Monday, November 23, 2009

Goodbye Millenium Goals?

This new report by Jakob Vestergaard and Martin Højland of the Danish Institute for International Studies examines claims about the magnitude of illicit financial flows from developing countries and concludes that tackling these flows is a crucial part of the poverty alleviation agenda.

In their starkly worded opening section the authors note:

If the UN Millenium Development Goals are to be reached by 2015, development aid needs to be tripled - which is most unlikely. Instead, countries should unite in a concerted mulitlateral effort to combat illiict financial flows: for every dollar poor countries receive in development assistance, more than eight dollars are illegally transferred back to rich countries, most of it in order to avoid local taxation. Effectively combating these illicit financial flows would generate more financial resources for development than foreign aid is likely to ever do - and help build a sustainable tax base in developing countries for the benefit of future development efforts.

This single paragraph lays bare the core of the development problem which TJN has been highlighting since our launch in 2003. Until such time as effective measures are taken to combat the abusive practices that both encourage and facilitate illicit financial flows, efforts to generate sustainable societies and economies in poorer countries are doomed to failure.

Vestergaard and Højland's policy recommendations are also very much aligned with the TJN policy agenda:

1. Developed countries should immediately and consistently assist developing countries in combating tax evasion practices by multinational companies;

2. Country-by-country reporting should hence be compulsory for all multinational corporations to increase transparency on sales, profits and taxes paid in all the jurisdictions where they operate;

3. Tax authorities in all countries should enhance their exchange of information in a joint effort to combat tax evasion;

4. Donors should fund capacity building for tax collection in developing countries so as to establish a foundation for independent financing of future development efforts.

Good to see that this agenda is taking root.


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