TOKYO - As the IMF and World Bank pursue implementation of tax policies in developing countries, members of Civil Society worry that these powerful institutions are putting the interests of international investors above those of the democratic governments of developing countries.
Of particular concern is the World Bank’s influential “Doing Business” ranking which many development experts find particularly damaging.
“The rankings are based upon criteria that might boost the bottom line of foreign investors but often damage national fiscal policies and hamper efforts to increase domestic resources through taxation”, said Øygunn Sundsbø Brynildsen, Senior Policy Analyst at the European Network on Debt and Development (EURODAD).
“The World Bank’s ‘Doing Business’ ranking pushes countries to lower taxes on corporations, reduce funds for vital public investment in health and education and often forces them to seek revenue elsewhere. It has caused more harm than good and we hope the Bank’s ongoing review of the rankings will result in their discontinuation” Brynildsen added.
Although generally encouraged by the IMF’s growing recognition of the equity effects of tax policies, campaigners in Tokyo expressed dissatisfaction that Value Added Tax (VAT) continues to be seen as a main source of tax revenues. “We are surprised that both the World Bank and the IMF continue to push VAT despite its clearly regressive nature,” said Pooja Rangaprasad of India’s Centre for Budget and Governance Accountability. “Ultimately, it is impossible to dispute the fact that VAT is a heavy tax burden on the poor.”
A further issue of concern to tax campaigners is the continued practice by the World Bank’s International Finance Corporation (IFC) of channeling its investments through secrecy jurisdictions. “Tax havens are being used to rob developing countries of much needed tax revenue by facilitating tax dodging. Development finance institutions like the IFC should be the first to discontinue the practice”, said Brynildsen.
Tax revenue for developing countries is a crucial source of independently generated income and as such campaigners feel its importance cannot be exaggerated. Given their influential role in forming national and international fiscal policies, campaigners believe it would be very counterproductive to its development mandate if the World Bank and IMF were unable to stop pushing tax policies that hinder efforts by developing countries to increase local economies and establish greater financial independence.
Pooja Rangaprasad, (currently in Tokyo, Japan)
Centre for Budget and Governance Accountability (CBGA), India, member of the Task Force on Financial Integrity and Economic Development
firstname.lastname@example.org +81 807 008 1838
Øygunn Sundsbø Brynildsen, (currently in Tokyo, Japan)
European Network on Debt and Development (EURODAD), member of the Task Force on Financial Integrity and Economic Development
email@example.com +32 486 903 491
Dietlind Lerner (United States)
Communications Director, Task Force on Financial Integrity and Economic Development