Thursday, May 26, 2011

U.S. Secretary of State Clinton gets it on tax and development

In her address to the OECD Session on Development and Gender, Secretary of State Clinton made some very welcome remarks:

There are many urgent issues we could discuss today, but I want to focus on two. First, partnering with developing countries on reforms in three interconnected areas – taxes, transparency, and corruption – because focusing on these three will give us the tools needed to enable more countries to fund more of their own development.

Clinton then observes:

I’ve spoken about the importance of countries and international organizations like the OECD working together on taxes, transparency, and corruption many times in many places, from Pakistan to Ecuador.

Now, we have stated vehemently - see here, here and here - that the UN Tax Committee is the right forum for reform of global tax dodging, particularly with regard to developing nations. So we would like to see the implementation of Clinton's statement "countries and international organizations like the OECD working together" to be the cooperation of the OECD with the UN and with developing countries instead of their constant fig-leafism.

Clinton continues:

Why? Because corruption, lack of transparency, and poorly functioning tax systems are major barriers to long-term growth in many developing countries. Corruption stifles entrepreneurship and it siphons funding away from critical services, hurting the people who rely on those services. Poor transparency makes it difficult if not impossible to determine how governments raise and spend their funds, and therefore, how to hold governments accountable. And weak tax systems rob states and citizens of the resources needed. Why? Either because the taxes are not levied at all, or because it’s very easy for people to avoid paying them. Nobody likes paying taxes, but the countries around this table represented know that in the absence of funding public services, it’s very difficult to achieve the kind of outcomes for prosperity, growth, opportunity that we seek.

And further, Clinton appears to back Automatic Information Exchange when she points out:

And let’s be very clear – many wealthy people in low-income countries avoid taxes by hiding their money offshore, an outflow that by some estimates comes to more than $1 trillion a year. Now, to some degree, it is logical that low-income countries would raise less revenue internally than others. After all, some of the most common sources of income in developing countries are very difficult to tax, and building strong public institutions is a challenge for any nation. But we also have to acknowledge that wealthy countries share responsibility, so that is why, for instance, the United States is making it easy for other governments to know when their citizens are keeping money in American accounts.

On the latter point, as a reminder, see here for the FACT Coalition testimony by Rebecca Wilkins of Citizens for Tax Justice, for the Internal Revenue Service (IRS) hearing on May 18 on Guidance on Reporting Interest Paid to Non-resident Aliens.

There's more, but while you can read the full text here, we would like to highlight Clinton's remark:

We all have an interest in solving these problems together, to empower governments to collect precious revenue.

Our view entirely. Thank you Secretary of State Clinton.


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