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The European Parliament and the European Commission put tax on the development agenda
17 December 2009
On December 9th the European Parliament and the European Commission co-organised a high level discussion on tax and development for combating poverty.
The conference, chaired by MEP Eva Joly, brought together prominent stakeholders from different sectors, including Mali’s Minister of Mines, EU Commissioners on Development and Tax, the Spanish Development Cooperation General Director and the Director on tax issues from the Organisation for Economic Co-operation and Development. Eurodad director, Nuria Molina and colleagues from Christian Aid and Tax Justice Network Africa were also invited to speak from the civil society perspective.
The organisation of this high level conference shows how the EP and EC are putting tax justice on the development agenda. Indeed, there is need to seriously combat illicit South North flows, many of which are related to tax evasion and aggressive tax avoidance by multinational corporations.
Nuria Molina pointed out the huge financial gap that illicit flows represent for developing countries, amounting to one trillion per year, and insisted on the responsibility of EU member states for hosting many of the existing secrecy jurisdictions. She also raised concerns about multilateral development banks and institutions, such as the EIB and the IFC funding companies and projects that use secrecy jurisdictions, undermining the right of developing countries to raise taxes and mobilise domestic resources.
The Chair of the meeting recalled that for every single dollar that goes to the South in Official Development Assistance, around 10 dollars leave developing countries as a result of illicit flows. She pointed out that companies play a key role in this, explaining that in France, multinational companies pay only 13% of corporate taxes, despite a national rate of 30%.
Rebecca Dottey from Christian Aid, Ghana, gave an example of how developing countries are directly facing financial deficit as a result of these illicit flows. She drew attention to the loss of revenue in Ghana as a result of tax incentives and Export Processing Zones, which were open to abuse on the part of companies, and trade mispricing on Ghana’s primary exports. Her organisation estimates that Ghana's loss in taxes due to mispricing for trade with the EU alone rose from 13 million euros in 2005 to 43 million euros in 2007. She also highlighted how firms operating in Ghana's Export Processing Zones benefit from a tax “holiday" of ten years, during which they are exempt from both direct and indirect taxes including income tax and valued-added tax. The total revenue loss resulting from such exemptions amounts to 75 million dollars annually.
All speakers agreed on the need to enhance transparency and also strengthen the capacity of tax administrations in developing countries. Yet Civil Society Organisations stressed that capacity building should not divert attention from the need to implement a multilateral automatic information exchange framework.
The Spanish presidency representative stressed that the EU already has an automatic information exchange mechanism (through the savings tax directive) and stated that this should serve as an example for other regions in the world. He also recalled that the forthcoming EU communication on good governance on tax matters should address these issues.
At this meeting EU institutions showed to be committed to fight illicit flows to enable development. The review of the European savings tax directive, the new directive proposal for cooperation on tax matters and the review of some accounting standards as well as the forthcomming EC communication on good governance on tax matters will be on the EU agenda next year. If EU leaders and institutions are serious about what they praise, progress on multilateral automatic information exchange and on country by country reporting standards should be made in the comming months.
Find the agenda and speeches of all the speakers here
Media links:
http://www.ipsnews.net/africa/nota.asp?idnews=49634
Eurodad speaking notes at the conference
: 480 Kb
Eurodad presentation at the conference
: 1997 Kb
Notes of the conference
: 81.5 Kb