1. Why should wealthy nations be concerned about seeing that poor ones collect their “fair share” of taxes?

2. Do you agree that accountants and accounting firms share the blame for perpetuating poverty in the developing world? Why or why not?

3. Is tax planning wrong?

4. Assume that you agree that new policies are needed to improve the ability of Third World countries to increase their tax yields. List policy recommendations that will achieve this result, and explain why you think these policies are needed.

MINI CASE 

Do accountants share the blame for Third World poverty? A report by the U.K.-based Christian Aid says so. It attacks accounting firms for helping to perpetuate poverty in the developing world through their aggressive marketing of tax-avoidance schemes: “The tax avoidance industry [including accounting firms] has a very negative impact on developing countries and their ability to raise taxation—which is . . . critical for their escape from poverty.” According to the report, the debate over how poor countries fund their escape from poverty has up to this point focused mainly on calls for debt cancellation and increases in aid. While these factors are important, they are only pieces in a larger and more complicated puzzle. Solving this puzzle involves looking not only at the money that flows into poor countries, but also at money they can’t get their hands on and the money that leaks away. Taxation is facing a crisis in poorer countries. In the rich world, government revenue from taxation between 1990 and 2000 averaged 30 percent of gross domestic product (GDP). In sub-Saharan Africa, the average over the same period was 17.9 percent, in Latin America it was 15.1 percent, and in south Asia it was 10.5 percent. The low tax yield in poorer regions of the world limits the amount of domestically generated resources that are available to governments for essential public services, such as healthcare and education.