One year after Addis Ababa, rich countries blocking UN from working on tax, again
Almost exactly a year ago at the Financing for Development Conference in Addis Ababa, a small group of rich countries blocked the United Nations from taking on a larger role in the fight against global tax abuse.
Now, at the one year anniversary mark, the same story seems to be unfolding yet again.
This time, the location is Nairobi and the venue is the United Nations Conference on Trade and Development, a summit that happens every four years so member nations can discuss how the UN should engage with issues of trade, finance, and development.
Currently, most global rules on tax and transparency are set by the Organization for Economic Cooperation and Development (OECD) and the G20, two groupings of the wealthiest nations on earth. But these processes leave little room for input from developing countries, which are often most adversely affected by illicit financial flows.
And it’s vital that developing countries have a seat at the table — the ambitious development goals set by the United Nations last year, the Sustainable Development Goals, directly reference the need to reduce illicit financial flows. So, it’s only logical that the United Nations would play a strong role in in setting the rules meant to help achieve this goal.
This is why news reports coming out of the conference, and information from our own ears on the ground, are so disconcerting; it seems rich countries are once again attempting to block any language in the final document that would increase the scope of the United Nations to work on these issues.
Rather than cut UNCTAD out of work on global tax and transparency, we should welcome their expertise and broader viewpoint into the global discussion. UNCTAD has a critical role to play. By working at the convergence of trade, finance and development, they are in a truly unique position.
Just last year, UNCTAD released a report that estimated developing countries lose nearly USD$100 billion in revenue each year when multinational corporations shift their profits into low-tax jurisdictions.
And though the money leaving via illicit financial flows is moving almost unabated from poor countries to rich ones, OECD members don’t seem to want to let a group that includes both work on how to bring it back.
So how could UNCTAD contribute to the growing discussion around curbing illicit financial flows?
It’s true that the OECD is leading much of the current work on international tax and transparency. But UNCTAD could be vital to assisting developing countries with relevant analysis, while helping them in the implementation of new standards, so that all countries are moving together towards meeting the ambitious goals set out in the SDG framework.
And though the OECD has pushed forward two of the biggest reforms to date, new commitments on these issues erupt each day.
For example, at a recent Anti-Corruption Summit held in London, 13 countries supported the idea of a global commitment to public country by country reporting (CBCR) for multinational corporations. This reporting would make it far easier to detect and deter tax avoidance and profit shifting.
But there are no international guidelines set in place to help support countries that want to fulfill this commitment, and UNCTAD could be an important partner in this process.
Over the past several years, illicit financial flows have gone from a niche issue discussed in a few conference rooms to a problem that is being attacked at a global level. But it’s important that solutions are also crafted at the same global level, and not only by a select group of nations, many of which seem to be benefitting quite nicely from the status quo.