Monday, January 12, 2009

Doha - update from SOMO

In October we highlighted a report from our Dutch Colleagues SOMO called "Taxation and Financing for Development" which contains much good stuff. They have just updated it, to add their commentary on the outcomes from Doha (which we blogged at length here.) The update, below, highlights some important points - for all to bear in mind.

"The Doha Declaration on Financing for Development, the outcome document of the conference, refers to capital flight and illicit financial flows in paragraph 20. However, the approach is heavily linked to money-laundering, stolen assets, corruption and capital flows that have criminal intent. There is no mention of illicit commercial flows, although these are far more extensive than the illicit lows related to corruption and proceeds from criminal activities, and therefore have a much bigger impact on developing countries.

The need to ‘effectively combat tax evasion’ is mentioned in paragraph. This is clearly a positive statement. However, even though the paragraph is relatively straight-forward, no connection is made between tax evasion and the notion of the above-mentioned illicit financial flows.

Another positive aspect in the same paragraph is the encouragement to make ‘tax systems more pro-poor’. Also important is that an explicit link is made between Foreign Direct Investment and taxation. The initial wording on this issue, in paragraph 25, reads: ‘It is important to promote good tax practices and avoid inappropriate ones.’ This paper contains the recommendation that the UN upgrade the UN Tax Committee to an intergovernmental body. This is also what civil society organisations and several governments were aiming for. To this effect, the outcome document says, ‘we acknowledge the need to further promote international cooperation in tax matters, and request the Economic and Social Council to examine the strengthening of institutional arrangements, including the United Nations Committee of Experts on International Cooperation in Tax Matters.’ Unfortunately, the term ‘strengthening’ is weaker than ‘upgrading’ the tax committee to an intergovernmental body.

The need to combat tax havens is not listed in the outcome document. The EU governments had included the need to ‘combat tax havens’ in their joint position for Doha. Nonetheless, this issue was already a casualty of the EU’s own internal divergence, as the UK, Ireland and Luxembourg strongly opposed it. The theme was consequently not picked up in the final document, despite the important role tax havens play in tax evasion strategies."

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