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Hidden Inequality: How Much Difference Would Adjustment for Illicit Financial Flows Make to National Income Distributions?

Author

Listed:
  • Cobham Alex

    (Tax Justice Network and King’s College, London, United Kingdom)

  • Davis William

    (UN Economic Commission for Africa, Addis Ababa, Ethiopia)

  • Ibrahim Gamal

    (UN Economic Commission for Africa, Addis Ababa, Ethiopia)

  • Sumner Andy

    (King’s College London, London, United Kingdom)

Abstract

A recent innovation in measuring inequality is the incorporation of adjustments to top incomes using data from tax authorities, revealing higher inequality. The thesis of this paper is that the incorporation of estimates of income from illicit financial flows (IFF), reflecting untaxed capital, may be as significant to national inequality – but with greater variation across countries. We propose a method of adjusting national inequality data for illicit flows, and present preliminary results. These estimates suggest that untaxed illicit flows could be as important as (taxed) top incomes to estimates of inequality – highlighting the importance of improving estimates of underlying illicit flows.

Suggested Citation

  • Cobham Alex & Davis William & Ibrahim Gamal & Sumner Andy, 2016. "Hidden Inequality: How Much Difference Would Adjustment for Illicit Financial Flows Make to National Income Distributions?," Journal of Globalization and Development, De Gruyter, vol. 7(2), pages 1-18, December.
    • Handle: RePEc:bpj:globdv:v:7:y:2016:i:2:p:18:n:2
    DOI: 10.1515/jgd-2016-0022
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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