Major progress for TJN's agenda

Amid the tumult in global finance, we have been pointed to an important report that has just been adopted by the European parliament. This is part of the EU's follow-up to the UN Financing for Development process, which is ultimately aimed at finding ways for poor countries to finance themselves.

First, and on a rather calm, sober, note, the EU resolution says this:

"Regrets that the Commission does not place more emphasis on the mobilisation of internal resources to finance development, as these are sources of greater autonomy for developing countries."

Good. They want more emphasis on tax, in particular. Naturally, in a stronger statement, they add this, too: that the EU parliament regrets that its package on aid effectiveness

"does not mention capital flight as a risk factor for the economies of developing countries; points out that capital flight does serious damage to the development of sustainable economic systems in developing countries and points out that each year tax evasion costs developing countries more than they receive in the form of ODA; calls on the Commission to include measures to prevent capital flight in its policies, as required by the Monterrey Consensus, including a frank analysis of the causes of capital flight, with the goal of closing down tax havens, some of which are located within the EU or operate in close connection with Member States;

Very good. It also mentions the figures promoted by Raymond Baker of Global Financial Integrity estimating that the illegal component of this capital flight amounts to $1.0-1.6 trillion each year, half from developing countries, and then provides stronger medicine:

"supports the international efforts made to freeze and recover stolen assets and asks those Member States that have not done so to ratify the United Nations Convention against corruption; deplores the fact that similar efforts are not being made to combat tax evasion and calls upon the Commission and Member States to promote the global extension of the principle of the automatic exchange of tax information, to ask that the Code of Conduct on tax evasion currently being drawn up at the United Nations Economic and Social Council (UN ECOSOC) be annexed to the Doha declaration and to support the transformation of the UN Committee of Experts on International Cooperation in Tax Matters into a genuine intergovernmental body equipped with additional resources to conduct the international fight against tax evasion alongside the OECD;"

as if that was not enough, they then drop a bombshell:

"Calls on the Commission to ask the International Accounting Standards Board (IASB) to include among these international accounting standards a country-by-country reporting requirement on the activities of multinational companies in all sectors."

We cannot stress the importance of this enough. A campaign has been underway for quite some years to achieve country-by-country reporting for extractive industries like oil or copper mining (which we strongly support; indeed TJN's Richard Murphy has been instrumental in designing the policies); indeed the US Senate held hearings on this, also on Sept 23.)

The striking thing about the new EU report is that it contains the words "in all sectors" when it refers to the Country-by-Country accounting standard for multinational companies. Yes, that means banks and accountancy companies, among many others, too.

All of this represents big progress. There's a long way to go, but we are greatly heartened to see that people in positions of power are listening to us.

If we could achieve Country-by-Country reporting, for example, it would be nothing short of a revolution in global transparency. Among many other things, it would enable us to see just how big companies shift money around through tax havens. And, oh, as Richard Murphy has remarked: "It is an essential part of the regulatory reform that will resolve the credit crunch."

The European Network on Debt and Development (Eurodad) has issued its own analysis here.