Taxation must be central to discussions on how to finance any new development goals, ActionAid said today ahead of a meeting of the high-level panel on the post-2015 development agenda next week in Bali.
Members of the panel will be discussing the thorny issue of how to finance any new development goals that follow the Millennium Development Goals which expire in 2015.
David Cameron is one of three co-chairs of the panel, and will be represented in Bali by Justine Greening, Secretary of State for International Development.
A new ActionAid briefing paper, Bringing taxation info the post-2015 development framework, sets out a number of options for increasing domestic resource mobilisation, focussing on how developing countries could increase their tax revenues. This includes building tax collection capacities, but it also means changing the international rules that stand in the way of developing and developed countries collecting taxes.
The issue of corporate tax avoidance and evasion has risen up the global political agenda, with Cameron promising it will be a key item for the G8 this year.
Clare Coffey, ActionAid’s post-2015 policy advisor who is attending the talks in Bali, said: “An ambitious agenda to end poverty needs to be supported by equally ambitious commitments on financing. In addition to aid, it is vital that other significant funding sources are identified. The most promising option is to enable developing countries to raise their own domestic tax revenues to build more equitable and just societies.
“We have seen from our work in Africa and South Asia how international tax rules support tax avoidance, and what that can mean in terms of lost revenues and thus lost public services. Our recent investigation in Zambia found that just one subsidiary of the British multinational Associated British Foods has avoided enough tax via tax havens to pay for 48,000 children to go to school each year.”
Building developing countries’ capacity to collect taxes is critically important. But as recent high profile cases have shown, even well-resourced tax authorities in Europe and North America struggle to tax multinationals properly in the absence of fair international tax rules.
Ultimately what is needed is international tax agreements that safeguard developing countries’ taxing rights, help reduce tax competition between different countries and shed light on tax havens and the tax operations of multinational companies.
Coffey added: “A new global partnership for development post 2015 could realistically help developing countries raise tax revenues to 25 per cent of GDP by 2030, whilst reducing the corporate tax gap by 20 per cent. That would generate both significant and sustainable amounts of financing, whilst helping developing countries to take charge of their own development.”