Rich Countries Should Listen to the Developing World on Tax Co-operation

May 17th, 2011

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Stefan de Vries/Flickr*

Rarely have developing countries been more vocal and united on a question of international taxation. The vexed question of the status of the arcane-sounding “Committee of Experts on International Cooperation in Tax Matters” is hotting up, after rich and poor countries clashed at a United Nations meeting last month.

The UN tax committee is charged with promoting international cooperation to deal with important issues such as taxing multinational companies across borders, and sharing best practice between countries. It has a specific mandate to take into account the specific needs of developing countries, which is why developing countries want to see it strengthened. “The day is gone when there are rule makers and rule takers,” is how one speaker made this case at the UN meeting in New York.

In written submissions before the meeting, developing countries including Brazil, China, South Africa, India and Mexico all called for the strengthening of the committee through greater resources and, in most cases, upgrading its status to become a proper intergovernmental body. Speaking last week in New York, Argentina as Chair of the G77 group of developing countries also concurred. This means that more than a quarter of G20 member states – including its next Chair – are on record in favour of a stronger committee. They aren’t the only ones. For example, here’s what Chile had to say:

It is essential for the tax authorities of both developing and developed countries to work together in order to prevent problems of tax evasion and international double taxation. There is thus a need for forums where such issues can be discussed and settled.

In this connection, the Committee of Experts on International Cooperation in Tax Matters is the only body with global membership in which these issues can be discussed.

It is therefore essential for the Secretariat of that Committee to be strengthened by the provision of financing for its work, so that developing countries can participate actively in its meetings and in the adoption of decisions and agreements. In addition, the Committee must work in coordination with other international bodies dealing with international tax matters, so that efficient use can be made of assigned resources.

Richer countries are keen to help developing countries raise more taxes, with many of their official development agencies giving increasing amounts of funds to developing countries and to international organisations for this purpose. So you’d expect them to swing in to action in response to this clear demand from developing countries, supporting a stronger committee, and stumping up some extra cash to increase its secretariat resources from the measly two permanent staff that it currently has.

But no, surprisingly the major donors – especially the EU and the US – say they oppose a stronger committee. They appear to prefer other organisations, such as the OECD, which by definition excludes most developing countries from its membership. It’s not the first time this issue has been discussed, and one country in particular – the UK – has long opposed a stronger UN committee.

It’s time the UK, US and others listened to developing countries and supported the long-needed reform for which they are calling.

Originally published on the ActionAid UK  Campaign Blog.

* Image license: Some rights reserved by StefdeVries

Written by Martin Hearson

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