Pale Transparency 2018

TAX TRANSPARENCY: IMPACT OF TAX HAVENS ON DEVELOPING COUNTRIES
by
Ramokone Olivia Pale
17381445
Submitted in partial fulfilment of the requirements for the degree
MCom in Taxation
in the
FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES
at the
UNIVERSITY OF PRETORIA
Study leader:
Keamogetswe Molebalwa
Date of submission:
2018-10-09
ACKNOWLEDGEMENTS
Conducting this study has been an interesting and fruitful journey for which I am grateful to
the University of Pretoria in affording me this opportunity. This opportunity could not have
been possible in the first place if it was not for my God, who makes all things possible.
I have learned a lot, I am more empowered academically, career-wise and personally as a

researcher and student. I want to thank my lecturer Ilinza Penning for having so much
patience and encouraging me throughout this process. Words cannot express the role my
supervisor Keamogetswe Molebalwa played throughout the study, she is such an inspiration
to me, she takes pride in her work and professionalism is her first priority.
I am grateful to my son, Reatlegile Mohau Pale for being so understanding and

compromising so much throughout this year just so I can complete this study. You are the
reason I do everything and you motivate me to go for greater things. My dear family, I draw
strength from you because you are my pillar. Thank you for praying for me and motivating
me throughout. Thank you, everyone!
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ABSTRACT
by
NAME AND SURNAME: Ramokone Olivia Pale

SUPERVISOR: Keamogetswe Molebalwa
DEPARTMENT: Department of Taxation
DEGREE: Magister Commercii (Taxation)
COURSE CODE: 07250182
Background:
Tax transparency has been in the limelight for many years and countries around the world
have made it a priority as it carries with it more benefits than problems. Developing countries
also face these problems. Tax havens, on the other hand, provide opportunities and benefits
for those who utilise them and further provide more problems than solutions for countries,
especially developing countries. This study conducted a systematic approach which
reviewed literature currently available to determine the current status of tax transparency
and the impact that tax havens have on developing countries.
Main purpose of study:
To conduct a systematic review of peer-reviewed academic journal articles found on

selected databases with the aim of determining the status of literature regarding tax
transparency and the impact that tax havens have on developing countries. The study
provides a structured overview of the academic journals publications on tax transparency,
tax havens and developing countries.
Method:
This study was conducted using a systematic review research approach. Keywords were
used to search peer-reviewed academic journal articles on databases; articles between
1993 and 2018 were sourced and selected based on relevancy to answer the research
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question. The search yielded a total number of sixty-one articles which were analysed and
utilised to answer the research question.
Results:
The study included sixty-one articles which were sourced and selected on academic
databases based on relevancy to the topic. The findings indicate that tax transparency
impacts positively on developing countries’ ability to collect revenue and enhance their tax
base, along with other benefits. Tax havens have a positive impact on individuals and
companies, but they negatively impact countries’ abilities to generate more revenue and
increase the tax base.
Conclusions:
This study found that tax transparency has a positive impact on developing countries as it
provides benefits, such as boosting their revenue collections and tax base while tax havens
impact them negatively as revenues which should be generated by those respective
countries are diverted to tax havens. Countries, companies and individuals who utilise tax
havens enjoy the benefits that they provide, however, countries lose more than they gain
with regard to tax havens.
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TABLE OF CONTENTS
ACKNOWLEDGEMENTS ..................................................................................................... I
ABSTRACT .......................................................................................................................... II
LIST OF FIGURES ........................................................................................................... VII
LIST OF TABLES ............................................................................................................. VII
KEY TERMS .................................................................................................................... VIII
LIST OF ABBREVIATIONS AND ACRONYMS ............................................................... VIII
CHAPTER ONE ................................................................................................................... 1
INTRODUCTION ................................................................................................................. 1
1.1 RATIONALE/ MOTIVATION FOR THE RESEARCH ............................................ 1
1.2 PROBLEM STATEMENT ...................................................................................... 4
1.3 RESEARCH QUESTION ....................................................................................... 4
1.4 RESEARCH OBJECTIVES ................................................................................... 4
1.5 RESEARCH DESIGN AND METHODOLOGY ...................................................... 5
1.5.1 Introduction..................................................................................................... 5
1.5.2 Theory behind research design elements ...................................................... 5
1.5.2.1 Philosophical stance .................................................................................. 5
1.5.2.2 Nature of the study .................................................................................... 6
1.5.2.3 Method of reasoning .................................................................................. 8
1.5.2.4 Time horizon ............................................................................................ 10
1.5.2.5 Unit of analysis ........................................................................................ 11
1.5.2.6 Nature of the data .................................................................................... 11
1.6 STRUCTURE OF THE MINI-DISSERTATION .................................................... 13
1.6.1 Chapter One: Introduction ............................................................................ 14
1.6.2 Chapter Two: Literature review .................................................................... 14
1.6.3 Chapter Three: Research design and methodology ..................................... 14
1.6.4 Chapter Four: Data analysis and presentation of results .............................. 14
1.6.4 Chapter Five: Conclusion ............................................................................. 14
CHAPTER TWO ................................................................................................................ 15
LITERATURE REVIEW ..................................................................................................... 15
2.1 INTRODUCTION ................................................................................................. 15
2.2 IDENTIFICATION AND RECORDING OF ACADEMIC LITERATURE ................ 15
2.2.1 Inclusion and exclusion criteria ..................................................................... 15
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2.2.2 Keywords...................................................................................................... 16
2.2.3 Databases .................................................................................................... 16
2.2.4 Recording of identified academic literature................................................... 17
2.2.5 Literature reviewed: Research design elements........................................... 17
2.2.5.1 Philosophical stance ................................................................................ 17
2.2.5.2 Nature of the study .................................................................................. 18
2.2.5.3 Method of reasoning ................................................................................ 20
2.2.5.4 Time horizon ............................................................................................ 21
2.2.5.5 Unit of analysis ........................................................................................ 22
2.2.5.6 Nature of the data ....................................................................................... 22
2.3 SUMMARY AND BRIEF DISCUSSION OF REVIEWED LITERATURE .............. 24
2.3.1 Tax transparency.......................................................................................... 25
2.3.1.1 Background of tax transparency .............................................................. 25
2.3.1.2 The effects of tax transparency ............................................................... 26
2.3.2 Tax havens ................................................................................................... 30
2.3.2.1 Definition of tax havens and countries classified as tax havens .............. 30
2.3.2.2. How do tax havens operate? ................................................................... 31
2.3.2.2 Why are tax havens used? ...................................................................... 33
2.3.3 Developing countries .................................................................................... 34
2.3.3.1 Background on developing countries ....................................................... 34
2.4 RESEARCH ETHICS .......................................................................................... 36
2.5 CONCLUSION..................................................................................................... 36
CHAPTER THREE ............................................................................................................ 38
RESEARCH DESIGN AND METHODOLOGY .................................................................. 38
3.1 INTRODUCTION ................................................................................................. 38
3.2 RESEARCH DESIGN ELEMENTS AS APPLICABLE TO THIS STUDY ............. 38
3.2.1 Philosophical stance ..................................................................................... 38
3.2.2 Nature of the study ....................................................................................... 39
3.2.3 Method of reasoning ..................................................................................... 39
3.2.4 Time horizon ................................................................................................. 39
3.2.5 Unit of analysis ............................................................................................. 40
3.2.6 Nature of the data ......................................................................................... 40
3.3 SYSTEMATIC REVIEW....................................................................................... 41
3.3.1 Motivation ..................................................................................................... 41
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3.3.2 Explanation................................................................................................... 42
CHAPTER FOUR .............................................................................................................. 43
DATA ANALYSIS AND PRESENTATION OF RESULTS .................................................. 43
4.1 INTRODUCTION ................................................................................................. 43
4.2 APPLICATION OF LITERATURE........................................................................ 43
4.2.1 The current status of literature relating to the impact of tax transparency
on developing countries................................................................................ 45
4.2.1.1 The impact of tax transparency on developing countries ......................... 46
4.2.1.2 The benefits of tax transparency in developing countries ........................ 48
4.2.2 The current status of literature relating to the impact that tax havens have
on developing countries................................................................................ 53
4.2.2.1 The impact of tax havens on developing countries .................................. 53
4.2.3 Possible identified solutions so far ............................................................... 55
CHAPTER FIVE ................................................................................................................. 58
CONCLUSION ................................................................................................................... 58
5.1 INTRODUCTION ................................................................................................. 58
5.2 REFLECTION ON ADDRESSING THE RESEARCH QUESTION AND
OBJECTIVES ...................................................................................................... 58
5.3 LIMITATIONS ...................................................................................................... 60
5.4 RECOMMENDATIONS AND FUTURE RESEARCH .......................................... 60
5.5 CONCLUDING REMARKS .................................................................................. 61
LIST OF REFERENCES .................................................................................................... 62
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LIST OF FIGURES
Figure 1: Philosophy stance literature results .................................................................... 18
Figure 2: Nature of study literature results ......................................................................... 19
Figure 3: Method of reasoning literature results ................................................................. 20
Figure 4: Time horizon literature results............................................................................. 21
Figure 5: Unit of analysis literature results ......................................................................... 22
Figure 6: Nature of data literature results........................................................................... 23
Figure 7: Nature of data method ........................................................................................ 24
Figure 8: Quality assessment: summary of results ............................................................ 25
LIST OF TABLES
Table 1:Key terms used in the study ................................................................................. viii
Table 2:Abbreviations and acronyms used in the study .................................................... viii
Table 3:Inclusion and exclusion criteria ............................................................................. 15
Table 4:Summary of articles retrieved from databases ...................................................... 16
Table 5:Summary of research findings .............................................................................. 43
Table 6:Countries perspective of articles ........................................................................... 45
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KEY TERMS
Table 1:Key terms used in the study

Key term Description
Horizontal Monitoring System A form of working in the present influenced by

mutual trust, understanding and transparency
which is between the enterprises and tax
authorities (International Tax Review, 2013:4).
De jure bank secrecy De jure is a bank secrecy that compels the

banks and other financial institutions not to
disclose investors or depositors’ identity,
except in cases where there is money
laundering and other criminal activity (Spencer,
2005:2).
De facto bank secrecy De facto is a bank secrecy that allows banks

and other financial institutions not to provide
information through the use of automatic
reporting to governments regarding foreign
depositors or investors (Spencer, 2005:2).
LIST OF ABBREVIATIONS AND ACRONYMS
Table 2:Abbreviations and acronyms used in the study

Abbreviation/Acronym Meaning
ATAF African Tax Administration Forum
BEPS Base Erosion and Profit Shifting
CbCR Country by Country Reporting
CIT Corporate Income Tax
EIOR Exchange of Information on Request
EU European Union
UD UN Financing for Development
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G8 Group of eight countries (Canada, France, Germany, Italy,
Japan, Russia, United Kingdom and United States of
America).
G20 Group of twenty countries (Argentina, Australia, Brazil,

Canada, China, France, Germany, India, Indonesia, Italy,
Japan, Republic of Korea, Mexico, Russia, Saudi Arabia,
South Africa, Turkey, United Kingdom, United States, and the
European Union).
GDP Gross Domestic Products
OECD Organisation for Economic Co-operation and Development
PIT Personal Income Tax
UN United Nations
UK United Kingdom
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TITLE
CHAPTER ONE
INTRODUCTION
1.1 RATIONALE/ MOTIVATION FOR THE RESEARCH
Tax transparency has been on the agenda of many countries including developing countries
(Pross, Kerfs, Hondius, Housden & Radhanath, 2016:1), and it is currently a concern for
them. Transparency refers to something similar to openness (Woods, 2018:1).Tax
transparency has different meanings; it is used by organisations to communicate the tax
approach being taken and also the amount of tax being paid. Organisations also use it to
provide clarity on complex tax matters and boost stakeholder confidence by providing
assurance that a fair share of tax is being paid. Tax transparency is also used by
governments to disclose the amount of taxes received and enhance co-operation between
countries through information sharing regarding the same taxpayer (Ernst & Young, 2013:9).
Tax transparency can be viewed as openness to communicate tax status. Woods (2018:1)
further highlights that tax transparency is critical to good governance. It is also viewed as a
crucial weapon in fighting tax fraud; tax evasion; base erosion and profit shifting and it is an
important tool to assist revenue authorities to generate more revenue for their respective
countries (Pross et al., 2016:1). In addition, tax transparency is also believed to be a weapon
in fighting aggressive tax planning and encourages information sharing between countries
(Anonymous, 2015:1).
It is a fact that tax transparency is on the agenda of countries, therefore this includes
developing countries. According to Ring (2016:26), there is no single agreed definition of
developing countries, however, while the United Nations (UN) recognises that it groups
countries into three broad categories, namely developed economies, economies in
transition, and developing economies. Nielsen (in Ring, 2016:26-27) further states that
despite the availability of a range of approaches to country classification, the ultimate
purposes of classifying countries as such is to highlight the underlying normative
1
implications of classification schemes and factors, such as Gross National Income, longevity
and education, which are key in assessing the status of a country.
The Organisation for Economic Co-operation and Development (OECD) has laid the
foundation and it is continuing to encourage tax transparency through a number of initiatives
and standards, including Country by Country Reporting (CbCR) and Exchange of
Information on Request (EOIR), to name a few (Pross et al., 2016:1). In an attempt to
persuade and uphold greater transparency in tax reporting among South African companies,
the tax component of the UK Building Public Trust Awards was also introduced (Venter,
Stiglingh, & Smit, 2017:11).
This highlights the importance of tax transparency for countries in general particularly
developing countries and the collection of revenues. However, since tax transparency is
associated with openness, the opposite of openness is closeness; it can, therefore, be
assumed that so far tax transparency appears to be a good thing as it appears to be open
and honest. whereas tax havens have been found to hinder transparency as by definition
they attempt to hide or be closed off (Whitehead, 2013:2).
Tax havens are found to be the opposite of tax transparency. Karp (1993:1) defines a tax
haven as a place with no taxes. It is also defined as a place that seeks to attract businesses
by offering facilities that are politically stable to assist individuals or entities get around the
regulations, laws and rules of jurisdictions elsewhere (Gilleard, 2014:1). The OECD (in
Slemrod and Wilson, 2009:1) define it as a jurisdiction that imposes no or nominal taxes and
offers itself as a place where non-residents use to escape paying taxes in their country of
residence.
Tax havens have been found to be a problem as they affect the budgetary revenue of
countries (Radu, 2012:1) and have a direct impact on tax transparency. According to Grocott
and Stevenson (2010:3), a large volume of tax leakages were as a result of lax regulations
and poor exchange of information with certain tax havens. This already indicates that tax
havens become problematic to tax transparency, especially with regard to non-haven
countries. According to Radu (2012:2), companies use tax havens to reduce tax liability. Tax
havens appeal to private investors because they have no or nominal taxation and operate
under strict secrecy rules. This enables investors to conceal income from the tax authorities
2
of their respective home countries (Konrad & Stolper, 2016:1). It is therefore assumed that
tax havens are a problem for non-haven countries.
Equivalents of 10% of the world’s Gross Domestic Products (GDP) are held in tax havens
globally (Alstadsæter, Annete, Johanesen, Niels, Zucman & Gabriel, 2018:1). According to
Bucovetsky (2014:2), tax havens account for less than 1% of the world population. The
OECD estimates that developing countries lose three times more as a result of tax haven
operations than they receive through international aid (Ring, 2016:30). Reports suggest that
20 trillion is hidden in tax havens that are currently in operation and over 60 billion of annual
tax revenues are lost due to the multinational corporations’ use of international tax strategies
(Alexander, 2013:3). These estimations already provide a brief overview of how non-haven
countries are affected or impacted by tax havens particularly with regard to the tax base and
revenue collections.
According to Alstadsæter et al. (2018:2), cross-border wealth management was first

developed in 1920 by Switzerland and Hong-Kong has been ranked second after
Switzerland. In 2009, thirty-five (35) tax havens were identified which represented over 15%
of the world’s countries (Slemrod & Wilson, 2009:1). Prior to that, a list of tax haven countries
was provided in 2008 (Schwarz, 2011:10). Johannesen and Zucman (in Alstadsæter et al.
2018:9) finds that Europeans held 90% of the wealth in Switzerland and it is further
estimated that 90%-95% of the wealth owned by Danish and Norwegian households at
HSBC Switzerland was undeclared.
Literature reveals that the absence or lack of tax transparency is partly the source of
problems in countries who seek to maximise revenue collections and there are many more
problems associated with it (Grocott & Stevenson, 2010:3, Anonymous, 2012:2, Alexander,
2013:2, Teather, 2016:2). According to Grocott and Stevenson (2010:4), African Business
(2015:2), Anonymous (2012:2), loss of revenue was, to a certain extent, as a result of lack
of tax transparency. While Grocott and Stevenson (2010:3), together with Houlder (2016:2)
believe that tax havens also contributed to the problem.
It is clear that countries particularly developing countries have problems with increasing their
tax base and maximising revenue collections according to the above brief findings. It is noted
that, so far, literature highlighted the importance of tax transparency for countries and the
3
fact that tax havens are problematic to these countries, however at this stage it is not known
whether developing countries are also affected in the same manner. Currently, the extent of
the impact of tax transparency and tax havens on developing countries is not known. Hence,
this study seeks to provide a structured overview of the current status of literature with regard
to this issue.
1.2 PROBLEM STATEMENT
There is literature available on the current status of tax transparency and the impact that tax
havens have on developing countries. This study seeks to systematically review the
identified literature on the topic of interest to answer the research question, namely to
determine the current status of tax transparency and the impact that tax havens have on
developing countries.
Conducting this study will benefit developing countries by discovering what their current
status is, as far as tax transparency and tax havens are concerned. Future researchers can
assist in identifying research that can be conducted on tax havens and developing countries.
1.3 RESEARCH QUESTION
What is the present status of peer-reviewed academic journal articles regarding tax
transparency and the impact that tax havens have on developing countries?
1.4 RESEARCH OBJECTIVES
 To identify and analyse peer-reviewed academic journal articles in order to determine

the current status of literature relating to the impact that tax transparency has on
 To further identify and analyse peer-reviewed academic articles in order to determine

the current status of literature relating to the impact that tax havens have on developing
countries.
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1.5 RESEARCH DESIGN AND METHODOLOGY
1.5.1 Introduction
This chapter will address the research design and methodology. It focuses on addressing
the theoretical part of research design and methodology. Brief theory descriptions will be
provided on each research design element. A research design is a blue print or plan for the
collection, measurement, and analysis of data, created to assist in answering the research
questions (Sekaran & Bougie, 2016:95). There are six elements of research design, namely:
philosophical stance, nature of the study, method of reasoning, time horizon, unit of analysis
and nature of the data.
1.5.2 Theory behind research design elements
1.5.2.1 Philosophical stance
- Positivism
Positivism strongly believes that there is an objective truth to understand the world well
enough so that we are able to predict and control it. According to Sekaran and Bougie
(2016:28), the key approach for positivist researchers is the experiment, which allows them
to test cause and effect of relationships through manipulation and observation. They use
deductive reasoning to put forward theories that they can test by means of a fixed,
predetermined research design and objective measures (Sekaran & Bougie, 2016:28).
Some positivist researchers believe that the goal of a researcher is only to describe
phenomena that one can directly observe or objectively measure. For these types of
researchers, knowledge of anything such as feelings, emotions and thought is impossible.
This results in no alternatives and clear findings or results and the definite truth about the
phenomena (Sekaran & Bougie, 2016:28).
- Interpretivism
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According to Rolfe (2006:1), interpretivist researcher strongly believes that in order to
understand this world of meanings, one must interpret it. Interpretivism, also known as
interpretivist involves interpreting elements of the study, thus interpretivism integrates
human interest into a study (Dudovskiy, 2018). The researcher must elucidate the process
of meaning construction and clarify what and why meanings are embodied in the language
and actions of social actors (Rolfe, 2006:1).
They are principally concerned with matters of knowing and being, not methods per se
(Rolfe, 2006:1). Accordingly to (Dudovskiy, 2018), interpretive researchers assume that
access to reality that is given or socially constructed is only through social constructions
such as language, consciousness, shared meanings, and instruments. Their meanings are
actually shaped according to the intent of their users; they merely suggest directions along
which to look, rather than providing descriptions of what to see (Rolfe, 2006:1).
- Pragmatism
Pragmatic research is described as a process where concepts and meanings (theory) are
generalisations of our past actions and experiences, and it is further described as
interactions we have had with our environment. The pragmatic researcher is not concerned
with taking a particular position regarding to what makes a good research. They feel that
research on both subjective meanings, observable phenomena and objectives, can produce
useful knowledge, depending on the research question of study (Sekaran & Bougie,
2016:29).
According to Sekaran and Bougie (2016:29), ”the focus of pragmatists is on practical,

applied research where different viewpoints on research and the subject under study help
in solving a ... problem”. For pragmatism, these different perspectives, ideas, and theories
help us gain an understanding of the world. Unlike positivism, pragmatism views the current
truth as tentative and changing over time and the value of research lies in its practical
relevance; the purpose of theory is to inform practice (Sekaran & Bougie, 2016:29).
1.5.2.2 Nature of the study
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- Causal study
According to Sekaran and Bougie (2016:44), causal studies test whether or not one variable
causes another to change; they are at the heart of the scientific approach to research. The
researcher is interested in delineating one or more factors that are causing a problem and
that means that the intention of the researcher for conducting a causal study is to be able to
state that variable X causes variable Y, therefore if variable X is removed or altered in some
way or another, problem Y is solved.
This implies that there will be interdependency on the variables as one will cause another to
change.
In order to establish a causal relationship, the following conditions should be met:
 “The independent and dependent variable should co-vary.
 The independent variable ... should precede the dependent variable.
 No other factor should be a possible cause of the change in the dependent variable.
 A logical explanation is needed and it must [explain] why the independent variable
affects the dependent variable” (Sekaran & Bougie, 2016:44).
- Descriptive study
The objective of a descriptive study is to obtain data that describes the topic of interest.
Descriptive research is either qualitative or quantitative in nature. Descriptive studies are
often designed to collect data that describe characteristics of objects such as persons,
organisations, products or brands, events or situations (Sekaran & Bougie, 2016:43).
Such studies are correlational in nature and describe relationships between variables,
however finding correlation does not mean that one variable causes change in another
variable and sometimes a researcher is interested in associations among variables to
describe populations, events or situations.
Descriptive studies may help the researcher to:
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 understand the characteristics of a group in a given situation;
 think systematically about aspects in a given situation;
 offer ideas for further probe and research; and
 Assist in making certain simple decisions (Sekaran & Bougie, 2016:44).
Exploratory study
This study is typically developed when not much is known about a particular phenomenon,
existing research results are unclear or suffer from serious limitations, the topic is highly
complex or there is not enough theory available to guide the development of a theoretical
framework. An exploratory study is necessary especially when some facts are known,
however more information is needed for developing a viable theoretical framework (Sekaran
& Bougie, 2016:43).
An exploratory study often relies on secondary and/or qualitative approaches to data

gathering, such as informal discussions. It is also used for a more formal approach, such as
interviews, focus groups, projective methods or case studies. According to Sekaran and
Bougie (2016:43), the results of exploratory studies cannot, typically, be generalised to the
population and they are flexible in nature. The focus of this type of research study is broad
at first; it becomes increasingly narrower as the research proceeds (Sekaran & Bougie,
2016:43).
1.5.2.3 Method of reasoning
- Deductive reasoning
According to Hurley (in Walton, 2014:2), deductive reasoning is an argument in which the
premises are claimed in order to support the conclusions. This implies that there is a direct
relationship between the premises and the conclusion as it is impossible for the premises to
be true and the conclusion false. This means that if the premises are true it is a fact that the
conclusion will also be true, the two cannot be separated. It directly applies to the inferential
link between the premise and the conclusion. Deductive reasoning begins from a
hypothetical state of things (Walton, 2014:8).
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A deductive approach is more concerned with a hypothesis concerned with developing a
hypothesis (or hypotheses) based on theory that already exist, and then designing a
research strategy to test the hypothesis. It has been stated that deductive reasoning means
reasoning from the particular to the general. The beginning of deductive reasoning is an
expected pattern which is tested against observations; whereas inductive reasoning begins
with observations which seeks to find a pattern within them (Dudovskiy, 2018).
- Inductive reasoning
Hurley (in Walton, 2014:2) defined inductive reasoning as an argument in which the
premises are claimed in order to support the conclusions. This implies that the relationship
between the premises and the conclusion is not direct as it is improbable that the premises
be true and the conclusion false. The inferential link between the premises and the
conclusion is not that of necessity, but of probability (Walton, 2014:2). Inductive reasoning
is based on the data but extrapolates partially beyond them (Walton, 2014:3).
Inductive reasoning starts with the observations and ends with theories that are proposed
only towards the completion stage of the research process, as a result of observations. The
purpose of this approach is to generate meaning from the data set collected for the purposes
of identifying patterns and relationships that are used to build a theory. It must be noted that,
it is more concerned with learning from experience. Patterns, resemblances and regularities
in experience which represent premises that are observed in order to reach conclusions or
to generate a theory (Dudovskiy, 2018).
- Abductive reasoning
When following an abductive reasoning approach, the researcher is more concerned with
seeking to choose the best possible explanation among many alternatives in order to explain
surprising facts or puzzles which are identified at the start of the research process
(Dudovskiy, 2018). According to Walton (2014:3), abductive reasoning is also referred to as
inference; as reasoning from given data leads to a hypothesis that explains the data. In the
course of explaining ‘surprising facts’ or ‘puzzles’, the researcher is able to combine both
numerical and cognitive reasoning (Dudovskiy, 2018).
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The abductive inference has most often been seen as an important kind of reasoning used
at the discovery stage of scientific hypothesis formation and testing (Walton, 2014:1). It is
further described is a notion that has become familiar to some of us, but the idea is a relative
newcomer as something that is widely known or accepted in logic (Walton, 2014:3). Walton
(2014:3) further explains that it tends to be the weakest of the three and a conclusion is
drawn as an intelligent guess.
1.5.2.4 Time horizon
There are two studies of time horizon namely: cross-sectional studies and longitudinal
studies.
Cross-sectional
This study is undertaken once when data are gathered. It can be taken over a period of
days, weeks or months, in order to answer a research question. Such studies are called
one-shot or cross-sectional studies. An example will be where data was collected between
April and June of last year to study the current status of literature on the topic being
researched. This means that data with respect to that particular research had not been
collected before, nor will be collected again for the research (Sekaran & Bougie, 2016:104).
Another example will be where data or statistics on unemployment percentages in South

African are collected once, at a particular point in time of the research to determine the
cause of unemployment and identify possible solutions and remedies and this data was
never collected before and after the research serves its purpose; the data will not be
collected again. Hence it is a one-shot or cross-sectional study which is conducted at that
particular point in time.
- Longitudinal
In cases where a researcher seeks to study people or phenomena at more than one point
in time in order to address a research question, it is classified as a longitudinal study. They
10
help to identify the cause-and-effect of relationships. Data for this type of study will be
gathered at two different points in time. Longitudinal studies are used by experimental
researchers as data are collected both before and after a manipulation (Sekaran & Bougie,
2016:105). For example, where data or statistics on unemployment percentages in South
African is collected at a particular point in time of the research to determine the cause of
unemployment and identify possible solutions and remedies and again collected later to see
if there is a change in unemployment statistics after solutions and remedies are
implemented. Hence it is longitudinal, as data is collected at two or more points in time to
answer the research question.
1.5.2.5 Unit of analysis
Unit of analysis refers to the level of aggregation of data which is collected during the
subsequent data analysis stage and the unit of analysis is determined by the research
question. Examples of a unit of analysis are individuals as the unit of analysis, dyads as the
unit of analysis, groups as the unit of analysis, divisions as the unit of analysis, the industry
as the unit of analysis and even countries as the unit of analysis (Sekaran & Bougie,
2016:102).
In a case where the unit of an analysis is countries, the study might seek to discover which
country has the highest unemployment rate. Therefore, data on unemployment statistics of
each country included in the unit of analysis will be aggregated. Depending on years,
sampling size in terms of countries to be included in the study and any other determinants
that the research seeks to cover to answer the research question will clearly be dictated by
the research question.
1.5.2.6 Nature of the data
- Primary data
Primary data can be described as first-hand data after being processed and having arrived
at certain results. If used after that it will be a secondary data. It generally uses interviews,
observations and questionnaires and these methods allow the researcher to collect a wide
11
variety of different sorts of data from human respondents. The selection process involves
method(s) which are used to obtain information needed and the research process integrates
other steps (Sekaran & Bougie, 2016:111). Hence the choice of method(s) to be selected
will depend on the objective(s) of the study, the question which the researcher seek to
answer and the research strategy.
In addition to the above, the choice of method(s) available for purposes of data gathering
depends on a number of factors including facilities available for the study, the level of
accuracy required to complete the study, the type of data required, the time frame of the
study, the expertise that the reviewer have and other resources and costs associated with
the study. (Sekaran & Bougie, 2016:112).
- Secondary data
Secondary data involves the re-use of pre-existing qualitative data which was used in
previous research studies (Heaton, 2008:2). According to Sekaran and Bougie (2013), it
refers to literature that already exists in the form of articles, journals, books and publications
to gain more understanding and knowledge of the topic of interest. This type of data includes
materials such as semi-structured interviews, responses to open-ended questions in
interview questionnaires, field notes and research diaries (Heaton, 2008:2).
Secondary data can be used for two main purposes, namely, to investigate the new or
additional research question or alternatively it can be used to verify the findings of the
previous research (Heaton, 2008:3). Secondary data analysis have three main modes,
namely through informal data sharing, using datasets obtained through informal data sharing
or finally, researchers may re-use their own self-collected data for purposes of investigating
new or additional research (Heaton, 2008:3-4).
- Quantitative
The quantitative research method is usually used to quantify a problem by way of generating
numerical data which can be used for statistical purposes. It is used to quantify attitudes,
opinions, behaviours and other defined variables and generalise results from a larger
sample population (DeFranzo, 2011). After collection and analysing the data the next step
12
will be to answer the research question, however before the research question is answered,
the data must be analysed by following some preliminary steps to help ensure that it is
accurate, complete and suitable for further analysis (Sekaran & Bougie, 2016:271).
Quantitative data analysis uses measurable data to formulate facts and reveal patterns in
research. Examples of qualitative data include surveys, face-to-face and telephone
interviews (which are longitudinal in nature), to name a few. The results from the tested data
will certainly provide more information on the variable and provide corrective action that
needs to be taken if any (DeFranzo, 2011).
- Qualitative
Qualitative data method, which is primarily exploratory, is used to gain an understanding of

reasons, opinions and motivations. It provides broader view and insights into the problem or
assist in developing ideas or hypotheses for potential quantitative research (DeFranzo,
2011). It is important to note that qualitative data analysis is not a step-by-step linear process
but rather a continuous and iterative process (Sekaran & Bougie, 2016:333).
According to (Sekaran & Bougie, 2016:333), there are three steps in qualitative data
analysis, which are as follows:
1. Data reduction, which refers to the process of selecting, coding and categorising data.
2. Data display, which refers to a way in which data is presented.
3. Data coding, which helps to simultaneously develop ideas on how the data may be
displayed, as well as generating some preliminary conclusions.
Once data is analysed, conclusions are drawn and it is at this point where the research
question can be answered; by determining what identified themes stand for, by thinking
about explanations for observed patterns and relationships or by making contrasts and
comparisons (Sekaran & Bougie, 2016:347).
1.6 STRUCTURE OF THE MINI-DISSERTATION
13
1.6.1 Chapter One: Introduction
This chapter discusses the rationale or motivation for conducting this study by providing the
background and introducing the problem statement. Thereafter the research question
regarding what this study seeks to answer is formulated and that is followed by the objectives
of the study, which explain how the research question will be answered. The chapter ends
with theoretical discussions of research designs and methodology.
1.6.2 Chapter Two: Literature review
This chapter provides the criteria used to select journals for the study. It details how journals
were identified and recorded on Qigga, the data analysis software. It provides a brief
discussion of reviewed literature, research ethics and it ends with a conclusion.
1.6.3 Chapter Three: Research design and methodology
Chapter Three explains the selected research design elements and how they are applicable
to this study. The chapter is concluded by a discussion of systematic review, which is divided
by providing the motivation and explanation for this.
1.6.4 Chapter Four: Data analysis and presentation of results
This chapter explains the detailed data analysis and presentations of the results of the
literature that was reviewed during the research. It discusses the findings and provides views
formulated from the literature reviewed.
1.6.4 Chapter Five: Conclusion
Chapter Five is the last chapter of the research report and it concludes the research. It
provides the reflections on addressing the research question and objectives, followed by a
discussion of the limitations experienced while conducting the study. Recommendations on
future research are included along with concluding remarks.
14
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
The purpose of this chapter is to provide an overview of the relevant literature on the impact
that tax transparency and tax havens have on developing countries. This chapter will
commence with the explanation of the process of identification and recording of academic
literature. It defines the inclusion and exclusion criteria used for the study. It will list the
keywords and databases used to identify the literature. It will record academic literature
reviewed for this study and discuss the theory of research design elements. It will also
provide research ethics as applicable to this study and end with a conclusion.
2.2 IDENTIFICATION AND RECORDING OF ACADEMIC LITERATURE
2.2.1 Inclusion and exclusion criteria
The total number of articles which are included in the study amounted to sixty-one for the
years between 1993 and 2018.These articles were selected based on the relevance of the
article to the study. In deciding which articles were to be used for this study, the researcher
first read the title and abstract of the articles and, if relevant, the article was included; if not
the article was excluded. One article was published before 1993, hence it was excluded,
seven articles were excluded as they were not relevant to the topic of interest and two
articles were duplicated. The table below illustrates the results of the inclusion and exclusion
criteria.
Table 3:Inclusion and exclusion criteria

Item Inclusion criteria Exclusion criteria
Years Academic articles published after 1993 Literature published before 1993
Relevancy Academic articles relevant to the topic Academic articles not relevant to the topic
Duplications Academic articles already included Academic articles duplicated
15
2.2.2 Keywords
The keywords below were used to identify and select literature for this study:
 “Tax transparency”.
 “Tax havens”.
 “Tax transparency AND Developing countries”.
 “Developing countries AND Tax Havens”.
The words ‘tax transparency’, ‘tax havens’, ‘tax transparency and developing countries’ and
‘developing countries and tax havens’ were searched on databases with the aim of
identifying journals and articles with relevant literature. The literature was identified to gain
a better understanding of the topic and to determine the current literature status. Articles
were selected based on relevancy to the body of the literature. This study is entirely based
on currently available literature.
2.2.3 Databases
Well recognised academic databases found in the University of Pretoria’s library were used
to search for articles which provide literature for the topic. Below are the databases that
were found to have sufficient relevant literature:
 Accounting, Tax & Banking Collection;
 ABI/INFORM Collection;
 Google Scholar;
 Business Premium Collection; and
 Science Direct.
A summary of articles retrieved from the databases is presented below. In total, sixty-one
articles are selected and included for this study.
Table 4:Summary of articles retrieved from databases
16
Database Academic journal articles
Accounting, Tax & Banking Collection 23
Business collection premium 15
Science Direct 12
Google Scholar 10
ABI/IMFORM Collection 1
Total 61
2.2.4 Recording of identified academic literature
The articles and journals were downloaded to Qigga. Qigga is a system or software that
assists a researcher to analyse the literature using tags. The articles are tagged as they are
read and groupings are created as tags are identified. This enables the researcher to
highlight and make summaries as articles are read. Once the tagging is complete, a report
is generated and it can be filtered accordingly.
In total, sixty-one articles were downloaded, analysed and tagged on Qigga according to
philosophical stance, nature of the study, method of reasoning, time horizon, unit of analysis
and nature of data. In addition, the articles were tagged using different summaries that the
researcher created and considered relevant in answering the research question and
objectives.
2.2.5 Literature reviewed: Research design elements
2.2.5.1 Philosophical stance
The graph below illustrates the results of the literature reviewed on the articles for this study.
Sixty-one articles in total were tagged according to philosophical stance. Of the sixty-one
articles analysed, forty-four articles were found to be using pragmatism, whereas twelve
articles used interpretivism and only five articles were found to have adopted positivism.
Details are provided below per philosophical stance.
17
Figure 1: Philosophy stance literature results
Philosophy stance
50
Number of articles
40
30
20
10
0
Interpretivism Positivism Pragmatism
Series1 12 5 44
- Positivism
Of the sixty-one articles loaded on Qigga which were all tagged in terms of philosophical
stance, five articles were found to use positivism. The articles were more focused on
determining the truth about the topic of interest. The authors tested cause and effect
regarding the topic being researched to reach a conclusion or truth.
- Interpretivism
Of the sixty-one articles loaded on Qigga, which were all tagged in terms of philosophical
stance, twelve articles were found to use interpretivism as these articles were more
concerned with the interpretation of elements to arrive at a conclusion.
- Pragmatism
The remaining forty-four of the sixty one articles loaded on Qigga which were all tagged in
terms of philosophical stance were found to use pragmatism, as they present different
perspectives, ideas, conclusions, contradictions, solutions, benefits, problems and theories
that help the reader gain an understanding and more knowledge of the topic.
2.2.5.2 Nature of the study
18
The graph below illustrates the results of the literature reviewed for this study. Sixty-one
articles in total were tagged according to the nature of the study. Forty-seven articles were
found to be using the descriptive method, whereas thirteen articles used an exploratory
study and only one article was found to have adopted a causal study. Details are provided
below per the nature of the study.
Figure 2: Nature of study literature results
Nature of study
50
Number of articles
40
30
20
10
0
Causal Descriptive Exploratory
Series1 1 47 13
- Causal study
Of the sixty-one articles loaded on Qigga which were all tagged in terms of nature of study,
one article was found to have used a causal study as the article was more concerned with
comparing variables to determine if one variable can cause another to change.
- Descriptive study
Of the sixty-one articles loaded on Qigga which were all tagged in terms of nature of the
study, forty-seven articles were found to have used a descriptive study. These articles
provide the theory, characteristics and in-depth understanding and knowledge of the topic
of interest.
- Exploratory study
The remaining thirteen articles loaded on Qigga which were all tagged in terms of nature of
study were found to be exploratory study. These articles were written when not much was
19
known about the topic of interest, no data was available to start with; the authors often relied
on qualitative literature to explore the topic of interest.
2.2.5.3 Method of reasoning
Sixty-one articles in total were tagged according to a method of reasoning. Forty-two articles
were found to have used deductive reasoning, whereas eighteen articles used inductive
reasoning and only one article was found to have adopted abductive reasoning. Details are
provided below per method of reasoning.
Figure 3: Method of reasoning literature results
Method of reasoning
50
Number of articles
40
30
20
10
0
Deductive Inductive Abductive
Series1 42 18 1
- Deductive reasoning
Of the sixty-one articles loaded on Qigga which were all tagged in terms of method of
reasoning, forty-two of the sixty-one articles were found to have used deductive reasoning.
These articles provide different views, opinions, meanings, interpretations, descriptions and
contradictions; through them patterns are generated in order to identify relationships to build
a theory.
- Inductive reasoning
Of the sixty-one articles loaded on Qigga, which were all tagged in terms of method of
reasoning, eighteen were found to have used inductive reasoning. These articles begin with
20
observations and propose theories towards the end of the article. The articles generate
meanings from the data set collected and identify patterns and relationships to build a
theory.
- Abductive reasoning
Only one of the sixty-one articles loaded on Qigga which were all tagged in terms of method
of reasoning, was found to have used abductive reasoning. This article is not concerned
with choosing the best possible explanation. The article begins with observations to seek a
pattern.
2.2.5.4 Time horizon
Sixty-one articles in total were tagged according to time horizon. Fifty-seven articles were
found to be cross-sectional, whereas four articles used a longitudinal approach. Details are
provided below per time horizon.
Figure 4: Time horizon literature results
Time Horizon
60
Number of articles
50
40
30
20
10
0
Cross-sectional Longitudinal
Series1 57 4
- Cross-sectional
Of the sixty-one articles loaded on Qigga which were all tagged in terms of time horizon,
fifty-seven were found to be cross-sectional. Data for these articles were gathered just once
21
at the time the articles were written in order to answer or arrive at a conclusion. There is no
indication of data being collected more than once during the time of writing the article.
- Longitudinal
The remaining four articles loaded on Qigga and tagged in terms of time horizon were found
to be longitudinal. Data for these articles were collected at more than one point in time in
order to arrive at a conclusion or to describe the topic being written about. The articles
compared the situation from previous years to the current situation.
2.2.5.5 Unit of analysis
Sixty-one articles in total were tagged according to a unit of analysis. The units of analysis
for these articles were companies, countries or persons and few articles combined any of
the three. Twenty-three articles were found to be using companies as a unit of analysis,
whereas twenty-six articles were found to have used countries as a unit of analysis, only
one article used persons as unit of analysis, eight articles combined companies and
countries as a unit of analysis and the remaining three articles combined persons and
companies as a unit of analysis.
Figure 5: Unit of analysis literature results
Unit of analysis
30
Number of articles
20
10
0
Companies & Companies &
Companies Countries Persons
Countries persons
Series1 23 26 1 8 3
2.2.5.6 Nature of the data
22
Sixty-one articles in total were tagged according to the nature of the data, eleven articles
were found to have used primary data and the remaining fifty utilised secondary data. Details
are provided below per nature of data.
Figure 6: Nature of data literature results
Nature of data
60
Number of articles
50
40
30
20
10
0
Primary Secondary data
Series1 11 50
- Primary data
data, eleven articles acquired primary data to write articles. These articles gathered data
from observations and questionnaires (first-hand data).
- Secondary data
data, fifty articles acquired secondary data to write articles. These articles were written
based on data that already exists and originated from previous studies. This literature was
used to determine the similarities, differences, style of thinking and conclusions made
regarding the topic.
The graph below illustrates the results of the literature reviewed on the articles used for this
study. Fifty-two articles were found to have used the qualitative method and the remaining
nine articles used the quantitative method. No articles were found to have used mixed data.
Details are provided below for each method.
23
Figure 7: Nature of data method
Nature of data method

60
Number of articles
40
20
0
Qualitative Quantitative Mixed
Series1 52 9 0
- Quantitative
Of the sixty-one articles loaded on Qigga which were all tagged in terms of method for nature
of the data, nine articles used a quantitative method to write articles. Data was used to
quantify a problem by way of generating numerical data which was, in turn, utilised for
statistical purposes to generalise results from a sample.
- Qualitative
The remaining fifty-two of the sixty-one articles loaded on Qigga which were all tagged in
terms of nature of the data were found to have used the qualitative method to write articles.
These articles used the theory that is already available to gain an understanding of reasons,
opinions and motivations, including insights into the problem and these assisted the writer
in developing ideas or hypotheses which could be used for potential quantitative research.
- Mixed method
No articles that use mixed data were found.
2.3 SUMMARY AND BRIEF DISCUSSION OF REVIEWED LITERATURE
As indicated below in Figure 8, sixty-one articles were sourced, selected and included for
the purpose of this study. All sixty-one articles were tagged using Qigga to determine what
24
the article is reflecting as the current status of tax transparency and the impact that tax
havens have on countries (including developing countries). Articles were selected based on
relevancy to the topic of interest. The following findings of the literature reviewed are
summarised below.
Figure 8: Quality assessment: summary of results
Accounting, Tax & ABI/IMFORM

Science direct Google scholar Business Premium
Banking Collection Collection
database database Collection Other 10
database database
(12 articles) (10 articles) (15 articles)
(23 articles) (1 article)
Total articles collected

(71 articles)
Excluded because not relevant to the Excluded because published

Excluded because duplicated
topic outside the period under
(2 articles)
(7 articles) review(1 article)
Total number of articles included in the research

61
2.3.1 Tax transparency
2.3.1.1 Background of tax transparency
As discussed earlier in the study, transparency is something similar to openness (Woods,

2018:1, Meijer, 2015:10). Tax transparency has different meanings but it is generally used
by organisations to communicate the tax approach being taken and also the amount of tax
being paid. It is used by organisations to provide clarity on complex tax matters and boost
stakeholder confidence by providing assurances that a fair share of tax is being paid. Tax
transparency is also used by governments to disclose the amount of taxes received and
enhance co-operation between countries through information sharing regarding the same
taxpayer (Ernst & Young, 2013:9).
25
According to Meijer (2015:3), many government transparency analyses focus on new and
future developments, however, information and communication technologies are seen as
the main driver of transparency. The analyses help understand current issues, however,
they fail to put issues into an historical perspective (Meijer, 2015:3). Hence, this makes it
difficult to provide a clear and measurable background on tax transparency.
The key elements of transparency are the availability of information and the potential use of
this information by outsiders (Meijer, 2015:5). Tax transparency has been in existence for
250 years in the Netherlands; the first to introduce transparency legislation and practices in
1750 (Meijer, 2015:4). Transparency consists of social, political and administrative
developments (Meijer, 2015:12). According to Hildreth (2005:5), transparency reduces
principle-agent problems and it has an impact on the economy as it minimises transaction
costs. Transparency is not costless and it may be difficult to prove its benefits (Hildreth,
2005:5). It seems from the above discoveries that tax transparency represents openness
and availability of information and the usage thereof, hence it can be suggested that the
opposite or lack of transparency could be seen as closeness or secrecy.
The Russian financial crisis of 1998 demonstrated that a lack of transparency with regard to
financial markets provides a path to disaster (Hansen, 2001:1). Hansen (2001:2) further
states that companies that survived that disaster learned that transparency and good
governance are key and necessary in order to restore and maintain the confidence of
investors and creditors. Woods (2018:39) and Meijer (2015:3) also agree that, indeed, tax
transparency is critical to good governance.
2.3.1.2 The effects of tax transparency
It has already been indicated that lack of transparency is a path to disaster and literature
provides a view of these disasters and problems. According to Teather (2016:1), all
countries are affected by tax dodging, however, poor countries are highly affected as 170
dollars of taxes are lost annually by poor countries. This was confirmed by Anonymous
(2012:2); that poor countries lose more than they gain as a result of tax avoidance; in other
words, the revenues that countries should be collecting for the benefit of residents are lost.
Sufficient evidence provides that tax evasion and avoidance cause significant revenue
26
losses (Brussels, 2015:3). It, therefore, becomes imperative for affected countries to
address the situation.
It appears that there is a relationship between countries’ revenue collection and tax base.
The efforts to protect countries’ tax base is an important strategy to expand governments’
tax base, which should ultimately improve their fiscal outlook (Franco, 2013:1). Countries
with high tax rates have a small tax base whereas smaller tax rate countries have a high tax
base (Johannesen, 2010:5). It becomes a priority for countries to protect their tax base as it
has a huge impact on the welfare of the residents of those countries (Slemrod & Wilson,
2009:1, M2 Equity Bites, 2013:2).
Tax base and revenue losses are not the only issues affected by lack of transparency. Base
Erosion and Profit Shifting (BEPS) is another mountain countries are faced with. BEPS
refers to tax planning strategies that artificially shift profits to low or no tax jurisdictions that
have little or no economic activity by exploiting gaps and mismatches in tax rules
(Shrivastav, 2015:1). Anonymous (2008:2) believes that profit shifting happens frequently
for the purposes of avoiding tax. This is a global problem which requires a global solution
(Shrivastav, 2015:1). According to Shrivastav (2015), the key pressure points in international
tax reform which were identified by the OECD for BEPS are related to party debts, captive
insurance, intergroup financial transactions, transfer pricing between related entities, thin
capitalisation rules, tax treaty abuse and preferential regimes. The key pressure points
mentioned are obviously directly linked to ensuring more transparency so that base erosion
and profit shifting can be addressed and the right country can collect their fair share of taxes.
On the other hand, banks and other financial institutions are also contributing to problems
countries already have.
According to Anonymous (2008:4), lack of transparency particularly in international private

banking is a big issue and this is as a result of de jure and de facto bank secrecy and other
confidentiality laws. According to Spencer (2005:2), bank secrecy operates in two basic
forms, namely de jure and de facto. De jure bank secrecy compels the banks and other
financial institutions not to disclose investors or depositors’ identity, except in cases of
money laundering and other criminal activity (Spencer, 2005:2). De facto bank secrecy
allows banks and other financial institutions to not provide information through automatic
reporting to governments regarding foreign depositors or investors (Spencer, 2005:2).
27
Facilitation of the receipt of corruption proceeds by providing bank secrecy and other
confidentiality laws as a result of a lack of transparency and tax-free treatment must be given
greater focus (Anonymous, 2008:4). A secrecy regime enables investors to hide taxable
capital from their respective countries of residence (Konrad & Stolper, 2016:2). This provides
a view of how banks contribute to the problem for countries; lack of transparency through
bank secrecy hinders countries as they do not receive relevant information regarding their
residents and in turn, they cannot effectively and accordingly plan for tax purposes. It is
suggested that these secrecy regimes are for the protection of tax avoiders and evaders to
prevent countries to correctly enforce provisions of legislation.
According to Radu (2012:4), Monaco is a country of great millionaires; it does not have
Personal Income Tax and tax evasion is not considered an offence. There are 340 000 bank
accounts held by authorities in this country and these banks maintain strict and absolute
secrecy (Radu, 2012:4). Banks, trusts, companies, brokerage firms, other financial
institutions and governments facilitate the receipt of corruption proceeds by providing bank
secrecy (Anonymous, 2008:3). This indicates how banks play a role in assisting tax evaders
to evade tax through secrecy. When it comes to tax transparency, problems do not end
there; capital flight also seems to add to the laundry list of problems.
According to Spencer (2005:2), lack of automatic exchange of information facilitates and

encourages capital flight and tax evasion. Capital flight was found to be Harmful Tax
Competition in a 1998 report published by OECD and it is their objective to limit capital flight
in member countries with the aim that it will limit tax evasion. It is understood that capital
fight is when residents hide their capital in other countries; it remains unreported or unknown
in the home country of that resident. This can be translated as the usage of offshore centres,
also known as tax havens.
Houlder (2016:2) estimates that nearly 10 trillion dollars are held offshore. According to
Alstadsæter et al. (2018:2), the use of tax havens has a large effect on inequality in the UK,
Spain and France. Africa is also losing more money as a result of illicit financial flows
(Whitehead, 2013:2). This indicates the impact that transparency has.
28
Over and above the problems, tax transparency also impacts legislation. Increased scrutiny
of corporate affairs (which in essence is tax transparency) will impact existing legislation
(Franco, 2013:3). Grocott and Stevenson (2010:8) confirm that it promotes a policy that
helps member states fight tax fraud and avoidance. Based on this statement it can be
imagined that tax legislation is drafted based on many factors, including observations of
taxpayers behaviours, hence lack of information can result in tax legislation that is not
effective and therefore does not address relevant tax issues. Limited transparency and
disclosure posed a threat to effective tax administration and to a certain extent foreign
multinationals contributed (Ring, 2016:33). In the same manner without relevant information
effective tax administrations cannot be implemented.
Transparency and cooperation is a vital weapon in the fight against aggressive tax planning
and abusive tax practices and to protect the tax base (Brussels, 2015:1, M2 Equity Bites,
2013:2). Haines (2017:1) adds that they have a duty to block tax abuse and profit shifting.
Brussels (2015:1) also believes that tax transparency is a crucial weapon for fighting against
aggressive tax planning and abusive tax practices. Automatic exchange of information on
tax rulings will enable detection of abusive tax practices by companies (Cunningham,
2015:2). Haines (2017:1) also believes that aggressive tax practices, tax abuse and profit
shifting can be fought by implementing more transparency. As such, it is believed that
transparency will enable developing countries to fight tax evasion, capital flight and
corruption and achieve self-sustaining growth (Owens & M oore, 2013:1).
Tax transparency is, however, not as glorified as it appears, as much as it is praised to be

very beneficial for countries in dealing with problems, it also comes with disadvantages. In
fact, the Liechtenstein government made a strong statement that logistically and politically,
tax transparency is never going to happen (Grocott, 2010:3). There is a fear that tax
transparency may have an impact on the confidentiality of affected taxpayers (International
Tax Review, 2013:4). Exchanged information may fall into the hands of corrupt officials
which could result in identity theft and hacking (Houlder, 2016:2). It is, therefore, observed
that as much as tax transparency is glorified to have advantages and benefits to countries,
it comes with huge responsibilities as it poses a threat to taxpayers; countries should treat
confidentiality as a priority.
29
2.3.2 Tax havens
2.3.2.1 Definition of tax havens and countries classified as tax havens
As discussed earlier in the study, a tax haven has been defined as a place with no taxes
(Karp, 1993:1). It is further defined by the OECD (in Slemrod & Wilson, 2009:1) as a
jurisdiction that imposes no taxes or small taxes and offers itself to people and companies
as a place to be utilised by non-residents to escape taxes in their country of residence. The
definition has indirectly been affirmed that a tax haven (with regard to private investors) it is
primarily used for countries that have no or only nominal taxation and operate under strict
secrecy rules that assist foreign investors to conceal capital income from the tax authorities
of their respective home countries (Konrad & Stolper, 2016:1).
The three authors confirm the fact that a tax haven is a place where residents escape their
tax responsibilities. Richardson and Taylor (2015:2) also agree with the definitions as they
characterise tax havens as jurisdictions with nil or only nominal amounts of Corporate Taxes.
At this stage, it is confirmed that a tax haven is a place that has no taxes or very low taxes
are imposed and it is utilised by non-resident companies and individuals to escape paying
tax in their respective countries (Alstadsæter et al., 2018:1, Karp, 1993:1, Slemrod & Wilson,
2009:1).
The literature states that a tax haven was first developed by Switzerland in 1920 and then
was followed by Hong-Kong (Alstadsæter et al., 2018:4). The third and fourth rank is
unknown at this stage and the Cayman Islands takes the fifth place in world of finance, which
constitutes 80% of investment funds around the world and manages assets of approximately
100 trillion dollars (Radu, 2012:2). Choy et al. (2017:8) further split the tax havens between
two categories, namely The “Big 7” and “Dot” havens. They confirm that the Big 7 havens
are classified by its populations of one million as of 1982. This, therefore, means the Dot
havens have less than one million in populations, which they refer them as “the rest”. The
“Big 7” includes Hong-Kong, Ireland, Lebanon, Liberia, Panama, Singapore and Switzerland
(Choy et al., 2017:8). It is imperative therefore to discover which countries are classified as
tax havens.
30
A list of tax havens was published in 2008 and the following countries were included:
Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda,
British Virgin Islands, Cayman Islands, Cyprus, Dominica, Gibraltar, Grenada, Ireland,
Jordan, Lebanon, Liberia, Liechtenstein, Luxembourg, Maldives, Malta, Marshall Islands,
Mauritius, Netherlands Antilles, Panama, Saint Kitts and Nevis, Saint Lucia, Saint Vincent
and Grenadines, Seychelles, Singapore, Switzerland and Vanuatu (Schwarz, 2011:10).
More tax havens which are not included in above list have been identified throughout the
literature, namely Delaware and Monaco (Radu, 2012:3). According to Alstadsæter et al.
(2018:3), Guernsey, Jersey, Austria, Belgium, United Kingdom, Macao, and United States
are also identified as tax haven countries. In addition, Grocott (2010:2) identifies Costa Rica,
Malaysia, Phillippines, Uruguay, and Isle of Man as tax havens. Whereas Desai et al.
(2006a:2) adds Caribbean Island and Hong-Kong to the list. Channel Islands, Andorra, and
San Marino are also identified as tax haven countries (Anonymous, 2008:4). This confirms
that there is a significant number of tax havens that are operational around the world. The
next discussion will be on how tax havens operate and that is key as it provides an overview
of how and why a country is classified as a tax haven.
2.3.2.2. How do tax havens operate?
According to Konrad and Stolper (2016:3) countries that are small can easily become tax
havens. Schwarz (2011:6) also believes that small countries that have dense populations
are tax havens. According to Radu (2012:3), a tax haven usually has currencies that can
easily be converted into dollars, euros or pounds. Tax havens, in general, have a double
monetary control system; this system distinguishes between residents and non-residents
and local and foreign currencies (Radu, 2012:3). Generally, a tax haven charges a fee for
the wealth management of a capital concealing investor and a tax haven country benefits
from this economic activity (Konrad & Stolper, 2016:2). Bucovetsky (2014:2) also confirms
that tax havens charge a fee for their services. Tax havens are paid in two forms, in cash or
through favourable investments that facilitate economic growth (which is indirect
compensation) (Slemrod & Wilson, 2009:3).
31
According to Bucovetsky (2014:2), it is undoubtedly guaranteed that many multinational
corporations make use of tax havens to reduce their tax payments. This was confirmed by
Desai et al. (2006a:9), that larger international companies are most likely to use tax havens.
Corporations register subsidiaries in tax havens and through this channel assets get moved
and hidden (Bucovetsky, 2014:2). According to Desai et al. (2006b:1), there is a concern
that low tax jurisdictions intentionally introduce low taxes as a way to attract investment
which would otherwise be in high tax jurisdictions. This goes as far as setting up dummy
corporations, trusts, banks and even insurance companies in tax havens to launder money,
not for drug smugglers but for doctors, dentists, lawyers, businessman and white-collar
professionals of all kinds (Karp, 1993:1).
Companies also use tax havens by manipulating transfer pricing. They buy products from a
branch located in a tax haven without a profit and they resell the product in an open market
without paying the fees and taxes (Radu, 2012:3). Richardson and Taylor (2015:2) also
agree that multinational corporations shift income between group subsidiaries located in tax
havens through transfer pricing, strategic debt location and preferential cost allocation.
Firms shift income by manipulating transfer pricing of goods and services which result in
providing more benefits and revenues to low-tax jurisdictions (Richardson & Taylor, 2015:3).
Tax havens also operate by utilising profit shifting and corruption. Statistics analysis by
specialists indicates that companies deflate and inflate invoices frequently, which facilitates
profit shifting for purposes of avoiding tax (Anonymous, 2008:2). This reveals other criteria
of utilising tax havens. In September 2007, star report estimated that developing countries
and transitional economies contributes 1.6 trillion dollars proceeds annually towards
corruption (Anonymous, 2008:3). According to Owens and Moore (2013:1), the G20 already
recognised the increasing links between tax transparency and effective action that must be
taken against corruption and money laundering.
Alstadsæter et al. (2018:7) state that names and addresses of the owners of all the shell
companies created by Panama Papers were published by International Consortium of
Investigative Journalists. Panama Papers refers to leaked documents that consisted of
detailed financial and attorney client information of offshore shell entities. The shell
companies were created over two decades ago and they were referred to as Panama
papers. It is interesting to find that amongst the countries that created shell companies,
32
Zimbabwe and Kenya are also mentioned (Alstadsæter et al., 2018:7). This finding is
disturbing as it is common knowledge that both countries are African countries and
developing countries at the same time. The question that arises is, therefore, why these
countries become problems for themselves; it was confirmed earlier in this study that the
use of tax havens is a problem for African or developing countries.
2.3.2.2 Why are tax havens used?
According to the evidence revealed in Desai et al. (2006a:1), the primary use of larger tax
haven countries is to reallocate taxable income, whereas smaller tax havens are used to
facilitate deferral of United States taxation of foreign income. Bucovetsky (2014:3) adds that
investors use tax havens for tax sheltering or for production. On the other hand, Slemrod
and Wilson (2009:2) believe that investors use tax havens to reduce the effective marginal
tax rate for any given statutory tax rate. The use of tax havens helps firms avoid taxes (Desai
et al., 2006a:2). In essence, a tax haven is punished if it levies a positive tax rate, as a result
investors will not use that country as a tax haven in future (Bucovetsky, 2014:3).
However, Konrad and Stolper (2016:4) seem to have a different view as they believe that
there area number of reasons why investors use offshore centres and these reasons are not
always to evade taxes. Offshore centres may be used for diversification, strong institutions,
financial expertise or even insurance against leviathan governments. Konrad and Stolper
(2016:1) further state that reasons could just be to enjoy the combination of concealment
opportunities and the quality of the property rights regime in a tax haven country.
The investor's decision to use a tax haven depends on the likelihood of its secrecy regime
and a tax haven with a secrecy regime attracts large capital inflows from tax evading
investors (Konrad & Stolper, 2016:2). A secrecy regime enables investors to hide taxable
capital from their respective countries (Konrad & Stolper, 2016:2). It appears that if a tax
haven does not guarantee a secrecy regime, it is unlikely to be utilised by investors. Konrad
and Stolper (2016:6) confirms that investors relocated their funds away from Switzerland
when it entered information exchange treaties with several EU (European Union) countries
and also enabled the banks to disclose client information to the US tax authorities.
33
It was already indicated that tax haven countries have no taxes or use low tax rates. High
tax rate countries, on the other hand, attract investors and assist them to evade taxes and
as a result haven countries are robust toward political pressure (Konrad & Stolper, 2016:3).
A tax haven must provide concealment opportunities in the future to attract business or
investors. An overview of what tax transparency is has been discussed, tax havens and their
operations have also been mentioned. However, the question remains as to their association
with developing countries.
2.3.3 Developing countries
2.3.3.1 Background on developing countries
According to Ring (2016:26) there is no single agreed upon definition of developing

countries, however, while the United Nations (UN) recognises this fact, it groups countries
into three broad categories, namely developed economies, economies in transition, and
developing economies. Tanzi (2000:1-2) also provides a view that developing countries
have often being characterised by the fact that they share a large portion of agriculture in
total output. They have large informal sector activities and occupations, they have a small
share of wages in total national income and have many small establishments (Tanzi,
2000:1). He also adds that they are classified by a small share of total consumer spending
made in large, modern establishments (Tanzi, 2000:3).
Nielsen (in Ring, 2016:26-27) further states that regardless of variety of approaches with
regard to country classification, the purposes for which such classifications are placed and
the underlying normative implications of classification schemes, a number of factors seem
generally relevant in assessing a country’s status, including gross national income, longevity
and education. According to these two authors that is how countries are classified as
Tanzi (2000:5) further uses a split of four regions to classify developing countries, namely
Africa, Asia, the Middle East and the Western Hemisphere to provide thirty-eight developing
countries. Within the African region developing countries are Kenya, South Africa, Tanzania,
Uganda, Zambia, Zimbabwe (Tanzi, 2000:11). Cote D’Ivoire (Ivory Coast) and Mauritius are
34
also added to the list (Tanzi, 2000:16). Western Hemisphere includes Argentina, Brazil,
Chile, Costa Rica, Mexico, Nicaragua, (Tanzi, 2000:11). Bolivia, Colombia, Dominican
Republic, El Salvador, Panama, Peru, Uruguay and Venezuela also adds to Western
Hemisphere (Tanzi, 2000:16).
The Middle East developing countries are Egypt, Jordan, Morocco, Pakistan and Tunisia
(Tanzi, 2000:16). Asian developing countries includes Fiji, Indonesia, Korea , Philippines,
Singapore, Sri Lanka and Thailand (Tanzi, 2000:16). He also adds Vietnam and Paraguay.
This provides one with a list of 38 developing countries.
According to (Thaçi and Gërxhaliu, 2018:3), developing countries can use tax to control
inflation and to achieve economic and financial stability. Tax is considered vital to reducing
(budget) deficits and for business survival (Grocott & Stevenson, 2010:1). This implies that
developing countries are generally facing inflation, which is something that can be eliminated
or reduced through the collection of taxes. However, the establishment of effective and
efficient tax systems is a challenge for developing countries (Tanzi, 2000:1). The economic
structure in developing countries makes it difficult to impose and collect certain taxes and
many countries have a limited capacity in terms of tax administration (Tanzi, 2000:1).
According to Tanzi (2000:1), the tax system in developing countries is expected to raise
enough revenue to finance government essential expenditures without excessive borrowing.
They are expected to raise this revenue in equitable ways that minimise negative impacts
on economic activities and do so within the international norms (Tanzi, 2000:1). This could
be viewed as intense pressure for these countries given the problems they are faced with.
Owens (2009:1) clarifies the fact that developing countries are aware of the benefits that
can be derived by implementing better tax systems that have more effective tax
administrations. However, it is a fact that a well-structured system requires a combination of
both direct and indirect taxes and developing countries rely more on direct taxes (Thaçi &
Gërxhaliu, 2018:1).
Unlike developing countries, developed countries collected four times more revenue from
Personal Income Tax (PIT) than they do in Corporate Income Tax (CIT) (Tanzi, 2000:9).
Due to the fact that developing countries have limited tax administration capabilities, the tax
35
treatment of financial income is problematic (Tanzi, 2000:13). It is a fact therefore that
developing countries struggle with the collection of revenues.
Amongst other problems, developing countries are also faced with the limitation of obtaining
basic data which makes it difficult for policy makers to assess the potential impact of
changes to the statutory tax system (Tanzi, 2000:1-2). It was indicated earlier that lack of
transparency has an impact on the ability of countries to implement effective legislation.
Tanzi (2000:1) further highlights the fact that the political set-up does not support rational
tax policy when compared to developed countries and developing countries, therefore,
seems to be affected the most. This study seeks to explore the effect of tax transparency
and tax havens, particularly on developing countries.
2.4 RESEARCH ETHICS
No ethical clearance was required as this study is not performed on human beings and
animals. The research ethics clearance has been submitted to the research committee for
approval. No other research ethics were applicable in this study.
2.5 CONCLUSION
This chapter reported on the literature that was reviewed for purposes of answering the
research question and objectives. It is clear that countries may be facing problems and
challenges that affect revenue collections and tax base and that have a direct impact on the
economy of that country and eventually on the residents.
Overwhelming evidence points to tax havens as part of the reason that non-haven countries
are losing to them. Hence they are benefiting from the loss of other countries as revenue
that should rightfully be collected to non haven countries is diverted to haven countries. The
lack of tax transparency is at the heart of these problems. However, there is hope as it
appears that implementation of tax transparency might be the solution for all non-haven
countries as this will enable countries to tax the residents accordingly and that will
automatically improve the tax base and revenue collections.
36
It is clear that countries affected include developing countries and it is to this effect that this
study is conducted, to contribute to the body of literature on the impact of tax transparency
and tax havens; particularly within developing countries. This study will do so by providing
the current status of literature on the impact that tax transparency and tax havens have on
37
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 INTRODUCTION
This purpose of this chapter is to discuss the application of theoretical research design and
methodology which were discussed in the previous chapters. The philosophical stance,
nature of the study, method of reasoning, time horizon, unit of analysis and nature of the
data applicable to this study are discussed. This chapter also covers the systematic review
approach and under systematic review a motivation as to the reasons why it is used
specifically for this study are provided, together with an explanation of what a systematic
review is and how it is generally applicable.
3.2 RESEARCH DESIGN ELEMENTS AS APPLICABLE TO THIS STUDY
3.2.1 Philosophical stance
This study falls within the ambit of the pragmatism philosophical stance. Pragmatism does
not take on a particular position of the research, however, feels that research on the
subjective meanings, objectives and observable phenomena can provide useful knowledge,
depending on the research question. This study will utilise perspectives, ideas and theories
of the currently available literature to help the researcher gain an understanding and more
knowledge of tax transparency and the impact that tax havens have on developing countries.
In gaining this knowledge and understanding, the researcher will then be able to determine
the current status of literature regarding tax transparency. A number of studies have been
conducted on the impact that tax havens have on countries (including developing countries).
The study seeks to determine what the current status of literature is regarding the impact
that tax havens have on developing countries. This study will only use a web of knowledge
currently available to answer the research question. The literature identified will be reviewed
and analysed to find out if there are similarities, differences, contradictions, benefits, impacts
38
and any other finding that the literature may reveal; that is what this study seeks to
accomplish.
3.2.2 Nature of the study
This study is exploratory in nature. Exploratory studies are conducted when much is not
known about a particular phenomenon, existing research results are unclear or suffer from
serious limitations, the topic is highly complex or there is not enough theory available to
guide the development of a theoretical framework. Currently, literature is available on tax
transparency and the impact that tax havens have on countries, however, it is scattered and
there is no structural overview of the impact that tax havens have on developing countries.
This study seeks to explore and contribute to the body of literature by determining the current
status of literature on the impact that tax transparency and tax havens have on developing
countries.
3.2.3 Method of reasoning
This study applies the inductive method of reasoning, as the study starts with the
observations and end with theories that are proposed towards the completion of the
research process as a result of observations. This study aims to generate meanings from
literature obtained with regard to the impact that tax transparency and tax havens have on
developing countries in order to identify patterns and relationships with the aim of building a
theory.
This patterns, resemblances and regularities in literature represent premises that are
observed and generated in order to reach conclusions or to formulate a theory on the impact
that tax transparency and tax havens have on developing countries.
3.2.4 Time horizon
This research adopts a cross-sectional study. Cross-sectional studies utilise a collection of

data over a period of time which can be days, weeks or months in order to answer the
research question and objectives. The data for this study was collected from February to
39
August 2018. Data will not be collected beyond the months specified and beyond the
completion of the study as the researcher would have achieved the goals and answered the
research question and research objectives as set out.
This is a once-off collection of data over a period specified; hence it is referred to as a one-
shot or cross-sectional method.
3.2.5 Unit of analysis
The unit of analysis applicable to this study is published academic articles. The articles
focussed on countries and taxpayers who are either companies or individuals. Data has
been collected on the topic of interest, namely articles that were downloaded from
databases, these articles reveal a web of knowledge and understanding on countries and
taxpayers with regard to tax transparency and the impact that tax havens have on countries.
There are some minimal articles which are included as literature for purposes of addressing
the research question, however, they are not specifically written about countries or
taxpayers, but still relevant to the study in terms of information.
The literature available is not based on particular countries, however a general overview of
the literature on how different countries experience tax transparency and the impact that tax
havens have on those countries that are non-haven. Once the researcher has the general
view of the current status of literature on countries, the focus will be narrowed down to
specific countries – in other words, developing countries.
3.2.6 Nature of the data
The nature of this study is secondary data. It is applicable to this study as literature in the
form of articles, journals, books and publications are already available on the current status
of tax transparency and the impact that tax havens have on developing countries. This
literature is referred to as secondary data.
The data is collected so that the researcher can gain more understanding and knowledge of
the topic. This literature is used to determine the similarities, differences, style of thinking,
40
conclusions and any other findings that the literature will uncover regarding this study. The
knowledge and understanding acquired will then be analysed and summaries will be
generated to answer research question and objectives.
3.3 SYSTEMATIC REVIEW
3.3.1 Motivation
A systematic review is a well-recognised method that has been used over the years and is
available to researchers. It follows a systematic approach which assists the researcher to
gain more knowledge and understanding of the topic by using literature that is already
available to answer the research question. It is easier to utilise as the researcher is able to
identify literature at once from online publications and utilise that information to address the
study. Unlike other time-consuming methods, such as conducting surveys and interviews
which may at times not be accurate, a systematic review enables the researcher to save
time as literature is already available (Mallett, Hagen-Zanke, Slater & Duvendack, 2012).
As indicated, systematic review follows certain steps. It starts by classifying the search
based on the research question. The researcher seeks to determine the current status of
tax transparency and the impact that tax havens have on developing countries; hence the
search has been deconstructed as such. The results of the literature searched on databases
were produced and covered a wide range of subjects that relate to the topic at various levels
of completeness and comprehensiveness, including the research findings. This remarkable
method of research is a tool which comes as an added value tool to assist the researcher to
pilot and screen the literature to include and exclude based on the relevancy and finalising
the data by comparing the results found.
Data gathering and finalisation is the critical stage of a systematic review because if not
done properly it can lead to a revision of the search strategy. It is important for the researcher
to follow the steps properly so that it can be done once and the research can be concluded
sooner. Therefore, it is the most efficient and effective method for this study, given the time
frames.
41
3.3.2 Explanation
According to Mallett et al. (2012):
 The starting point of a systematic review will be to develop a research question. A

number of things must be considered, including the population of the study,
intervention needed to conduct the study, the outcome of the study and comparator, to
name a few. This becomes the basis of a string of searches that are used in order to
refine the literature search. From this step, a protocol which is often peer-reviewed and
piloted is developed and it will describe the definitions and search strategies to be
utilised, methods to be used for inclusion and exclusion criteria and which approach to
combine. Often this step leads to a repetition of the search strategy.
 The next step will be to conduct a search from academic databases and institutional
websites, which must manually be selected. Due to the fact that the researcher seeks
to gain as much understanding and knowledge as possible, all studies found are
included. The researcher will then start eliminating or excluding studies which are not
relevant to the topic of interest. This is normally achieved by reading the abstract and
full text of the study. At this stage, the screening process is at times piloted with all
other literature that is being screened, to ensure consistency. It can also be piloted on
similar studies conducted by other researchers, followed by a comparison of the
results. This step will lead to finalising the studies that are included in the final analysis.
 When the final analysis of the data is completed and decided upon, the last step is to
extract the relevant data in order to produce the findings and evidence discovered.
This step depends on the type or field of study; a meta-analysis may be utilised to
synthesise or manufacture evidence and directly compare results. A summary of
findings is drawn and that should, in turn, answer the research question and objectives,
which conclude a systematic review approach.
42
CHAPTER FOUR
DATA ANALYSIS AND PRESENTATION OF RESULTS
4.1 INTRODUCTION
This chapter records the findings from the literature reviewed and ultimately answers the
research question and objectives. The impact of tax transparency and tax havens on
developing countries is discussed. The benefits of tax transparency are also discussed in
this chapter and it ends with possible solutions identified thus far. As indicated, sixty-one
articles were sourced, selected and included for the purposes of this study. All sixty-one
articles were tagged using Qigga by analysing each and every one of them to determine the
current status regarding the impact that tax transparency and tax havens have on
developing countries and also to establish if there are any benefits associated with tax
transparency. The study arrived at the findings below.
4.2 APPLICATION OF LITERATURE
A total of sixty-one published articles reviewed yielded the following findings on the impact
of tax transparency and tax havens on developing countries. The summarised findings will
be interpreted in detail below:
Table 5:Summary of research findings

The impact of tax transparency The impact that tax havens have
Boost international cooperation on Encourages unfair tax competition (Slemrod

corporate tax and transfer pricing (Pross & Wilson, 2009:2, Haines, 2017:1).
et al., 2016:4).
Impact tax audits as tax authorities have Increase reputational risks (Grocott, 2010:2,
more information through tax Franco, 2013:2, Venter et al., 2017:2,
transparency to conduct accurate and Manzano & Pinamont, 2014:2, M2 Equity
fair tax audits (Grocott, 2010:2). Bites, 2013:1)
43
Assists in securing relevant tax data Assist investors to reduce the final tax liability
regarding foreign multinationals (Ring, (Hinnekens, 2003:2).
2016:33).
Assists developing countries to have Positively associated with multinationals,

access to information directly from transfer pricing, aggressiveness, thin
multinationals (Ring, 2016:55) capitalisation and intangible assets
(Richardson & Taylor, 2015:24).
Automatic exchange of information can Facilitate loss of revenue (Grocott &
reduce the mobility of capital and this will Stevenson, 2010:3, Anonymous, 2008:4).
assist governments to tax income
(Houlder, 2016:3)
Assists developing countries generate Reduce revenue collections and decrease

more revenue (Grocott & Stevenson, the tax base (Radu, 2012:1, Slemrod &
2010:3). Wilson, 2009:2, Alstadsæter et al., 2018:4).
Additional revenue collections have Benefits and assist firms to avoid taxes
already been witnessed by some (Desai et al., 2006a:18).
countries who implemented tax
transparency (Pross et al., 2016:3).
It encourages policy debates and also Benefits by providing freedom to foreign

discourages aggressive tax minimisation exchange control, freedom to build reserves,
practices (Friezer, 2013:1) freedom not to disclose information, freedom
to not pay heavy taxes and fees (Radu,
2012:5).
It will enhance communication amongst
countries and best practices will be
established (Grocott, 2010:3,
Euromoney Institutional Investor PLC,
2015:3).
It will combat base erosion, profit shifting

and offshore non-compliance (Owens &
Moore, 2013:2, M2 Equity Bites, 2013:3,
Houlder, 2016:2, Pross et al., 2016:1).
44
It will encourage local and international
tax fairness (International Tax Review,
2013:3, Owens & Moore, 2013:1, M2
Equity Bites, 2013:2).
The above findings were deduced from the sixty-one articles reviewed and these studies
had the following country perspective.
Table 6:Countries perspective of articles

Countries 1993 2000 2001 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total
African 2 1 1 2 3 9
Anguilla 1 1
Argentina 1 1
Asia 1 1 2
Australia 1 2 3
Belize 1 1
Brazil 1 1 2
Cayman Islands 1 1
China 1 1 2
Developing countries 1 1 1 2 1 2 2 1 2 1 1 1 16
Europe 1 1 1 2 1 6
France 1 1 2
Germany 1 1 1 3
Gibraltar 1 1
Group of countries 1 1 1 1 4
India 1 1 1 3
Ireland 1 1 2
Isle of man 1 1
Kenya 1 1
Malawi 1 1
Monaco 1 1
Netherlands 1 1 1 3
Panama 1 1 2
Russia 1 1 2
South Africa 1 1 1 2 1 6
Spain 1 1
Switzerland 1 1 1 3
United Kingdom 1 2 2 1 1 1 8
United State of America 1 1 1 1 2 1 7
Total 1 1 3 1 1 1 2 1 13 3 1 13 17 8 9 6 5 8 94
A total of sixty-one articles were tagged based on country perspective and twenty-nine
countries have been written about. The articles provide a general overview of tax
transparency and the impact that tax havens have on countries mentioned and also on
developing countries. The articles included are between 1993 and 2018.
4.2.1 The current status of literature relating to the impact of tax transparency on
45
4.2.1.1 The impact of tax transparency on developing countries
It is estimated that developing countries lose R160 billion annually as a result of transfer
pricing that is not at arms-length standard (Grocott & Stevenson, 2010:3). It is further
estimated that 11.5 trillion dollars is placed in other jurisdictions (Anonymous, 2008:4). The
estimations provide an overview of losses encountered by countries. According to Radu
(2012:3), companies manipulate transfer pricing by buying products from offshore centres
without profit and resell in open markets without paying fees and taxes. Companies also
reduce tax contributions by exploiting tax rulings and this is as a result of a lack of
transparency. Of course, the ultimate impact is on revenue collections and tax base.
The banks have also been accused of facilitating capital flight by their secrecy operations
and the effect of these operations, are that investors and depositors do not report interest
income in their respective countries (Spencer, 2005:3). Tanzi (2000:13) declares that it is
difficult for developing countries to tax interest income derived by their residents, he adds
that if interest income is at all taxed, it is through the withholding tax mechanism. According
to Thaçi and Gërxhaliu (2018:3), firms use banks to avoid taxes when tax rates are high.
They are willing to give up the economic benefits in order to avoid taxes. Capital flight also
affects developing countries negatively. According to Spencer (2005:4), capital flight affects
developing countries the same way that it affects other countries. This amounts to non-
compliance to tax declarations and automatically affects the ability of countries to collect
revenue and to increase the tax base. Hence, organisations such as the OECD, IMF and
World Bank are committed to assisting developing countries in improving their tax
administration in an attempt to fight capital flight.
The UN International Conference also encouraged developing countries to strengthen

international cooperation (amongst other things) and they have pledged their support to
developing countries (Spencer, 2005:4). Grocott and Stevenson (2010:8) add that to
improve international cooperation, tax authorities must work together. It was also observed
that countries are working together to address cooperation on economic challenges that are
common to them (Shaheen, 2012:1). It appears that cooperation is key to ensuring
successful implementation of tax transparency. It is also an added benefit that organisations
are committing to assisting developing countries in dealing with their problems.
46
It is believed that ensuring more openness between states will encourage more cooperation
between tax administration authorities (Cunningham, 2015:2). It appears that cooperation is
key as enhancing the transparency of multinational enterprises is expected to have a
significant impact on boosting international cooperation specifically in relation to corporate
tax and transfer pricing (Pross et al., 2016:4). Tax transparency is impactful to developing
countries and through cooperation, developing countries can successfully implement it.
It is a fact that tax transparency will also impact tax audits. According to Grocott (2010:2),
multinationals use legal tax avoidance to minimise tax liabilities; exchange of information will
make things easier for tax authorities to verify disclosed information. It is believed that with
regard to the audits, the impact will be huge as tax transparency will provide more
information which would normally not be available. This will ensure efficiency and it is an
added advantage as correct amounts of taxes will be collected. Euromoney Institutional
Investor PLC (2015:3) added that tax transparency or information exchange will effectively
govern audit processes and will ensure consistency in audits around the world.
As much as tax transparency has the potential to positively impact on developing countries,
there are concerns associated to it. According to Shrivastav (2015:2), the OECD observed
that developing countries rely heavily on revenues collected through Corporate Income Tax,
hence Base Erosion and Profit Shifting (BEPS) is of significance to developing countries.
The OECD launched the BEPS project, which consists of 15 action plans in key areas to
tackle tax challenges and these actions are endorsed by the G20 (Shrivastav, 2015:1).
According to Ring (2016:50), Action 13 will have the master file, a local file and CbC report
which countries will benefit from as they will receive better information and be able to self-
report regarding transfer pricing and allocation of profits globally. There are concerns
particularly for developing countries participating in this action. Ring (2016:50) stresses that
multinationals have concerns regarding the use of information that developing countries will
receive through participation in Action 13. She adds that developing countries may use the
information for tax adjustment and will fail to engage in full transfer pricing analysis (Ring,
2016:50).
47
There is also a concern for developing countries on the usage of this information, that
taxpayer privacy and confidentiality will be jeopardised; multinationals are concerned as to
whether developing countries will adequately protect data received through this action (Ring,
2016:51). Developing countries must, therefore, assure multinationals that receipt of such
information will be safeguarded and assist with proper implementation.
4.2.1.2 The benefits of tax transparency in developing countries
According to (Owens, 2009:2), a seminar held by the African Tax Administration Forum
(ATAF) reflected on the importance of adopting the international standards of transparency
and exchange of information. This highlights the importance of tax transparency and the
reason why it should be encouraged, especially in developing countries. Greater tax
transparency will benefit both developing and developed countries
(M2 Equity Bites, 2013:2). Developing countries depend more heavily on mechanisms of
information exchange to secure relevant tax data regarding foreign multinationals operating
in their jurisdictions (Ring, 2016:33); hence tax transparency is of high importance to them.
International forums such as G20 and Global Forum have indicated their commitment and
support to encouraging and assisting developing countries to implement global standards of
transparency and exchange of information to get a fair deal in the global tax environment,
through the fight against tax avoidance and evasion (Owens, 2009:4, Grocott & Stevenson,
2010:8). The Global Forum has further committed to monitoring the impact that new tax
transparency standards will have on developing countries (Owens, 2009:4).
Ring (2016:46) identified possible advantages for developing countries which are associated
with the implementation of BEPS Action 13. It is believed that the benefits include developing
countries having access to information directly from multinationals through this action (Ring,
2016:55). Whereas developing countries suffer from limited tax enforcement and audit
resources, global tax administrators automatically receive information and that enables them
to begin their analysis (Ring, 2016:54). In addition, Venter et al. (2017:8) suggest that tax
transparency could benefit capital markets as investors view tax transparency as a sign of
quality disclosure and they add that it could reduce the risks and costs of being subject to
an audit.
48
It is believed that tax authorities must create a feeling of fairness towards taxpayers to avoid
disadvantaging them (International Tax Review, 2013:3). Owens and Moore (2013:1)
mention that the G8 organisation also launched a ten point action plan; it is believed that its
implementation will improve tax transparency, multinationals will achieve fairer taxation and
it will also help developing countries build their tax capacity. It proves that there is a
significant benefit to developing countries by the mere implementation of tax transparency.
This benefits both taxpayers and countries.
Former South African Minister of Finance, Pravin Gordhan also confirmed that the
automation of exchanging tax information will contribute and add value to the establishment
of effective, efficient and fair international tax systems (M2 Equity Bites, 2013:2).
Transparency initiatives will have an impact on current tax procedures and systems and this
could require legislative and organisational changes (Anonymous, 2013:4). It is strongly
believed that tax transparency when paired with international tax reform may provide
opportunities for a tax director to clean up all company tax strategies that does not serve a
legitimate purpose (Alexander, 2013:6). Developing countries have to invest in the tax
system to effectively maximise collection of taxes.
Christian Aid is an organisation that also advocates that developing countries should be
included in initiatives such as information exchange agreements through country-by-country
reporting standards, which will to a certain extent prevent companies from shifting profits to
tax havens (Anonymous, 2010:1). According to Grocott and Stevenson (2010:4) if
developing countries are informed via the automatic sharing of tax information, then they
would not fall a foul of abusive tax arrangements. The international community is also
fighting tax evasion through information sharing (Alexander, 2013:4). Developing countries
should learn from such communities as tax evasion and capital flight in developing countries
are enabled by lack of transparency in onshore and offshore financial centres. (Anonymous,
2008:3-4).
It is expected that automated exchange of information can reduce the mobility of capital and
this will assist governments to tax the wealth and capital income as required by legislation
(Houlder, 2016:3); this will effectively reduce non-compliance. Houlder (2016:2) reports that
49
global tax transparency has a significant strategic shift from offshore to onshore wealth
management. This proves that tax transparency indeed adds value. The enhancement of
tax transparency is believed to fight against tax evasion and corporate tax avoidance
(Cunningham, 2015:2). According to Pross et al. (2016:3), taxpayers are already moving
quickly to comply with their offshore tax affairs as a result of tax transparency
implementations. However, Haines (2017:2) seems to share a different view, as he believes
that tax transparency will not likely impact tax behaviour or compliance of taxpayers
particularly with regard to the utilisation of exchange of information.
Tax transparency is a crucial weapon in fighting offshore tax evasion (Pross et al., 2016:1).
Certain companies artificially reduce their tax contribution, this is as a result of the lack of
tax transparency on tax rulings (M2 Equity Bites, 2013:1). The implementation of BEPS
initiatives was with the view that tax planning that utilises gaps to artificially reduce taxable
income or shifting profits to tax havens will be dealt with (Russell, 2015:1). He believes that
this provides countries with tools that ensure that profits are taxed where economic activities
are generated and performed. Developing countries received attention in the UN Financing
for Development (FfD) conference, where tax transparency was addressed as a key theme
(African Business, 2015:2). It was agreed that disclosure practices and transparency must
be enhanced in both source and destination countries (African Business, 2015:2); this will
ensure that the right country collects what is due to it.
Anonymous (2010:1) stated that Christian Aid believes that tax revenues have the potential
to transform poor people’s lives in developing countries, also confirmed by (M2 Equity Bites,
2013:2). It was highlighted earlier that developing countries rely heavily on the collection of
revenue. The OECD estimated that developing countries lose three times more in revenue
collections to tax havens than they receive in international aid (Ring, 2016:30); also
according to Christian Aid and Action Aid, developing countries lose more than they receive
through tax evasion (Anonymous, 2010:2). This explains why authors (Grocott & Stevenson,
2010:3, Anonymous, 2010:2) believe that if tax information was effectively used, developing
countries will have more access to tax revenues. It is hoped that sharing detailed taxpayer
information will reduce tax avoidance, minimise tax evasion and improve offshore tax
compliance (Grocott, 2010:1).
50
This explains why Christian Aid also confirms that it believes greater transparency will assist
developing countries to generate revenue (Grocott & Stevenson, 2010:3). Tax
administrators have reported increased revenue statistics by adopting the advice provided
by OECD initiatives (Euromoney Institutional Investor PLC, 2015:1). In the past seven years,
the impact of tax transparency has already been witnessed as it is reported that 30 countries
identified additional revenue of around EUR 50 billion, which is translated to be $54 billion
(Pross et al., 2016:3). These revenues were retrieved through voluntary disclosures and
other similar initiatives which targeted offshore tax evasion (Pross et al., 2016:3). It appears
there is unity in the fight against offshore tax evasion being facilitated through tax havens.
Various countries and supranational organisations such as the OECD have also
implemented several initiatives against tax havens and this process is often referred to as
the fight against tax havens. Some countries become compliant with this initiative and others
continue operating as tax havens and provide tax sheltering services (Konrad & Stolper,
2016:1). However, the success of tax transparency has already been reported as companies
and individuals now avoid using low-tax jurisdictions that have signed a number of tax
exchange agreements (Grocott & Stevenson, 2010:6). They further confirm that tax
transparency will assist in dealing with uncooperative tax havens (Grocott & Stevenson,
2010:8).
Owens (2009:2) highlighted the importance of African countries to understand the role of
transfer pricing in raising revenues, encouraging investments and discouraging tax
avoidance. He believes that this will ensure that multinational enterprises do not artificially
shift taxable profits to tax havens and in so doing it will reflect the real economic activity
undertaken (Owens, 2009:2). Shaheen (2012:4) concludes that national problems need
national solutions and global problems also need global solutions; tax avoidance affects
everyone and therefore countries should help each other.
Reliable statistics assist in producing policy measures that combat the problem
(Cunningham, 2015:3). According to Ring (2016:46), another benefit that developing
countries will have as a result of Action 13 is the impact it will have on domestic legislation.
Due to increased information exchange, rules requiring specific reporting by multinationals
may get a boost from the combination of an available international framework that can be
51
adopted (Ring, 2016:57). Action 13 brings benefits to developing countries as it will provide
assistance to domestic tax policy conversations and allocation of resources as a result of
possible useful tax information received (Ring, 2016:46).
It was indicated earlier in the study how important data is to policy implementation. Owens
and Moore (2013:2) confirms the importance of data to developing countries with their
statement that it assists them to effectively implement their transfer pricing provisions. G8
committed that they might create a pan-African database for tax administrators in developing
countries to effectively assist them (Owens & Moore, 2013:2). Euromoney Institutional
Investor PLC (2015:3) also confirms that it will impact proposed tax legislation. Friezer
(2013:1) adds that increased tax transparency has a positive impact as it encourages policy
debates and also discourages aggressive tax minimisation practices. Generally, it can be
concluded that tax transparency will impact tax policies and its changes.
It was discussed earlier in the study that the lack of tax transparency facilitates BEPS; it is
confirmed that all the initiatives have more benefits which include combating base erosion,
profit shifting and generally fighting offshore non-compliance (Owens & Moore, 2013:2, M2
Equity Bites, 2013:3). Pross et al. (2016:1) believe that greater transparency is key in fighting
base erosion and profit shifting and it plays a role in closing tax loopholes. Tax transparency
is, therefore, an added advantage for developing countries. It will assist in the fight against
corruption as it has also been reported as a problem, Grocott and Stevenson (2010:4)
confirm that above-mentioned implementation of transparency and exchange of information
will also help with this challenge.
International tax competition plays a crucial role as it encourages economic growth and
efficient delivery of public services (Gilleard, 2014:2). It is believed that this has to be done
to show honest taxpayers that non-compliance will no longer be tolerated and also to
promote competition between financial centres based on service, not secrecy (Grocott and
Stevenson, 2010:6). In fact, the European Commission promotes tax transparency as a tool
for healthier tax competition and a tool in identifying abusive tax practices (Cunningham,
2015:1, Dewar et al., 2015:1, M2 Equity Bites, 2013:1). However, Faith (2007:1) seems to
disagree with this view as she believes that, in fact, tax havens are a necessary part of tax
competition.
52
It is further stressed that developing countries having access to this information will enable
them to identify areas of training for staff (Ring, 2016:45), and through automatic exchange
of information between countries, developing countries will have access to the same
information that the taxpayer would have provided which will enable accuracy in collecting
revenue (Ring, 2016:45).
It is believed that through all tax transparency initiatives, countries will enhance
communication amongst each other and best practices will be established (Grocott, 2010:3).
Euromoney Institutional Investor PLC (2015:3) agrees that it will assist tax administrators in
adopting best practices. Revenue authorities in different countries will also be more
consistent and transparent in the treatment of similar issues, as added by (Grocott, 2010:4).
To avoid double taxation and to maintain consistency, the application of tax transparency
by jurisdictions must be the same in the sense that different application criteria for tax
matters must be avoided (Hinnekens, 2003:2). Therefore, communication and consistency
will provide best practices.
4.2.2 The current status of literature relating to the impact that tax havens have on
developing countries
4.2.2.1 The impact of tax havens on developing countries
The most significant impact that tax havens have through tax avoidance is on emerging
(developing) countries as they do not have the necessary tools to enforce an exchange of
information (Radu, 2012:2). According to the literature reviewed, many countries are facing
challenges in revenue collection and tax havens are partly to be blamed (Radu, 2012:1,
Slemrod & Wilson, 2009:2). In 2007, 5.6% trillion dollars were estimated to be held in tax
havens globally (Alstadsæter et al., 2018:4) and 90-95% of the wealth that is in tax havens
is not declared in their respective countries (Alstadsæter et al., 2018:9). This already
indicates a problem and the impact on the non-haven countries becomes clear – lower
revenue collections and reduction of the tax base are the result.
53
According to Bucovetsky (2014:2) and Alstadsæter et al. (2018:9), companies use tax
havens to reduce the tax liability and they hide assets through the use of subsidiaries in
haven countries. Tax practitioners often use hybrid entities to assist investors to reduce final
tax liability (Hinnekens, 2003:2). As a result of the use of tax havens, reallocation of income
from high-tax jurisdictions to low-tax jurisdictions is effected (Desai et al., 2006a:2). This is
done by combining trusts, foundations and holding companies with the purpose of
disconnecting assets from their owners (Alstadsæter et al., 2018:9). They are also used to
facilitate legal tax avoidance and illegal tax evasion (Slemrod & Wilson, 2009:2).
Karp (1993:1) confirms that it is difficult for the US to trace money once wired to tax havens
and upon return in the name of a foreign entity. According to him, it is even more difficult to
establish if “lost” assets are generating taxable income for the benefit of the citizens and it
is not easy to determine if the original money was reported and taxed in the first place. This
is how tax liabilities are reduced through the use of tax havens. It is reported that several
US bills fight offshore secrecy through the utilisation of information reporting (Alexander,
2013:3). On a positive note, literature reveals that Switzerland is adopting the international
tax transparency standard (Kapalle, 2015:4); this remains a grey area as to whether other
tax havens will follow or they will maintain their status as tax havens.
It is reported that tax havens affect tax competition as Haines (2017:1) suggests that the
efforts to fight aggressive tax practices will eliminate unfair tax competition. It is believed
that countries are faced with tax competition problems, which are caused by tax havens as
they force countries to reduce their tax rates below efficient levels (Slemrod & Wilson,
2009:2).
On the other hand, the use of tax havens by companies shifting income to their subsidiaries
held in low-tax jurisdiction comes with increased reputational risks (Franco, 2013:2). So too,
is the use of aggressive tax planning and non-compliance of companies, which will raise
reputational and legal tax risks (Franco, 2013:2, M2 Equity Bites, 2013:1). It is added that
the exchange of information and transparency of taxpayers’ information one way or the other
may cause taxpayers’ reputations to be damaged (Grocott, 2010:2, Franco, 2013:2, Venter
et al., 2017:2, Manzano & Pinamont, 2014:2). However, Alexander (2013:4) believes that
through formal and informal programs, reputational risk arising from tax controversies can
54
be reduced. Venter et al. (2017:2) also add that the EU suggested that managing
reputational risk and regaining the trust of society is essential to tax transparency. There is
a lack of trust between taxpayers and tax authorities (International Tax Review, 2013:3). It
is believed that companies trade-off between the benefits of tax transparency such as being
a good citizen, creating trust, avoiding reputational damage and enhancing public
perception, in exchange for obligations to shareholders to minimise costs (Gilleard, 2012:3).
Hence, reputational risk is directly linked to tax transparency.
Tax havens can be classified as a problem for countries but definitely not for the companies
and individuals utilising them. According to Radu (2012:5), tax havens benefit them by
providing freedom of foreign exchange control, which enables them to have freedom to build
reserves, freedom not to disclose information and the freedom not to pay heavy taxes and
fees. It also offers services such as global custody, investment fund management and
administration of offshore companies and trusts, legal and accounting services and stock
transactions (Radu, 2012:5). It is a fact that these companies and individuals utilise tax
havens for their own benefit, regardless of the impact it has on their respective countries.
It is further emphasised that the use of tax havens have a positive association with
multinationals, transfer pricing, aggressiveness, thin capitalisation and intangible assets
(Richardson & Taylor, 2015:24). Desai et al. (2006a:18) demonstrated in their study that tax
haven operations benefit and assist firms to avoid taxes; that the use of tax havens provide
trading opportunities and have the ability to reduce taxes. In fact, Johannesen (2010:1)
presents a model of tax competition for real investment and profits, and the results provide
that the presence of tax havens in some cases increases tax revenues of countries. Tax
havens are therefore not as bad as they are painted, as they carry with them benefits for
taxpayers and companies.
4.2.3 Possible identified solutions so far
There is no problem without a possible solution; there are possible solutions that literature
provides. It is suggested that bank secrecy in tax matters whether through de jure or de
facto must be abolished and the automatic exchange of tax-relevant information be
implemented internationally (Spencer, 2005:3). This will mean that every country will be
55
transparent regarding their tax status and providing an exchange of information. It remains
a mystery whether all countries will agree. According to Spencer (2005:3), the solution to
capital flight and tax havens (which in turn cause tax evasion and tax avoidance) is to abolish
bank secrecy altogether. The revised Article 26 of the OECD Model Income Tax Treaty
overrides bank secrecy and confidentiality in international tax matters (Spencer, 2005:4).
This is an indication that more work is being done to implement tax transparency so that
countries can benefit.
It is added that countries should instead concentrate on increasing tax rates and invest
minimal resources on enforcement. They believe that if countries adopt this conclusion, the
demand for tax havens’ services will rise and that will ultimately raise effective prices of their
services which will eventually discourage their use (Slemrod and Wilson, 2009:2). This is an
interesting analogy if indeed it can be proven, nevertheless, Stiglitz and Pieth (2016:3) add
that tax havens should be cut off from the global financial community as they serve as
centres for tax avoidance and evasion, which facilitate corruption or illicit activities. Slemrod
and Wilson (2009:1) went further to demonstrate that the elimination of tax havens will
improve welfare in non-haven countries. This is indirectly affirmed by Konrad and Stolper
(2016:9), who suggest that chances of elimination of offshore tax evasion are better if
countries that impose high tax rates can impose lower tax rates and severe penalties for
disclosed tax evasion.
Johannesen (2010:9) does not seem to agree with this analogy; his study strongly suggests
that eliminating tax havens will not stop aggressive tax competition. However, Gilleard
(2014:7) still maintains that it is better for governments to be two-faced about tax policy and
rhetoric and strike the balance between the need to attract investment with the need to be
seen as strictly enforcing compliance. Reports by the Central of the Bahamas indicated that
there is already a significant strategic shift from offshore to onshore wealth management
caused by the pressure for global tax transparency (Houlder, 2016:2).
The Horizontal Monitoring programme was also highly recommended as a solution, as it

was believed that its implementation brings greater convergence (it already impacted
Russia’s tax system) (International Tax Review, 2013:4). It might be able to benefit
developing countries as well.
56
57
CHAPTER FIVE
CONCLUSION
5.1 INTRODUCTION
The purpose of this chapter is to reflect on the journey that was taken throughout the study
in addressing the research question as well as to report on limitations experienced and make
recommendations for future study. This chapter also provides brief concluding remarks on
the study in general.
5.2 REFLECTION ON ADDRESSING THE RESEARCH QUESTION AND OBJECTIVES
This section discusses and concludes on whether the research question and objectives
stated in Chapter One were achieved and answered. The research study followed a
systematic review approach which reviewed literature currently available on the topic of
interest. The literature used to conduct this study was peer-reviewed academic journal
articles, which were found on databases as mentioned earlier. The purpose of this study
was to answer the research question “What is the current status of literature regarding the
impact that tax transparency and tax havens have on developing countries?” This research
question birthed two research objectives. The first research objective for this study was:
 To identify and analyse peer-reviewed academic journal articles in order to determine

the current status of literature relating to the impact that tax transparency has on
The research objectives were addressed through the literature and it was found that tax
transparency has a direct impact on countries, particularly developing countries. According
to the findings, tax transparency has more benefits than disadvantages to (developing)
countries if implemented. Tax transparency impacts developing countries by positively
enhancing and boosting revenue collections and their tax base. There is, however, another
view which discourages the implementation of tax transparency, as it is believed it will not
impact taxpayers’ behaviour and tax compliance in anyway, and ultimately it will not impact
58
revenues and tax bases of said countries. These articles discouraged the idea of tax
transparency for reasons such as confidentiality, rights of taxpayer information and
reputational risks associated with this tax transparency. However, the majority of literature
from articles reviewed are supportive of the idea of tax transparency.
Even though the study did not determine the complete extent of the benefits associated with
the implementation of tax transparency, particularly in developing countries, it can be
concluded that the implementation of tax transparency might result in partial or complete
elimination of tax havens that have a direct impact on the countries’ abilities to maximise
collection of revenue and extend their tax base. This might enable the right country to collect
revenues due as opposed to revenues being wired to tax havens instead. It is a fact that
more studies have to be conducted to prove the impact of tax transparency to its full potential
as it is believed that the findings of this study may change, pending progression and
technological changes.
The second research question was:
 To further identify and analyse high-quality academic research articles in order to

determine the current status of literature relating to the impact that tax havens have on
The findings on the impact that tax havens have on developing countries are more negative
than positive. One article indicated that tax havens affect countries positively, particularly
with regard to transfer pricing and thin capitalisation to name a few. Another article also
highlighted opportunities and benefits that tax havens provide to countries and individuals
utilising them as they provide freedom to build reserves and not to disclose information and
reduce tax liabilities.
However, the majority of articles and literature revealed that tax havens are posing many
problems to (developing) countries. These problems include, amongst other things,
facilitation of loss of revenues by developing countries through tax havens assisting
residents to avoid taxes in their respective countries. The impact of this problem directly
59
affects developing countries’ ability to maximise collection of revenues and extend their tax
base. A general view is that tax havens create more problems than benefits for developing
countries. Hence it can be concluded that indeed tax havens impact developing countries
negatively.
In conclusion, the systematic review revealed that tax transparency impacts developing
countries positively and brings more benefits than disadvantages, whereas tax havens
impact them negatively as they create more problems and disadvantages than benefits.
5.3 LIMITATIONS
During the course of this study, a number of limitations were experienced. The study was
mainly focused on reviewing the literature that is currently available on the topic of interest.
This was as a result of the fact that the study was limited to acquiring literature from certain
databases which were available on the online library of the University of Pretoria. This
resulted in limitations of extending the search and acquiring literature from other sources,
such as books, newspapers and websites.
In addition to this, there were certain articles which were relevant to the study based on the
title of the article and the abstract found on mentioned databases, however, the articles will
require a purchase in order for the articles to be retrieved or they will require certain
credentials in order to access them. It will clearly state that the article is restricted, therefore
cannot be obtained. Hence this was a limitation to the study.
5.4 RECOMMENDATIONS AND FUTURE RESEARCH
The literature reveals the benefits associated with tax transparency for (developing)
countries. It is recommended therefore that future research explores whether
implementation of tax transparency might result in the partial or complete elimination of tax
havens and in turn benefit developing countries. One study has already determined that the
elimination of tax havens improves the welfare of non-haven countries, however, it cannot
be concluded that it applies to developing countries, hence it is recommended that research
60
is conducted on developing countries or African countries to determine the extent to which
they can benefit.
It is noted that many countries and different organisations invest funds and resources in an
attempt to fight offshore tax compliance. It is also noted that countries should rather
concentrate on increasing tax rates and invest minimal resources on enforcement. They
believe that if countries adopt this conclusion, the demand for tax havens’ services will rise
and that will ultimately raise effective prices of their services, which will eventually
discourage their use. This is an interesting analogy if it can be proven. Other countries have
already indicated a significant strategic shift from offshore to onshore wealth management,
caused by the pressure for global tax transparency. It is recommended that research such
as this be conducted on developing countries to determine if the results will be the same.
5.5 CONCLUDING REMARKS
This study was conducted to determine the impact that tax transparency and tax havens
have on developing countries. Analysis of the literature reviewed revealed that there is a
relationship between tax transparency and secrecy. It is also a fact that secrecy is
associated with tax havens as they were described as such (secretive). It almost appears
as though one cannot talk about tax transparency without mentioning tax havens with regard
to loss of revenues and tax base and other problems experienced by countries. It can,
therefore, be concluded that there might be a direct influence between tax transparency and
tax havens, particularly on non-haven countries. Lack of transparency is almost a
confirmation as the direct link between tax havens resulting in tax evasion and tax
avoidance.
Based on the above analysis and findings, it is concluded that tax transparency has a
positive impact on developing countries while tax havens have a negative impact on
developing countries; therefore, the study has achieved its objectives as it answered the
research questions and fulfilled research objectives as planned. This study is therefore
complete.
61
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TAX TRANSPARENCY: IMPACT OF TAX HAVENS ON DEVELOPING COUNTRIES

Ramokone Olivia Pale

Submitted in partial fulfilment of the requirements for the degree

FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES

I have learned a lot, I am more empowered academically, career-wise and personally as a

I am grateful to my son, Reatlegile Mohau Pale for being so understanding and

NAME AND SURNAME: Ramokone Olivia Pale

Main purpose of study:

To conduct a systematic review of peer-reviewed academic journal articles found on

Figure 1: Philosophy stance literature results .................................................................... 18

Figure 2: Nature of study literature results ......................................................................... 19

Figure 3: Method of reasoning literature results ................................................................. 20

Figure 4: Time horizon literature results............................................................................. 21

Figure 5: Unit of analysis literature results ......................................................................... 22

Figure 6: Nature of data literature results........................................................................... 23

Figure 7: Nature of data method ........................................................................................ 24

Figure 8: Quality assessment: summary of results ............................................................ 25

Table 1:Key terms used in the study ................................................................................. viii

Table 2:Abbreviations and acronyms used in the study .................................................... viii

Table 3:Inclusion and exclusion criteria ............................................................................. 15

Table 4:Summary of articles retrieved from databases ...................................................... 16

Table 5:Summary of research findings .............................................................................. 43

Table 6:Countries perspective of articles ........................................................................... 45

Table 1:Key terms used in the study

Horizontal Monitoring System A form of working in the present influenced by

De jure bank secrecy De jure is a bank secrecy that compels the

De facto bank secrecy De facto is a bank secrecy that allows banks

LIST OF ABBREVIATIONS AND ACRONYMS

Table 2:Abbreviations and acronyms used in the study

ATAF African Tax Administration Forum

BEPS Base Erosion and Profit Shifting

CbCR Country by Country Reporting

CIT Corporate Income Tax

EIOR Exchange of Information on Request

UD UN Financing for Development

G20 Group of twenty countries (Argentina, Australia, Brazil,

GDP Gross Domestic Products

OECD Organisation for Economic Co-operation and Development

PIT Personal Income Tax

1.1 RATIONALE/ MOTIVATION FOR THE RESEARCH

According to Alstadsæter et al. (2018:2), cross-border wealth management was first

1.2 PROBLEM STATEMENT

1.3 RESEARCH QUESTION

1.4 RESEARCH OBJECTIVES

 To identify and analyse peer-reviewed academic journal articles in order to determine

 To further identify and analyse peer-reviewed academic articles in order to determine

1.5.2 Theory behind research design elements

1.5.2.1 Philosophical stance

According to Sekaran and Bougie (2016:29), ”the focus of pragmatists is on practical,

1.5.2.2 Nature of the study

In order to establish a causal relationship, the following conditions should be met:

 “The independent and dependent variable should co-vary.

 The independent variable ... should precede the dependent variable.

Descriptive studies may help the researcher to:

 think systematically about aspects in a given situation;

 offer ideas for further probe and research; and

 Assist in making certain simple decisions (Sekaran & Bougie, 2016:44).

An exploratory study often relies on secondary and/or qualitative approaches to data

1.5.2.3 Method of reasoning