Tuesday, September 11, 2007

Seoul, the World Bank, Doha, and more astonishing progress

On July 2 we published a blog entitled An Astonishing Month, outlining several important steps forward for the Tax Justice agenda. Well, we have made more astonishing progress since then.
For starters, there has been plenty of news coverage of TJN issues, often starring Richard Murphy. One issue involves the media furore that has been developing in the UK (encouraged by Richard and other TJN-related people) regarding the UK’s antiquated domicile rule. On this, we’ve seen headlines in the FT, the Guardian, The Independent, and elsewhere, such as “Close tax loophole to help poor children.” Richard also supplied plenty o analysis and data allowing the Trades Union Congress (TUC) to build a campaign about the domicile rules, with the non-domicile scandal costing the UK around $4.3bn per year. Read about this here and here. There was also a tax protest in the tax haven of Jersey, which is covered in the blog entry below this one. Prem Sikka had a comment piece in the Guardian pointing out the outrage of international accounting standards – which are run by a private company based in Delaware substantially funded by the big four accountants. It is, as he explains, a distubing example of the privatisation of public policy making. A long podcast on the New Internationalist about tax justice issues, including the weird world of Africa’s offshore oil, has been widely listened to. Richard Murphy was judged the victor by Alex Hawkes of Accountancy Age in a debate with tax specialists on the popular Hecklers radio programme. This was as nothing, however, when compared to the media impact of a report in the Financial Times on August 28th entitled “One-third of biggest businesses pays no tax” – a story that understandably ran and ran, with several interviews of Richard Murphy on BBC television and elsewhere.

But big things have been happening elsewhere, which you may not have heard so much about.

You may remember our July 2 blog indicating that Norway had indicated its intention to commission and pay for a World Bank report on illicit financial flows – given the World Bank’s refusal to date to even try to measure seriously the tax haven problem. We are delighted to hear that Robert Zoellick, the World Bank’s new president, has formally accepted the request by the Norwegians for a study of tax havens and illicit financial flows.
This is truly excellent progress. But that is not all.

TJN’s John Christensen was recently in Seoul, Korea, addressing a plenary session of the Leading Group of countries on Solidarity Levies to Fund Development (in which Norway is also an active participant.) Read John's speech here and a Norwegian press release here. On September 3 John witnessed another exciting announcement: Mari Skåre, a senior advisor to Norway’s Ministry of Foreign Affairs, announced that Norway is also willing to take a lead in a task force addressing the role of tax havens and capital flight from developing countries. France, Spain and Chile have already indicated their interest, and more countries will hopefully join after that. As Skåre said:

One objective should be to get more data on the table. We need to have better knowledge and understanding of the nature of the financial structures and what role they play in money laundering and hiding stolen assets. The cross border flow of the proceeds from criminal activity, corruption and tax evasion is estimated to be between 1 and 1.6 trillion dollars every year. A large chunk of this comes from developing countries. We need to know more about these flows and the mechanisms and financial structures that support them. We are particularly interested in undertstanding the role of tax havens in hiding stolen assets deriving from resource extraction and the role of these structures in what is referred to as the paradox of plenty.

It is fantastic to hear and see this agenda emerging. But it is also important to understand the context in which this is developing. The United Nations hosted a conference on Financing For Development in Monterrey, Mexico, in 2002, which was attended by more than 50 heads of state or government, and which called on developing countries to mobilise domestic resources for development, including the need for “equitable and efficient tax systems and administration.” The Monterrey Conference has led to the “Monterrey Consensus” and a number of projects, including plans for an International Conference on Financing for Development to review the implementation of the Monterrey Consensus, which will be held in Doha next year, probably in December.

The Seoul meeting that John attended, and the task force that Mari Skåre announced, will feed into the high-profile Doha agenda. As she said:

In the Monterrey Consensus it is stated that a critical challenge is to ensure the necessary internal conditions for mobilising domestic savings, and that an enabling domestic environment is vital also for reducing capital flight. Another side of the equation are financial centres - often located in developed countries - set up to hide stolen assets. These mechanisms need to be better understood and we hope that a task force under the Leading Group can contribute to the Finance for Development Process by raising awareness and identifying key areas for action.

This is exactly the sort of thing TJN has been hoping for. What is at stake is huge. As John Christensen said in his address to the Seoul conference:

The damage done by tax havens and capital flight extends beyond the purely economic. Encouraged and facilitated by tax havens, corruption threatens the viability of weak states and has a negative impact on democratic processes. Good governance is undermined by regulatory and tax competition, and ethical practitioners of corporate responsibility place their companies at a disadvantage by not engaging in the tax evasion practices of their competitors.

The idea that rich and powerful elites can ‘game the system’ using tax havens undermines public confidence in the rule of law, and corrupts the integrity of the rules, systems and institutions which shape society. This corruption is so deeply embedded in the modern world that the majority of people take it as a fact of life. Small wonder then that so many people have become cynical and pessimistic about the current world order.

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