Global South calls for international body to fight tax havens

A workshop held at the UN resounded with calls for international cooperation to combat tax dodging that is depriving poor countries of development resources.

by Tharanga Yakupitiyage

NEW YORK: Tax havens are “one of the worst enemies of our democracies”, said state representatives during a meeting at the United Nations.

Due to concerns over the impacts of illicit financial flows, the country missions of Ecuador, South Africa and India convened an informal workshop to discuss the issue and potential solutions.

“Tax revenues are said to be the lifeblood of a state. With integration of economies in a globalized world, actions taken on taxation in one country affect practically everybody within borders and across borders,” said Permanent Representative of India to the UN Syed Akbaruddin, who added that the trends in illicit financial flows are alarming.

While Oxfam suggests that $7.6 trillion is held in offshore accounts, others estimate a much higher figure, including UN expert Alfred de Zayas who found that up to $32 trillion could be in secret jurisdictions around the world.

This deprives developing nations of essential resources needed to achieve major social and economic goals as laid out in the internationally agreed 2030 Agenda for Sustainable Development, whose motto is to leave no one behind.

“[In] the commitment to leave no one behind ... the issue of taxation is fundamental in that effort,” said Deputy Permanent Representative of South Africa to the UN Mahlatse Mminele.

According to the UN Conference on Trade and Development (UNCTAD), illicit financial flows cost developing countries more than $100 billion per year.

Africa bears the brunt of such outflows as they are estimated to be equivalent to all official development assistance received by the continent in the last 50 years. In one case revealed by the Panama Papers leaks in 2016, a company dodged a tax bill of $404 million in Uganda, a figure representing more than the East African nation’s annual health budget.

Ecuadoran Foreign Minister Guillaume Long painted a similar picture in his country, estimating that one-third of its gross domestic product (GDP) is being “robbed” and stowed away in tax havens, which limits opportunities for the creation of wealth and further widens societal inequality.

International cooperation

Long, whose country currently chairs an intergovernmental group of developing nations known as the Group of 77, called for international cooperation on tax issues. “The issue of international tax cooperation is of crucial importance and is directly linked to the right of development and the possibility of implementing Agenda 2030, a link to guarantee human rights,” he told the workshop attendees.

Akbaruddin similarly noted the necessity of international cooperation in a world of cross-border trade and finance and criticized the lack of multilateral efforts on the issue, stating: “Those who champion multilateralism in areas such as biodiversity, in areas such as human rights, in areas such as peace and security, decide to stop championing them when it comes to matters of international tax cooperation ... what accounts for this enigma?”

Currently, the Committee of Experts on International Cooperation on Tax Matters provides a framework for dialogue and cooperation on tax issues. Though it helped create the UN Code of Conduct on Cooperation in Combating International Tax Evasion, the committee has been insufficient.

Long noted that the committee works in individual capacities rather than on a governmental level and does not have sufficient resources to tackle the issue.

The three representatives therefore called for strengthening and upgrading the committee, transforming it into an intergovernmental body that represents all.

Of the 25 seats in the committee, 12 are occupied by the 35-member Organization for Economic Cooperation and Development (OECD) which includes countries like the United Kingdom and the United States, leaving the other 158 countries with only 13 seats.

“Every country, every state – rich or poor, big or small – does have the right to an inclusive place at the table to decide on an issue that impacts all of us,” said Akbaruddin.

The representatives called on the UN and the Secretary-General to take urgent action on the issue.

“The international community needs to urgently address this global test ... the status quo should no longer be allowed to persist,” said Mminele. (IPS)

Third World Economics, Issue No. 640, 1-15 May 2017, p8