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WORLD: Taxation A Sticky Issue At Upcoming Financing Talk Fest

David Cronin

BRUSSELS, Nov 24 2008 (IPS) - Amid frantic efforts to save the banking system from ruin, some top-level European Union (EU) officials have nonetheless found time to profess their concern for Africa recently.

Louis Michel, the EU’s development aid commissioner, says that the ‘‘intolerable irony’’ behind the financial crisis is that poor countries which are in no way responsible for it will suffer through a slowdown in investment and a scarcity of credit.

While Africa is expected to record economic growth of up to five percent in 2009, it constitutes a two percent drop on this year. ‘‘Every percentage point of lost growth is a major setback in the fight against poverty and a human catastrophe for countries in the South,’’ he wrote in the French newspaper Libération.

The EU will soon have an opportunity to make good on its oft-repeated commitments to reduce African hardship during the next international Financing for Development conference being held in Doha, Qatar.

But all the indications are that the 27-country Union will adopt a timid stance at the United Nations-sponsored event, which runs from Nov 29 to Dec 2.

Unlike similar events that are primarily focused on aid, this conference is supposed to tackle a range of other issues that affect global inequality, including debt, taxation and the structure of financial institutions like the World Bank and International Monetary Fund.


These are listed in the so-called Monterrey Consensus, drawn up at a previous United Nations (UN) conference in Mexico.

One of the main reasons why expectations are low for the Doha gathering is that it comes so soon after a presidential election in the U.S.. Some participants are even suggesting that it would be wise to postpone efforts to reach a new agreement until after Barack Obama takes up his responsibilities as president in January next year.

Another reason is that the EU appears reluctant to drive forward an ambitious agenda.

Jean Saldana from the Catholic network International Cooperation for Development and Solidarity, known by its French acronym CIDSE, said that during previous international conferences the EU has been known to act as a ‘‘bridge’’ between rich and poor countries. On this occasion, however, the Union’s governments are not playing that role, she added.

Taxation matters are proving particularly sensitive.

Estimates of the amount of tax receipts that should be paid to poor countries but are denied them vary from between 500 billion and 800 billion dollars per year, well over five times the amount they receive in aid.

The causes of these losses include tax exemptions offered to major companies in order to entice them to invest in poor countries, as well as the establishment of tax havens where vast sums can be squirreled away without being examined by inspectors.

Anti-poverty campaigners have recommended that a code of conduct should be introduced with a view to cracking down on tax evasion; and that robust accountancy standards should be introduced requiring each major company to publish how much tax it pays in each jurisdiction where it works.

They have also urged that the UN’s tax committee be upgraded into a body with proper resources and power. At present, the UN only has two tax specialists, compared to 40 with the Paris-based Organisation for Economic Cooperation and Development, which bands together 30 industrialised countries.

While Obama has indicated that he wishes to close down tax havens, some of the EU’s most powerful leaders – particularly Gordon Brown, the British prime minister – seem determined to keep them.

Many of the world’s tax havens are either located within the EU or on the dependent territories of its member states. They include the City of London, Cyprus, Luxembourg, the Channel Islands and the Cayman Islands.

Nuria Molina from the European Network on Debt and Development (Eurodad) suggested that, while aid may be suffering as a result of budgetary constraints in donor countries, there is no excuse for not boosting the collection of taxes.

‘‘This is a tax justice issue. It doesn’t really entail further commitments in aid. It is about having enhanced information-sharing on tax regimes and how to allow developing countries to retain the proceeds of companies so that they can pay for much-needed development strategies.’’

ActionAid spokesperson Laura Sullivan said there is a ‘‘massive potential of taxation to contribute to development’’. She described the loss resulting from capital flight from poor to rich countries as ‘‘a hole that has to be plugged’’.

Jasmine Burnley from CONCORD, a coalition of European anti-poverty groups, argued that taxes can also be imposed in rich countries in order to raise money that can then be spent as development assistance. These could include taxes on currency speculation and the wider application of a levy on the purchase of airline tickets.

Such a levy was introduced by Brazil and France in 2006 with the aim of buying medicines to fight major killers like AIDS and tuberculosis.

Yet she complained that many governments regard innovative sources of development assistance as a substitute to honouring pledges they have made to increase their aid budgets.

While most of the EU’s countries have undertaken to allocate at least 0.7 percent of their national incomes to development assistance, ‘‘they are simply going back on what they have promised’’, she added.

 
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