- Development & Aid
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Wednesday, January 29, 2020
Soren Ambrose is Head of Policy, Advocacy & Research at ActionAid International
NEW YORK, Jul 27 2015 (IPS) - The final round of negotiations on the Sustainable Development Goals – the successor to the Millennium Development Goals, due to be inaugurated in September at the U.N. General Assembly – is now underway in New York.
The United Nations and many member governments want to conclude the debates by the end of July, so that there will not be open debate during the SDG Summit. But reports indicate that the atmosphere in the room is one of seething distrust.
That’s because of what happened during the Financing for Development (FfD) conference in Addis Ababa, Ethiopia last month.
The developing countries – those grouped together in the “G77,” which 50 years after its founding actually has 134 members – were pushing a proposal for a universal intergovernmental organisation, within the U.N., which would have as its mandate reform and maintenance of the international tax system.
While this proposal would not have immediately remedied any of the myriad ways that corporations dodge taxes in developing countries, it would be a decisive change to the system that has allowed such activities to flourish.
To the extent that there are international rules, or standards and guidelines, on taxation now, they are proposed and elaborated by the Organization for Economic Cooperation & Development (OECD), a club of 34 of the world’s richest countries. Every once in a while they make a show of consulting those other 134 countries, but those others never actually get a vote.
In the new proposed way of making decisions on international tax rules, every country would have an equal voice and equal vote. This fight matters is because developing countries are confronting the need to change how the rules are made, and who makes the rules.
Until they manage that, they will always, at best, be running to stay in place. Changing who makes the rules is a necessary, although not sufficient condition, for creating permanent change.
Taxation is vital because wealthy companies and individuals get and stay rich by using a portion of their considerable resources to hire lawyers and accountants to guide them in dodging the taxes they should be paying in the countries where they excavate, grow, or purchase their raw materials, assemble their products, and make an increasing proportion of their sales.
If they don’t have such staff in-house, they can hire the services of big accounting firms for whom this is the most lucrative activity.
Most big companies manipulate “tax treaties” between countries and tax havens like Switzerland, Mauritius, and the Cayman Islands to create legal fictions that exempt them from paying most of the taxes they owe.
What they do is usually not technically illegal, because of the impossibility of keeping up with the tactics of the armies of experts dedicated to avoiding taxes. But neither is it quite ethical.
This deprives countries of the revenue – to the tune of at least 100 billion dollars every year – that they need to fund development, and ensures the perpetuation of the concentration of wealth in the hands of a very few. That wealth translates to power – a veritable global plutocracy.
The OECD, to be fair, has made some moves to clamp down on the most egregious forms of tax avoidance, including their “base erosion and profit shifting” (BEPS) process begun in 2013.
The corporate lawyers and accountants were a little nervous about BEPS, but with the process winding up, it appears that any reforms it demands will not be manageable. The promises at the outset of the process to include developing countries never amounted to much.
The FfD process in the U.N. was, of course, universal. The U.N. and national governments usually like to have the “outcome document” finalised before a summit meeting. The prospect of a messy negotiation with thousands of advocates just outside the door makes them nervous.
But after months of negotiations in New York and a series of missed deadlines, the big debate over the tax body was not resolved. The ministers would go to Addis facing open negotiations.
Bolstered by the support of hundreds of civil society groups, the G77 governments – a group that has to accommodate the interests of very disparate countries – held together. Three BRICS countries – South Africa as the chair of the G77, along with India and Brazil – were vocal actors on the side of the developing countries, something they can’t always be relied on to do as they ascend the global power ladder.
With negotiators starting to meet before the formal start of the meetings on July 13, there were several days filled with ever-shifting rumours. But on the evening of July 15, the eve of the scheduled end of the conference, the announcement came: there would be an outcome document little changed from the unsatisfactory draft they brought from New York.
Promises were made to expand the resources and prestige of the existing U.N. Committee of Tax Experts, but nothing more. No universal membership, and no mandate for reform.
The G77 held out to the end. But the rich countries, led by the United States with the steady support of the European Union, Canada, Japan, and Australia, refused to give up the regime of loopholes and havens and double-dealing that adds up to billions in lost revenue every year.
Make no mistake, ordinary people in rich countries also lose out as corporations dodge taxes. But with their territories serving as the leading facilitators of tax avoidance in the world, their governments showed they want the present system to endure.
The current global hyper-capitalism now puts no constraints on capital. Unlimited profits, unlimited wealth, and unlimited power have been accruing to the finance industry and the wealthy corporations and individuals it serves for over 40 years.
The rich countries’ politicians not only put up with it, they tout the “private sector” as the panacea for development in poor countries, with nearly no evidence to support them.
And at home, they cut public services and impose austerity, explaining that government just can’t afford to serve the people. Their priority has been corporations’ and investors’ bottomless appetite for profit and power.
As my colleague Ben Phillips has written about the FfD, it’s actually good news that the rich countries had to put an ugly stop to the negotiations, with barely a face-saving compromise to point to. Usually they manage to find a way to assign the blame to someone else.
Forcing them to show their hand is valuable; it’s clear that those making the rules are far more identified with a powerful few than with the public they claim to serve.
The next step is at the SDG Summit at the end of September, at the time of the annual U.N. General Assembly meetings. There we will learn whether and to what extent the developing countries will stand up to those who have monopolised power for so long. If they do, we may be on the road to reversing parts of the system that perpetuates the status quo.
Whatever happens, we aren’t going anywhere. Civil Society won’t change this global dynamic by attending these conferences, or through polite lobbying. We will have to endure many more meetings, and more setbacks.
But ultimately it’s the pressure of the people which will force their governments to be responsible. The movement to stand up to those who have hijacked our power is building.
Edited by Kitty Stapp
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