At the last FFD conference in Addis Ababa developing countries made clear the centrality of domestic resources (specifically tax revenue) in ensuring governments are able to deliver on their human development and growth objectives.
Tax revenue is not just one of the options of financing development among other sources, it’s the most important and sustainable source of financing development!
Tax revenue and tax policy is crucial to developing countries ability to fulfill their human rights obligations including providing quality gender responsive public services such as health, education, water and sanitation. Tax policies are also important and necessary instrument for addressing inequalities within countries.
Equitable tax policies that positively address the inequality gap in society and the resulting tax revenue can help support and rebuild the infrastructure and the environment throughout all the UN Member States, which would make the 3 dimensions (economic, environmental, and social) dimensions of sustainable development of the 2030 Agenda more likely to be realized. It would also increase the supply of resources rooted in the environment due to natural cycles, development of infrastructure, and leverage domestic resources.
Impact on developing countries: (Examples from Uganda) From one company, Uganda almost lost out on $400m, enough for its entire education budget / also evidenced from Panama Papers leaks.
After Addis international community response has been to introduce an array of various technocratic based initiatives mostly of a technical assistance nature.
Processes & International Platforms led by institutions ( e.g WB, OECD,IMF etc) will detract from the kind actions needed to bring about meaningful change to the global tax system and put an end to the use of harmful tax practices by MNCs, use of tax havens and the race to the bottom rather what we need is a really political body in which all countries especially developing countries can make decision. As such need to upgrade United Nations Tax Committee (UNTC) into an International Tax Commission.
Thabo Mbeki -led High Level Panel (HLP) report on Illicit Financial Flows, which was adopted by Heads of State in January 2015 clearly put corporate tax avoidance as the biggest source of outflows for Africa, and has made a clear link to development. To this effect African governments have made a major commitments to change corporate tax laws, review tax incentives, asses impacts of tax treaties undertake regional tax cooperation including exchange of information’s measures through ATAF, EAC, SADC.
However, developing countries efforts above are being undermined by the failure and constant blockage from rich countries to put in place significant measures at the global level that would deal with negative tax practices such as an intergovernmental tax body.
Everybody is happy to talk about international tax cooperation but what we really need is the kind of tax cooperation that will bring about the re-allocation of taxing rights in way that redresses the existing imbalance brought about by the broken international tax rules promoted and protected by rich countries to the advantage of MNCs.
The starting point therefore is a truly inclusive well-resourced intergovernmental tax body that can shape the global tax rules and architecture for the benefit of all countries.