Statement to Expert Discussion 1 by the Civil Society FfD Group (including the Women’s Working Group on FfD), Delivered by Jason R. Braganza, Tax Justice Network Africa and SID, on May 25, 2017 (FfD Forum 2017)

My intervention will focus on the need for a deeper understanding of the ecosystem of Illicit Financial Flows (IFFs); the importance of widening the scope of defining IFFs; and the need for a Global Intergovernmental Tax body under the UN to combat IFFs.

  1. We wish to restate with necessary vigour this ECOSOC forum cannot and should not relegate the issue of illicit financial flows to its narrow definitional form comprising mainly of criminal elements including tax evasion and corruption. To do so would be to underestimate the real ecosystem that allows IFFs to be generated, while undermining the ability to tackle all money flows that move across countries, often to secrecy jurisdictions, at the detriment to development. Chairperson, the world needs to realise that Illicit Financial Flows are not a developing country issue, regardless of the context or forum in which they are discussed. Over the past couple of years, analysis, research, and revelations have and continue to show the true meaning of an interconnectedness of the global financial architecture. Too often, the finish line for illicit financial flows are banks in Europe and North America. The Panama Papers were a defining moment for the discussion on IFFs and the ecosystem in place that facilitates IFFs from both developed and developing countries. It’s also vital to illustrate that IFFs have a disproportionate impact on the poorest countries in the World. Chairperson, in addition, to IFFs, the globe has to grapple with a constantly changing financial architecture which seems determined to undermine domestic resource mobilisation efforts for sustainable development. In particular, IFFs that take the form of not only tax evasion, criminal activity, money laundering, terrorism financing BUT also abusive and aggressive tax practices that manifest themselves as tax avoidance measures, are a major threat to the Agenda 2030. Without looking at the problem from a broader scope, we run the risk of allowing devastating tax abuse to continue unchecked
  2. During this past week, this Forum has taken upon itself to relegate a defining piece of work on IFFs carried out by the African Union/UNECA High Level Panel Chaired by H.E. Thabo Mbeki, to a mere footnote in the outcome document. Latest figures indicate IFFs from Developing and Emerging countries nearing the USD 1 trillion in 2014. This figure could be significantly larger in 2015 through to 2016. Chairperson, it has been stated in this very week the financing gap for Agenda 2030 is approximately USD 2 trillion. The math couldn’t be clearer … stop IFFs and Agenda 2030 is a reality. Chairperson, we wish to reiterate the importance of the international community taking cognisance of these figures and the practices that enable IFFs to exist. Important to this is widening of the scope that covers the definition of IFFs to include legal tax related IFFs referring broadly to tax avoidance, and practices such abusive transfer pricing, trade mispricing , trade misinvoicing and so on. Despite the commendable efforts towards economic diversification, increased revenue collection through automation, tax reforms, there is still a gaping hole when it comes to curbing tax avoidance and aggressive tax planning by multinational corporations. These weaknesses make a lot ‘easier’ for tax avoidance to take place than evasion and for MNCs to remain within the right side of the law. This for developing countries is a major challenge that cuts across the entire revenue administration, collection, and management ecosystem. Chairperson, the recommendations from the High Level Panel on IFFs need to form part of the agenda on curbing IFFs as well for enhancing international cooperation on tax. The work of the Mbeki panel should not be considered for mere “noting” but instead should help inform a meaningful discussion on how to stop IFFs.
  3.  Lastly Chairperson, we wish to reiterate with respect to international tax cooperation, one of the most important priorities of developing countries, we are deeply concerned with the encouragement to strengthen existing institutions, which are not inclusive, as opposed to establishing bodies that are better fit for purpose, including an intergovernmental UN tax body with universal membership and a mandate to combat IFFs, including abusive tax avoidance.

Thank you.

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