PHM-Exch> Statement to the United Nations High-Level Dialogue on Financing for Development

[Claudio Schuftan]

From: South Centre <south at southcentre.int>


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*South Centre Statement to the United Nations High-Level Dialogue on
Financing for Development*

*Four years after its adoption, Agenda 2030, “Transforming Our World,” the
United Nations’ (UN) most recent and most ambitious development agenda, is
off-track. Various estimates of the spending needed to achieve the
Sustainable Development Goals (SDGs) range from $1 to $3 trillion.
Domestically mobilized resources are critical to achieve these goals. A
main source of the inadequate scale of public revenues are shortfalls in
corporate tax collection, which are largely explained by international
corporations hosted by or doing businesses in developing countries that
take advantage of facilities offered by the international tax standards and
practices to avoid full payment of taxes in those countries. A substantive
global reform process involving a variety of multilateral platforms is
underway.  The question is not whether the system of global tax standards
and practices will change, but in what direction it will change.  Drawing
lessons from the developing country context will be critical if the ongoing
process of global tax reform will benefit developing countries and achieve
substantial success in generating the income needed to effectively attain
the SDGs. *

*Statement by Carlos Correa, Executive Director of the South Centre*

*at the*

*High-Level Dialogue on Financing for Development*

*United Nations, 26 September 2019 *



Four years after its adoption, Agenda 2030, “Transforming Our World,” the
United Nations’ (UN) most recent and most ambitious development agenda, is
off-track.

Various estimates of the spending needed to achieve the Sustainable
Development Goals (SDGs) range from $1 to $3 trillion. This is what would
be required as a global total to, *inter alia*, eradicate poverty, educate
and provide access to clean water to everyone, build infrastructure
resilient to climate change and obtain almost all energy needs from
non-fossil fuel sources.

Domestically mobilized resources are critical to attain those objectives.
Government resources in developing countries have to serve as the “main
pillar” of financing for development.  Developing country governments are
twice as dependent on corporate taxes as developed countries.  However, a
2019 Organisation for Economic Co-operation and Development (OECD) report
found that government revenues in low income countries remain stubbornly
below the 15 per cent of Gross Domestic Product (GDP) “considered necessary
for effective state functioning”.

A main source of the inadequate scale of public revenues are shortfalls in
corporate tax collection, which are largely explained by international
corporations hosted by or doing businesses in developing countries that
take advantage of facilities offered by the international tax standards and
practices to avoid full payment of taxes in those countries.

Data gathered in the fight against Illicit Financial Flows (IFFs),
pioneered by the United Nations Economic Commission for Africa
(UNECA)-African Union (AU) Panel chaired by President Thabo Mbeki, indicate
that for Africa 65% of lost revenue is from “commercial channels”, which
consist of transactions that are legal from the standpoint of dominant tax
international practices and standards, including those favored by OECD
countries, but deprive African countries from a legitimate source of
income.

Public investment in favor of sustainable development priorities is
universally touted as critical, but the required scale of investment is
readily undermined by standards and practices prevailing in the existing
international tax system.

A substantive global reform process involving a variety of multilateral
platforms is underway.  The question is not whether the system of global
tax standards and practices will change, but in what direction it will
change.

Developing countries, who have long hosted subsidiaries of multinational
companies and their activities, have sought changes in standards,
procedures, and rules shaping the allocation of taxing rights among
sovereign states. This has become even more urgent in the context of the
digital economy.

Developing countries have made proposals seeking to change the dominant tax
conventions’ procedures that ensure advantageous taxing rights to rich
countries.  Those proposals have been successful only in a piecemeal
fashion and have remained as suggested alternatives -in the context of the
UN Model Double Taxation Convention- to the overarching OECD Model Tax
Convention, which contains agreed standards among the OECD members.

The OECD’s Base Erosion and Profit Shifting Project (BEPS) has become an
important venue for reform discussions.  The work of the UN’s Committee of
Experts on International Cooperation in Tax Matters, while only an expert
body, has garnered new intense interest on the part of developing country
governments and international civil society because of its more
representative character.  Various bodies of the European Union (EU) have
become active in adjudicating, analyzing, and making proposals on tax
reform.  Regional tax administration forums in Latin America and Africa
became very active participants in these efforts.

While many developing countries have been included in lists as ‘tax
havens’, developing country tax authorities have often found developed
country facilities to be the most haven-friendly for taxpayers seeking to
evade paying taxes where they operate.

In November 2016, the South Centre, an intergovernmental think-tank of, for
and by developing countries, currently with 54 Member Countries, launched
the “South Centre Tax Initiative”, a project to build a network of tax
officials and experts from the South to advance the role of developing
countries in the current global effort at tax reform and combatting illicit
financial flows.

Drawing lessons from the developing country context will be critical if the
ongoing process of global tax reform will benefit developing countries and
achieve substantial success in generating the income needed to effectively
attain the SDGs.

The South Centre thus joins the Group of 77 and China in inviting the
community of the United Nations to locate the efforts to reform the
standards and practices of the international tax system to venues where
developing countries have secure access to setting the agenda and
introducing their proposals.

The South Centre also joins the Group of 77 and China in its call to
upgrade the UN Committee of Experts in International Cooperation of Tax
Matters to an intergovernmental level.
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