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Calls for clampdown on tax-dodging multinationals at UN development conference

Liberia's President Ellen Johnson Sirleaf addresses the opening of the conference in Addis Ababa, 13 July  2015
Liberia's President Ellen Johnson Sirleaf addresses the opening of the conference in Addis Ababa, 13 July 2015 Reuters/Tiksa Negeri

At the opening of a five-day conference on global development funding on Monday United Nations Secretary General Ban Ki Moon called on world leaders to put aside “narrow self-interest”. But French NGOs are dismayed that their country has only sent a junior minister to the conference, which aims to find agreement on how to pay for the UN’s new development goals.

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“European countries want an ambitious agreement,” Gregoire Niaudet, of the French NGO Secours Catholique, on the phone from the conference in Addis Ababa.

But there is a disagreement between developed and developing countries over taxation.

A group of 77 developing countries calling themselves the G77 wants a UN tax body that could set rules to collect taxes from multinational companies operating in their countries.

The International Monetary Fund has estimated that developing countries lose nearly 200 billion euros of potential tax revenue each year because companies set up in low-tax countries, like Luxembourg and the Netherlands, and pay no tax where they do business.

“It is unconscionable, a crime, the extent to which corporations operating in developing and emerging markets talk about corporate social responsibility but when it comes to the most corporate responsibility – paying your fair share of taxes – they are totally irresponsible,” economist and Nobel laureate Joseph Stiglitz, who is at the conference to support UN tax organisation, told RFI.

It is no longer up to a small group of developed countries to set tax rules, he says: “If we are going to have globalisation, we need to have global rules. And those global rules can’t be made by the G1 or the G7 or a self-appointed group of advanced countries; it has to made globally.”

And yet this is a major point of disagreement.

“There is a consensus on European level not to move forward on this issue,” said Niaudet.

France is among those countries and Niaudet warns that not addressing an issue of such importance to so many developing countries will hinder an agreement at the Cop21 climate conference in December.

“If some countries are not satisfied with the Addis Ababa agreement, then they will reopen these issues in other negotiations, particularly at the climate conference in Paris in December,” he said. “And that’s an issue for France, not to disturb these negotiations.”

New development goals

Before the Cop21 is a development conference in New York in September where some 190 nations will agree to 17 Sustainable Development Goals to replace the Millennial Development Goals that expire at the end of the year.

The new goals range from ending poverty, to fighting climate change, to achieving gender equality – everything to make the world a better place.

But someone needs to pay for it.

The UN Conference on Trade and Development estimates it will cost between three and four trillion euros each year. 

Most of that is public spending on infrastructure and social services. For developing countries, much will be funded by foreign aid.

And yet aid cannot cover it all, so in Addis there is talk of finding other sources, through reforming corporate taxes and other reforms.

Owen Barder, an economist with the Centre for Global Development who is at the conference says small policy changes, such as removing import tariffs, could make a big difference.

“In the European Union we provide aid to India and we are right to do that because a third of the world’s poorest people live in India,” he told RFI by phone from Addis.

“But we also impose a tariff on Indian textile exports. If they want to sell a T-shirt in the EU, we tax that at 10 per cent. Now, if we got rid or that tax on Indian T-shirts that would be good for Indian jobs, growth and it would be good for the poor people in India. And it would be good for European consumers, who would be able to by goods cheaper in the supermarket.”

Another source of potential income for developing countries is remittances: money sent back by people going to work in Europe or the United States, where they earn a lot more money than they would back home

Barder says remittances benefit Europe and the US, because migrants do jobs that need doing, and they help people's home countries, both through the revenue and the skills.

He uses the example of nurses from the Philippines going to work in Europe and the US:

“More people get training as nurses and doctors, because they have the possibility that they might be able to go abroad and earn this higher income,” he explained. “And so the countries that have the most emigrant health workers also have the most domestic healthworkers. There are more nurses per capita in the Philippines than in the US.”

Whether through remittances, taxes, foreign aid or a combination of them all, the development goals will have to be funded somehow.

Niaudet says that if developed countries do not get on board with a plan that everyone agrees with, developing countries could decide to go their own way.

“The countries that are not around the table may create alternative systems,” he said. “These will be competition for the OECD, G20 and International Monetary Fund. And this is not what other countries want.”

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