G overnment Revenue 11 These indicators have a number of limitations which should be borne in mind when using them as benchmarks: different countries have different sources of revenues, the nature of government revenue collection varies, and there are varying degrees of centralization of tax policy. For this reason, they should be seen as helpful, first snapshots of performance, but would need to be augmented by more detailed analyses for a complete picture. In using these indicators it is critical to make comparisons across similar countries. Low-income countries, for example, tend to have lower tax-GDP ratio than high-income countries. We consider that UN human rights treaty bodies and others would be remiss not to consider appropriately benchmarking these indicators as an essential tool in analyzing a government’s effort to mobilize tax revenue. Tax Avoidance, Evasion and Institutional Weaknesses Tax avoidance and evasion lead to substantial loss of revenue for governments. Bribery and corruption are also common problems. It is vital to strengthen tax collection processes. Cutting the budgets of tax collection offices means that fewer people are available to curtail avoidance and evasion, and is thus a false economy. The existence of tax havens, with very low taxes facilitates tax avoidance and evasion. Multinational corporations take measures to show their profits as accruing in tax havens to avoid paying taxes. One way of doing this is through mispricing goods and services that are transferred between different branches of the same company operating in different countries. By setting up a branch in a tax haven and then manipulating the price of imports purchased from and exports shipped to other divisions and affiliates of the same company operating in different countries, corporations can show their profits as accruing to the branch in a tax haven rather than in a country with higher taxes. Estimates of the annual tax revenue lost to developing countries due to trade mispricing amount to USD 98 to 106 billion.15 This compares to total overseas development assistance in 2009 from the countries in the OECD’s Development Assistance Committee of USD 83.5 billion.16 Insofar as tax policy in one country affects the ability of other countries to establish an effective tax system, a case can be made for cooperation among states to eliminate ‘beggar thy neighbor’ strategies and cross-border tax avoidance strategies. Distributive Outcomes of Tax Regimes Tax policy needs to comply with principles of non-discrimination and equality. Consider the case of increasing VAT rates. This will increase prices of goods and services to households and have a disproportionate impact on lower-income households. This is because low-income households spend a larger share of their income on goods and services than high-income households, who can afford to