Letter from America: Group-Think, Expert Communities and the Pariahs of Innovation

June 15th, 2011

The Harvard Club of NYC

Mark H. Anbinder/Flickr*

Developing countries should have a voice in the discussion on international taxation, writes David McNair of Christian Aid

Sitting in New York’s Harvard Club surrounded by tax lawyers is not one of the places you expect to find yourself when you sign up to work for an NGO. But there we were, surrounded by taxidermy, listening to a live pianist and discussing the ins and outs of negotiating tax treaties.

The world of international taxation, despite affecting millions, is controlled by a small community of people. I have yet to meet a member of this group that is anything but decent, polite and intelligent. But like any community, the vision and outlook of those within it can be constrained by the unwritten rules, personal power dynamics and vested interests. The community has its own celebrities, its quirky members and its quiet well respected elder statesmen (yes, they are mostly men).

There is inevitably an element of group-think in such a community. And those who think outside of the box are treated as slightly amusing, or pariahs, depending on how vocal they are.

So sitting in the Harvard Club, as strange as it feels, is a fascinating experience. It is inevitable that an outsider is treated with suspicion when they ask difficult questions or criticize the way things are done.

But in recent years, the international tax community has got used to comments, criticisms and engagement from NGOs as the tax and development debate grows.

This is not without effect. The OECD’s system for taxing multinationals, on which many in this community have devoted their working lives, and which can be incredibly lucrative, is assumed to be the only way things can work. But is it suitable for developing countries? The consensus seems to be that, in its current form, it probably isn’t.

Following this pressure, it seems that things are starting to shift – with the OECD looking a simplification of standards, and the UN presenting a range of options in its practical manual on transfer pricing.

Of course, common international standards are a positive thing – but only if they serve the interests of all and aren’t biased against the weaker parties. If the majority of countries around the world have no say in the development of such standards, it seems like a sure-fire way to ensure a patchwork of standards which lead to double taxation and thus inhibit investment, or double non-taxation where countries lose out on desperately needed revenue.

With many of the experts inputting into the development of international standards also employed by international advisory firms which make money from the current system, there must be some checks and balances put in place.

Ultimately, to make this system better and ensure that more states adopt common standards, the community must be expanded with a forum for developing countries to input into these international standards

Next month the Group of 77 and China will table a resolution to upgrade the UN Committee of Experts on International Cooperation in Tax Matters. I am well aware of the challenges that the UN bureaucracy poses to actually getting things done. And there are arguments for and against the UN playing a role in international tax matters, many of which have some validity.

But as last week’s meeting at the UN showed, if resourced, this committee has the potential to play a significant positive role in helping developing countries to understand, adapt and input into international tax cooperation. A shame then, that the committee is so under-resourced that Christian Aid and other NGOs had to stump up the cash to pay for the meeting.

The G77 motion is not new. The discussion regarding the status of the committee has been bouncing around for years. But as this motion is discussed and debated yet again, let’s not only listen to the experts who have an interest in protecting their turf and maintaining the status quo. Let’s also listen to the alternative voices who might just have something valuable to say.

* Image License: Some rights reserved by Mark H. Anbinder

Written by David McNair

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