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The World Social Forum reviews debt and taxes: who pays, who profits and why?

Added 11 Apr 2013

By Bodo Ellmers

While most of the world’s population was reeling from one of the globe’s multiple crises, social movements and non-governmental organisations (NGOs) gathered at the World Social Forum (WSF) in Tunisia last month in search of alternatives. The country where the Arab Spring started in late 2010 was a great choice to host the WSF in 2013. Inspired by the successful campaign to overthrow the autocratic regime of Ben Ali three years ago, Tunisian civil society is amazingly active, highly motivated and convinced that civil society activism can actually make social change happen.

Tunisia: microcosm of a defunct financial regime

However, the Tunisian experience also shows that activism on a national level needs to be complemented by international solidarity and cooperation because nations that are integrated into a globalised world economy have limited space to determine their development. A mountain of external debt taken out by the former regime today is threatening public service delivery and constraining Tunisia’s progress. The tax system inherited from the Ben Ali regime is unjust and includes loopholes for tax avoidance and capital flight. Tax income is insufficient to finance even the current public affairs, causing high and additional borrowing needs to avoid austerity policies.

A balance of payments crisis looms as investment, export production and tourism in particular have been badly affected by concerns about instability. Tunisia is currently negotiating a loan agreement with the International Monetary Fund. Just a few years after the Ben Ali regime was overthrown, a new player that is not democratically elected and mandated by the Tunisian people is playing a substantial role in the nation’s economic and social prospects.

Tax-debt-development finance: promoting alternatives

One of the questions that concerned activists at the WSF was how to get out of the current mess – where governments depend on financial markets to fund public services, and nations depend on external lending to fund their development. These questions are inextricably linked to debt and taxes, which has been at the core of Eurodad’s work for many years. So we pushed the debt-tax-finance agenda in order to develop alternatives and promote new thinking.

Tax justice: Who pays matters

That domestic resources should play a stronger role in public and development finance became a global consensus position recently as the OECD aid industry is running out of steam, and even formerly aid-dependent countries’ governments are getting increasingly tired of foreign funding that comes with too many strings attached.

For the civil society activists gathered in Tunis, however, the question of tax justice is the primary concern. Regressive tax policies and loopholes for tax avoidance and capital flight caused the current situation – where poorer populations pay more than their fair share to national and global public goods. Consequently, the actions needed to create tax justice – in more technical terms: progressive taxes and tax rates; shutting down tax havens; automatic exchange of tax information; country-by-country reporting; and disclosure of real ownership of corporations – featured highly on the 2013 WSF agenda, including in its final tax declaration. Which reassures us at Eurodad that we are on the right track.

Debt: who shouldn’t pay matters too

But since public debt levels in many countries of the global north and south are high and surging, and governments’ debt service is ever increasing, there is a risk that the tax regime will become an exploitation mechanism – that governments will use citizens’ tax payments for the benefit of creditors rather than citizens. So, while tax income needs to go up, debt levels need to come down to make public finance work for everyone.

Activists in Tunis challenged the current creditor-biased debt regime with the slogan “we don’t owe – we don’t pay” – and promoted a variety of exit options from the straitjacket of debt dependency that has trapped many people around the world. Among these options were comprehensive debt work-out mechanisms and debt audits that would unveil and assess the origins and legitimacy of debt.

A debt audit is currently being debated in Tunisia, with the support of local activists. The findings might provide interesting insights for responsible financing and into the question: what happened to all the money that Western banks and international financial institutions generously lent to former dictator Ben Ali, and why did they lend it to him in the first place?