FTC response to submission of FACTI Panel Final Report

February 26th, 2021

The Financial Transparency Coalition (FTC) welcomes the final report by the High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel). The FACTI panel’s landmark report has recognized the risks of financial opacity and tax abuse on the world’s most marginalised groups, with a clear focus on tackling gender inequality.

This broader framing of the problem of illicit financial flows (IFFs) augments the FACTI Panel’s support for the systemic understanding of problems in the current global financial system, as seen in the report’s 14 primary recommendations. We especially applaud the FACTI Panel’s support for systemic reforms in the current global financial system, following on from the Mbeki Panel’s report on IFFs from Africa in 2015.

The FACTI report’s call for an overhaul of the way tax rules and norms are decided clearly comes through with its call to establish a UN Tax Commission. Such a body will serve to fulfil the FACTI Panel’s ambitious, yet achievable, policy agenda. A UN Tax Commission will be well-placed to coordinate efforts towards achieving the implementation of the Panel’s 14 recommendations, allowing all countries and citizens to fully participate under the principles of equality, justice and non-discrimination. Without this shift, many of the substantive recommendations are unlikely to be implemented.

We also appreciate the FACTI Panel’s decision to expand the definition of the problem of tax abuse.  The misconception that tax “evasion” is legal, and largely victimless, has been replaced by the reality that tax “abuse” and “avoidance” are clearly harmful. Related to that expanded definition, we also welcome the Panel’s decision to call for an overhaul to the OECD’s transfer pricing guidelines, especially by moving to tax corporations as single taxable entities and adopting unitary taxation and a minimum tax rate of 20% to 30%.

The Panel also establishes an international standard of financial transparency concerning public registries of the legal, beneficial owners of all companies, trusts and foundations, the automatic exchange of information, and the introduction of public country-by-country reporting in order to understand where multinational corporations profit from their economic activity—as well as whether they pay their taxes in a fair and transparent way in all countries. If implemented, these policies would be a significant upgrade to existing norms published by bodies like the OECD and the Financial Action Task Force (FATF).

The Panel’s report also recognizes that financial crimes encompass a wider range of actions than simply bribery, and that corruption must be understood in the wider context of IFFs. Likewise, a system which relies on the self-regulation of professional enablers like lawyers and accountants simply cannot continue, and we should move towards mandatory standards to tackle enablers’ roles in modern offshoring and financial secrecy systems. Buoyed by a wide body of evidence, the FACTI Panel’s report demonstrates that self-regulation does not work, especially while entire jurisdictions continue to facilitate and nurture secrecy with little consequences.

We also welcome the Panel’s emphasis on regional efforts—such as the African Tax Administration Forum and the Asia-Pacific Regional Hub on Domestic Resource Mobilization and International Tax Cooperation—to further improve tax cooperation around the world. Such a push for regional tax governance mechanisms will help effectively tackle financial crimes and tax abuse. We also believe that this regional momentum, which we continue to advocate, can further contribute to the development of a UN Tax Commission.

Furthermore, we welcome the highlighting of the connection of the issue of illicit finance to human rights, and the Panel’s focus on undergirding its policies with fundamental values like equality and justice. The FTC believes in a rights-based approach to financial transparency, and that a rights-based approach will allow us to link tax abuses and financial crimes to the abuses of specific rights–such as the right to food or the rights of children. 

We also applaud the FACTI Panel’s insistence on the vital role of civil society organizations when it comes to supporting and ensuring financial transparency, especially through research, monitoring and advocacy. However, this space has been increasingly constrained and operating under threat. Implementation of the report’s 14 recommendations will require a vibrant civic space to keep a functioning civil society, as well as the protection of media freedoms to allow journalists to report on financial crimes and tax abuses, especially when people who speak out against powerful interests put their own lives and livelihoods at risk. We find it reassuring that the Panel’s findings call for providing support for human rights defenders, and for those exposing tax abuse and financial crimes. 

The FTC looks forward to supporting the implementation of the report’s findings, and will closely monitor progress among all governments and institutions. 

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