreneurial environment.

Guyana is one of the poorest countries in the Western Hemisphere, and its state-dominated economy, dependent mainly on agriculture and mining, has been stagnant for many years. Violent crime and drug trafficking are serious concerns.

Business Freedom 63.4
Despite some progress, the overall freedom to conduct a business remains restricted by Guyana’s regulatory environment. Starting a business takes about the world average of 35 days. Obtaining a business license requires less than the world average of 18 procedures, but closing a business can be costly.

Trade Freedom 71.3
Guyana’s weighted average tariff rate was 6.9 percent in 2008. Import restrictions, import taxes, import-licensing requirements for a relatively large number of products, burdensome standards and regulations, inefficient customs administration, weak intellectual property rights enforcement, inadequate infrastructure, and corruption add to the cost of trade. Fifteen points were deducted from Guyana’s trade freedom score to account for non-tariff barriers.

Fiscal Freedom 55.9
Guyana has relatively high tax rates. The top income tax rate is 33.3 percent, and the top corporate tax rate is 45 percent. Other taxes include a property tax and a value-added tax (VAT). Excise taxes on fuel were temporarily suspended in 2008. In the most recent year, overall tax revenue as a percentage of GDP was 35.7 percent.

Government Spending 26.2
Total government expenditures, including consumption and transfer payments, are high. Privatization of state-owned enterprises has achieved mixed results. Poor management of public expenditures has led to persistent fiscal deficits. In the most recent year, government spending equaled 49.6 percent of GDP.

Investment Freedom 30.0
Guyana has been moving toward a more welcoming environment for foreign investors, but major foreign investments receive intense political scrutiny in an economy still dominated by the state.

Financial Freedom 40.0
Guyana’s underdeveloped financial system remains plagued by inefficiency and a poor institutional framework. High credit costs and scarce access to financing remain barriers to more dynamic entrepreneurial activity. The percentage of loans that are considered non-performing is a relatively high 14 percent.

Freedom From Corruption 26.0
There is extensive corruption at every level of law enforcement and government. Public officials are required to disclose their assets to an Integrity Commission before assuming office, but the commission had not been constituted as of mid-2009. Widespread corruption undermines poverty-reduction efforts by international aid donors and discourages foreign investors.

The CAF noted, “The size of the Jagdeo government was also slammed, being deemed the biggest barrier to development since expenditures exceed the gross domestic product (GDP).”

Of course the two doctors (Ashni and Jagdeo) can only spin doctor their way through his one. Expect full Prem-Misirable and Randyitis to be in the papers for the next weeks, doing articles for the non-selling chronicle and sending those articles as letters to the other media…spin! Spin Doctors.

“According to the compilation released this week, Haiti is placed at 147 on the overall list, with Guyana at 155 and scored 48.4, making its economy the 155th freest in the 2009 Index of 183 economies examined.” The Forum commented.

We quote extensively from the “2010 Index of economic Freedoms” as follows:

World Rank: 153 Regional Rank: 27 of 29 (Guyana)

Guyana’s economic freedom score is 48.4, making its economy the 153rd freest in the 2010 Index. Its overall score remains the same as last year because improvements in three of the 10 economic freedoms were offset by declines in investment freedom and property rights. Guyana is ranked 27th out of 29 countries in the South and Central America/Caribbean region, and its overall score is well below the world and regional averages.

Guyana does not perform well in any of the 10 economic freedoms and is slightly above the world average only in labor freedom and monetary freedom. Average economic growth over the past five years has been only about 3 percent, lagging behind other developing countries.

Long-standing constraints on overall economic freedom include property rights protected only erratically under the weak rule of law and widespread corruption in all areas of government. The biggest barrier to development is Guyana’s oversized government, with expenditures that often exceed half of GDP. Significant restrictions on foreign investment, combined with an inefficient bureaucracy, substantially depress the entrepreneurial environment.

Guyana is one of the poorest countries in the Western Hemisphere, and its state-dominated economy, dependent mainly on agriculture and mining, has been stagnant for many years. Violent crime and drug trafficking are serious concerns.

Business Freedom 63.4
Despite some progress, the overall freedom to conduct a business remains restricted by Guyana’s regulatory environment. Starting a business takes about the world average of 35 days. Obtaining a business license requires less than the world average of 18 procedures, but closing a business can be costly.

Trade Freedom 71.3
Guyana’s weighted average tariff rate was 6.9 percent in 2008. Import restrictions, import taxes, import-licensing requirements for a relatively large number of products, burdensome standards and regulations, inefficient customs administration, weak intellectual property rights enforcement, inadequate infrastructure, and corruption add to the cost of trade. Fifteen points were deducted from Guyana’s trade freedom score to account for non-tariff barriers.

Fiscal Freedom 55.9
Guyana has relatively high tax rates. The top income tax rate is 33.3 percent, and the top corporate tax rate is 45 percent. Other taxes include a property tax and a value-added tax (VAT). Excise taxes on fuel were temporarily suspended in 2008. In the most recent year, overall tax revenue as a percentage of GDP was 35.7 percent.

Government Spending 26.2
Total government expenditures, including consumption and transfer payments, are high. Privatization of state-owned enterprises has achieved mixed results. Poor management of public expenditures has led to persistent fiscal deficits. In the most recent year, government spending equaled 49.6 percent of GDP.

Investment Freedom 30.0
Guyana has been moving toward a more welcoming environment for foreign investors, but major foreign investments receive intense political scrutiny in an economy still dominated by the state.

Financial Freedom 40.0
Guyana’s underdeveloped financial system remains plagued by inefficiency and a poor institutional framework. High credit costs and scarce access to financing remain barriers to more dynamic entrepreneurial activity. The percentage of loans that are considered non-performing is a relatively high 14 percent.

Freedom From Corruption 26.0
There is extensive corruption at every level of law enforcement and government. Public officials are required to disclose their assets to an Integrity Commission before assuming office, but the commission had not been constituted as of mid-2009. Widespread corruption undermines poverty-reduction efforts by international aid donors and discourages foreign investors.

The CAF noted, “The size of the Jagdeo government was also slammed, being deemed the biggest barrier to development since expenditures exceed the gross domestic product (GDP).”

Of course the two doctors (Ashni and Jagdeo) can only spin doctor their way through his one. Expect full Prem-Misirable and Randyitis to be in the papers for the next weeks, doing articles for the non-selling chronicle and sending those articles as letters to the other media…spin! Spin Doctors.

“According to the compilation released this week, Haiti is placed at 147 on the overall list, with Guyana at 155 and scored 48.4, making its economy the 155th freest in the 2009 Index of 183 economies examined.” The Forum commented.

We quote extensively from the “2010 Index of economic Freedoms” as follows:

World Rank: 153 Regional Rank: 27 of 29 (Guyana)

Guyana’s economic freedom score is 48.4, making its economy the 153rd freest in the 2010 Index. Its overall score remains the same as last year because improvements in three of the 10 economic freedoms were offset by declines in investment freedom and property rights. Guyana is ranked 27th out of 29 countries in the South and Central America/Caribbean region, and its overall score is well below the world and regional averages.

Guyana does not perform well in any of the 10 economic freedoms and is slightly above the world average only in labor freedom and monetary freedom. Average economic growth over the past five years has been only about 3 percent, lagging behind other developing countries.

Long-standing constraints on overall economic freedom include property rights protected only erratically under the weak rule of law and widespread corruption in all areas of government. The biggest barrier to development is Guyana’s oversized government, with expenditures that often exceed half of GDP. Significant restrictions on foreign investment, combined with an inefficient bureaucracy, substantially depress the entrepreneurial environment.

Guyana is one of the poorest countries in the Western Hemisphere, and its state-dominated economy, dependent mainly on agriculture and mining, has been stagnant for many years. Violent crime and drug trafficking are serious concerns.

Business Freedom 63.4
Despite some progress, the overall freedom to conduct a business remains restricted by Guyana’s regulatory environment. Starting a business takes about the world average of 35 days. Obtaining a business license requires less than the world average of 18 procedures, but closing a business can be costly.

Trade Freedom 71.3
Guyana’s weighted average tariff rate was 6.9 percent in 2008. Import restrictions, import taxes, import-licensing requirements for a relatively large number of products, burdensome standards and regulations, inefficient customs administration, weak intellectual property rights enforcement, inadequate infrastructure, and corruption add to the cost of trade. Fifteen points were deducted from Guyana’s trade freedom score to account for non-tariff barriers.

Fiscal Freedom 55.9
Guyana has relatively high tax rates. The top income tax rate is 33.3 percent, and the top corporate tax rate is 45 percent. Other taxes include a property tax and a value-added tax (VAT). Excise taxes on fuel were temporarily suspended in 2008. In the most recent year, overall tax revenue as a percentage of GDP was 35.7 percent.

Government Spending 26.2
Total government expenditures, including consumption and transfer payments, are high. Privatization of state-owned enterprises has achieved mixed results. Poor management of public expenditures has led to persistent fiscal deficits. In the most recent year, government spending equaled 49.6 percent of GDP.

Investment Freedom 30.0
Guyana has been moving toward a more welcoming environment for foreign investors, but major foreign investments receive intense political scrutiny in an economy still dominated by the state.

Financial Freedom 40.0
Guyana’s underdeveloped financial system remains plagued by inefficiency and a poor institutional framework. High credit costs and scarce access to financing remain barriers to more dynamic entrepreneurial activity. The percentage of loans that are considered non-performing is a relatively high 14 percent.

Freedom From Corruption 26.0
There is extensive corruption at every level of law enforcement and government. Public officials are required to disclose their assets to an Integrity Commission before assuming office, but the commission had not been constituted as of mid-2009. Widespread corruption undermines poverty-reduction efforts by international aid donors and discourages foreign investors.

The CAF noted, “The size of the Jagdeo government was also slammed, being deemed the biggest barrier to development since expenditures exceed the gross domestic product (GDP).”

Of course the two doctors (Ashni and Jagdeo) can only spin doctor their way through his one. Expect full Prem-Misirable and Randyitis to be in the papers for the next weeks, doing articles for the non-selling chronicle and sending those articles as letters to the other media…spin! Spin Doctors.

Have a look at this table of Corruption perception Index [CPI] from Transparency International [TI], which places NZ at the top, Australia at number 8 and India at 84th.

 I have lived in all 3 countries and know the difference. NZ and Australia are far cleaner as far as the impact of corruption is concerned in day to day lives of the people.

Somalia and Afghanistan are at the bottom. Pakistan and Bangladesh are at 139th place. Nepal is even lower. You would see that whole South Asia is very poorly placed in this list. Bhutan is the only exception. Are we surprised? At least, I am not.

I would love to see India within the top 10.

As TI says, Corruption ruins lives, take action and fight back. Please do think about what we, the people, can do to reduce corruption in the world.

Yadu Singh/Orlando*/17-11-09

*I am attending American Heart Association Conference at Orlando, Florida, USA currently.

The first observation that has to be made is that this is Corruption Perception Index. It’s a perception. So while keeping in mind that this is a perception –  a subjective index – we must ask, How TI tries to make the composite index as objective as possible.

CPI, for the purpose, is defined as abuse of public office for private gain. It’s a composite index. The CPI 2008 draws on 13 different polls and surveys from 11 independent institutions.  All institutions provide ranking  and overall extent of corruption of countries they operate on.  The definition of corruption being same as defined above, and survey excludes cases such as political instability and nationalism.

Sources of Data

TI receives score of corruption from all surveying institution. All survey result providers are not considered at par. While data compiled by African Development Bank, Asian Development Bank, CIPA are taken as it is, as they regularly analyze a country’s performance, crosschecking it with peers; the data compiled from IMD and PERC are averaged out with last year to reduce abrupt variation in scoring from random effects.

Type of questions

ADB, AFDB, CPIA by World bank ask for ineffective audits, conflict of interest, policies being manipulated by corruption on a scale of 1(bad) to 6(good) . BTI asks question such as to what extent Government can contain corruption or to what extent public is tolerant to official corruption. Likewise all surveys compiles data on extent of corruption on some scale.

Sample Design

While all sources provides data on extent of corruption, the sample design varies from institution to institution. For ADB and AFDB sample is foreigners having business experience in local country to avoid home-country-bias. IMD, PERC asks question from local residents or expatriates.

Now one may raise concern that there may be a problem of circularity, that is previous year score might affect respondent response.  TI tested this hypothesis in year 2006, and it was found to be not true.

Standardization of data

Key observations:

• The less free countries include ones you’d expect like Iran, China, and Cuba based on government structure and policy.
• The most free country in the sample is Estonia followed by the UK.
• The partly free countries include a variety of developing countries ranging from Kenya to Russia which all have reputations of some sort of government or private sector control issues which would support the country not being categorized as completely free).

Now, after reviewing the results of the report, I was curious if corruption plays a significant role in the determination of a country’s Internet Freedom assessment.   In particular, India is a full democracy but didn’t receive a fully free score in the Freedom Report analysis but is known for corruption up and down the private and public sector.

I then took a look at a recent global corruption study and looked at the scores for these same 15 countries on a corruption index and plotted them on a single graph to see if there was any obvious correlation.  Transparency International is a global organization that fights against corruption.   They published a free corruption index for 2008 which you can find here—again highly recommend reading this report.    Below you’ll see a graph for the same 15 countries and the corruption score received for each (0= highly corrupt, 10= highly clean).   A green colored bar means the country was in the top 25% percentile of the 180 countries the study evaluated, a red bar means a country was in the bottom 25% percentile of the 180 countries and a blue bar implies the country was in the middle 50% percentile.

A couple of observations:

• The same countries with the highest Internet Freedom scores had the cleanest corruption index scores: Estonia and United Kingdom.
• Likewise, some of the same countries with low Internet Freedom scores such as Iran and Russia were scored as highly corrupt.
• However, a country like Brazil which had a strong Internet Freedom score is around the 50% percentile when it comes to corruption (score of 3.5) (56th percentile out of 180 countries).
• Likewise, Kenya is a very interesting study—a nearly free Internet Freedom Ranking but one of the worst corruption index scores of 2.1 (19th percentile out of 180 countries).
• India is on the low end of the corruption scale with a score of 3.4 out of 10 which places it around the 50the percentile of the 180 countries evaluated.   I have to believe that corruption in the government agencies, demonstrated by the corruption index score, has to be a factor in keeping India from a fully free Internet evaluation.

Below is a graph combining the two studies into one graph for the 15 countries.  The axis of the graph uses the exact scoring scale of the respective studies.  Even though the studies are performed by different groups and thus wouldn’t be the most statistically accurate method of comparison, I do believe it is directionally appropriate and useful analysis.

Countries in the bottom right quadrant have the best combination of Corruption and Internet Freedom Scores (Estonia and United Kingdom- green circle) and countries in the top left quadrant have the worst combination of scores (Iran- red circle).

The graphs above don’t lead necessarily to consistent conclusions- as mentioned, Kenya has a strong Internet Freedom score but have a very poor corruption score, but on the flip side Iran and Russia have poor Internet Freedom and Corruption scores.   LIkewise, top Internet free countries Estonia and the UK are very clean countries when it comes to corruption.  Overall, I do think that corruption does impact the countries overall Internet Freedom score.  While not specifically a category in the Internet Freedom methodology, corruption practices are inherently embedded in many of the criteria used, i.e. telecommunications infrastructure (do corrupt practices dictate which telecommunications companies prosper) or censorship (does corruption determine what gets censored and what doesn’t).

One of the really interesting takeaways from this data is the success of Estonia in avoiding corruption and maintaining a very free Internet for their citizens since regaining its independence from the Soviet Union in 1991.   Interestingly, the President of Estonia (Toomas Hendrik) will be speaking at the World Affairs Council in San Francisco on June 12.  I now hope to attend this event.

On the other hand, other authors argue that, though corruption may be beneficial in isolated instances, its cumulative effect in the end is detrimental to development. As stated by Kempe Ronald Hope (2002), corruption diverts public resources from their public purposes and distorts the composition of government expenditure. Paulo Mauro (1998) carried out cross-country comparisons a concluded that corruption has large, adverse effects on private investment and economic growth. “Regression analysis shows that a country that improves its standing on the corruption index from, say, 6 to 8 (0 being the most corrupt, 10 the least) will experience a 4 percentage point increase in its investment rate and a 0.5 percentage point increase in its annual per capita GDP growth rate.”

The World Competiveness Report 2008-2009 (2008) presents an estimation of the relationship between a series of indicators to GDP per capita. These are the figures in the area of Rule of law:

Relationship of indicators to GDP per capita (log) while controlling for endowments (The World Bank, World Development Indicators 2008)

According to this report, corruption was the most frequently mentioned factor that hampers doing business:

The Connecticut Center for Economic Analysis (2004) conducted another quantitative assessment worth citing based on US data:

Note. Again and again, these type of explanatory quantitative evaluations must be taken carefully since, as we all know, growth and development is an outcome of multivariable interactions. When we try to understand the influence that A has on B, we seek for comparisons between two or more communities’ As and Bs. However, we see that in community 1 A is influenced by C and thus we need to freeze the latter’s effect. At the end of the day, these studies are an impressionist portrait of what is happening at our street. They are our reference, and that is their value.

Personally, I think that corruption helps to reduce market barriers but in this process, new obstacles are created. Successful investors in corrupted environments are those who are capable to integrate corruption into their business planning, which demands not only sufficiency in managerial, political and financial resources, but a strong argument to overcome the psychological factor that represents investing in such an uncertain environment. Now, in the macroeconomic perspective, here are some graphs on corruption that help inferring a general picture of the relationship between corruption and development:

Favoritism in decisions of government officials

When deciding upon policies and contracts, government officials in your country (1 = usually favor well-connected firms and individuals, 7 = are neutral)

See more at:

A. J Heidenheimer et al, Political Corruption: A Handbook (New Brunswick, NJ: Transaction Books,

1989), pp. 8–11.

Elia Armstrong, Combating Corruption for Development: The Rule of Law, Transparency and Accountability

J.S.N. Nye, op. cit., and Susan Rose-Ackerman, Corruption and Government: Causes, Consequences,

and Reform (Cambridge, UK: Cambridge University Press, 1999), among others.

Nathaniel Leff, “Economic Development Through Bureaucratic Corruption”, in Heidenheimer, op. cit.

Samuel P. Huntington, “Modernization and Corruption” in Heidenheimer, op. cit.