Monday, May 16, 2011

Developing countries are finding their voice

The ActionAid blog is remarking on something we've been noticing in the last few weeks - the increasing attention developing countries seem to be paying to international tax, and their increasing muscularity in international forums on these issues. As the blog put it:
Rarely have developing countries been more vocal and united on a question of international taxation.
Their blog concerns a report from a meeting of the UN Economic and Social Council (ECOSOC) regarding efforts to beef up international international cooperation in tax matters, and particularly efforts to strengthen the UN's efforts to play more of a role in setting international tax rules - an arena where the OECD (which represents rich countries only) has been jealously, even aggressively, guarding the turf for decades. We recently explained how rich countries have tried to sabotage or oppose efforts by developing countries to assert themselves more strongly, so it's good to see a new mood afoot.

David Spencer, a senior adviser to TJN, participated in the meeting and described the mood:
"There was a very significant development. The delegate from Argentina, representing the Group of 77 and China, the delegate from Bahamas representing the Caricom countries, and the delegates from Barbados and Mauritius spoke quite effectively and very explicitly for a universal forum where every country would be represented, and that the OECD should not try to dominate the development of international tax issues: no more Rule Makers forcing Rule Takers to accept what the Rule Makers decide. I was quite surprised by the vigor of their argument.
. . .
The Group of 77 and China and countries sympathetic to (or within ) that group were strikingly vocal in standing up to the EU/OECD forces. I was quite amazed by the forcefulness of their arguments and their words."
This is important, important stuff. The specific issue at hand here - the decision on whether or not to upgrade the current rather impotent UN Tax Committee to an intergovernmental body - is far less important than the general shifts we discern in tectonic plates of international tax, which may now be underway. Upgrading the committee, while important, isn't an end in itself - it's the assertion of political will that is of greatest interest. And that seems what we are beginning to see now.

The G77 - representing developing countries - needs to take this far, far further and mobilise those countries in the G20 and in the UN Tax committee to become more aggressive and co-ordinated with respect to the interests of developing countries when it comes to international tax rules.

On the specific issue at hand here, wealthy countries seem to be displaying myopia and double standards. As the ActionAid blog notes,
"Richer countries are keen to help developing countries raise more taxes, with many of their official development agencies giving increasing amounts of funds to developing countries and to international organisations for this purpose. So you’d expect them to swing in to action in response to this clear demand from developing countries, supporting a stronger committee, and stumping up some extra cash to increase its secretariat resources from the measly two permanent staff that it currently has.

But no, surprisingly the major donors – especially the EU and the US – say they oppose a stronger committee. They appear to prefer other organisations, such as the OECD, which by definition excludes most developing countries from its membership. It’s not the first time this issue has been discussed, and one country in particular – the UK – has long opposed a stronger UN committee.

It’s time the UK, US and others listened to developing countries and supported the long-needed reform for which they are calling."
Quite so.

2 Comments:

Anonymous Anonymous said...

Why did it take so long for developing countries to realise what is at stake here?

1:57 pm  
Blogger Allison said...

Perhaps one explanation of the delayed finding of a voice on transfer pricing lies in the single minded focus of the IMF and the OECD on pushing consumption taxes rather than income taxes in these countries. The IMF in particular has often implied that less developed countries are incapable of implementing income taxes coherently. Accordingly IMF technical support appears to have concentrated on building (regressive) VAT regimes, with relatively much less assistance for income tax administration. For its part, the OECD has actively stood in the way of theoretical development on income tax issues when it comes to less developed countries, preferring instead to bring countries under its wing as second class "observers" to the existing OECD norm-making process. Controlling international norm making power is of central importance to developed countries and therefore the OECD.

7:07 pm  

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