Back in September I was sitting in the salubrious office of an official from one of International Financial Institutions – when he slouched back in his chair, sighed and said ‘I can’t even bear to read those G20 communiqués – they are so vacuous.’ That evening, I found myself at a dinner hosted by DC law firm Jones Day where former Mexican President Zedillo branded the G20 ‘a disappointment.’
I’m pretty confident you won’t have read it, but this week’s edition of Transfer Pricing Week saw Vodafone’s tax director, John Connors, publicly enter the debate regarding Christian Aid’s campaign for country-by-country reporting.
For some time now we have been talking with Vodafone about tax and development and trying to convince it that it should get on top of this crucial issue. And Vodafone has acknowledged that we have ‘had some interesting discussions.’
This week, that conversation went public – and this is something we welcome. We are campaigning for transparency after all.
Connors said in the article that ‘country-by-country reporting is a little misguided’ suggesting that our campaign is based on ‘fanciful numbers and figures of the impact of tax avoidance and transfer pricing.’
When we launched our first tax report, I was working in Ireland – where I got all kinds of abuse for the things we were saying – but things have changed.
Now, when we talk about tax and development and country-by-country reporting we are in good company. Since we started working on the tax, the G20, the OECD, the EU and the UN have started taking our proposal very seriously.
In the past year, US Secretary of State, Hillary Clinton, and British Prime Minister David Cameron have been fairly vocal about Pakistan not taxing its elites, while the US and UK give aid to the country.
Of course, in a fragile state like Pakistan, statements by the UK and US governments on tax are no doubt motivated by the potential for tax reform to build a strong and responsive state – which is less likely to be a security concern internationally.
But Finance Minister, Dr Abdul Hafeez Shaikh, has joined the call for the rich, legislators and media ‘moguls’ to carry out their national duty by paying taxes as per their income and capacity. In doing so we he vowed to expand the tax-net and go after the tax dodgers.
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.
‘We don’t care how much tax we pay, as long as you tell us how much it is, let us pay it and leave us alone’
Perhaps not what you might expect to hear from the head of tax from a major global bank. But as the most influential tax professionals from across America gathered in DC to discuss the latest developments in business taxation with the OECD, simplicity and certainty was the resounding call from business.
The OECD is looking for its place in the world, and it’s pretty clear that this “rich countries’ club” is not as dominant as it once was and is now clamoring to pull in support from the emerging economies. And with developing countries being touted as having double digit growth potential, while the pole position for Africa and Latin America’s largest trading partner has been lost to China, the OECD is looking beyond its borders to restore its raison d’etre. Tax and development is a key piece in this game.
Christian Aid’s David McNair Recounts His Trip to Washington, DC for the International Monetary Fund’s Spring Meetings Last Week
Extreme turbulence and black clouds were the order of the day as I flew through a storm into Washington, DC. Ironic, then, that I was on my way to the institution tasked with picking up the pieces of the financial crisis and managing these turbulent economic times.
But the International Monetary Fund (IMF) itself has not escaped from the crisis unchanged. The new ‘fund’ seems less driven by economic orthodoxy at the expense of other perspectives and more open to criticism – to a point.
So as more than 160 delegates, from government ministers to academics and diplomats met to discuss the challenge of ‘domestic resource mobilisation’ in developing countries (raising taxes, to you and me), there was a spirit of learning and cooperation in the air. Good news, given that the IMF has just launched two massive topical trust funds designed to raise money to strengthen IMF technical advice on tax policy and administration, and taxation of natural resources.
It is probably foolish to underestimate the power that IMF economists have over the tax policies of many countries across the world – and not just developing countries (see Ireland for details). The power dynamic was not lost on me. Sitting beside delegations from developing countries, I could hear whispered conversations and criticisms throughout, but when they were asked for their perspectives, many were silent.
Back in 2009, when Task Force members began lobbying the UK government on what the G20’s crackdown on tax havens might look like, the response was that automatic exchange of information was cumbersome, difficult, that there was far too much information to be useful – and, to paraphrase, that it would end up being shipped around the world in boxes which would cause a fire hazard.
But last week the UK parliament accepted the Draft Penalties, Offshore Income etc. (Designation of territories) Order 2011. This measure, designed to crack down on UK taxpayers holding assets offshore, makes clear that the UK sees automatic information exchange as more effective than the ‘on request’ model enshrined in the OECD’s Tax Information Exchange Agreements.
Based on a system of categorising jurisdictions to determine penalties for tax evaders, the UK government have chosen not to use the OECD’s list of non-cooperative jurisdictions, but rather to look at the “the existence of information exchange agreements…[and]…the quality of such agreements… particularly with regard to whether they provide for the automatic exchange of information on savings income.”
If I were based at 30 Cannon St in the heart of the City of London, 
I’d be feeling somewhat under pressure as I made my journey to the state-of-the-art building. Members of this task force have long argued that the IASB, a private company registered in the US state of Delaware, has the potential to transform the way that companies operate to make them more accountable to government’s civil society, to challenge corruption and to help poorer countries to raise revenue to pay for education and healthcare for the world’s poorest people.
But today, the UN published a report suggesting the IASB could make a major contribution towards a more sustainable future for us all – by requiring that listed companies disclose their environmental and social impacts alongside financial statements. Of course, the technocrats will argue that it’s all too complicated. Compliance costs would be huge, there would be so much information that it would be difficult to interpret, it would impact investment and would make things worse; but we’ve heard these arguments before in relation to country-by-country reporting.
Today in the UK’s Guardian newspaper, Armando Barrientos argues that rather than the “aid industry” (as he describes it), transferring money and resources directly to the poor would be much more effective.
This is an appealing argument. If poverty is at heart a lack of power, then providing cash, without conditions, to the poor restores some of that power. After all, aren’t those in poverty best placed to know their needs? Initiatives such as the Basic Income Project advocate that a small amount of money should be granted to all without means test of conditions. Trials in Namibia have shown that this can reduce poverty and inequality dramatically.
But while this argument is appealing, it should not be made in isolation. What good does it do if the poor have more money on essential goods, when there is no provision for education to help them lift themselves out of poverty?
In May 2010, Christian Aid published a report entitled ‘Tax of Life’ highlighting the impact of tax dodging on Irish Aid programme countries. It’s a somewhat obvious point. Why would a country in times of austerity give aid to a country without considering the impact of international policies on the ability of that country to develop.
Tax is something that is growing in importance in the development world. The European Council recently published conclusions which approved a paper emphasising the importance of tax for development and the need to explore transparency standards such as Country-by-Country reporting and Automatic Exchange of Information – recommendations which taskforce members have been pushing for some time.
Back in Dublin, the government’s committee on Foreign Affairs were so struck by Christian Aid’s report that they called in the relevant government departments to give an account of what they were doing about the problem of tax dodging.
A group of experts chaired by Nobel laureate Prof. Joseph Stiglitz has called for an end to offshore and onshore financial centres.
The draft report of the UN commission on the reform of the international monetary and financial system, presents a range of proposals for the reform of the global financial architecture following the global financial crisis.
Most notably, the report highlights how onshore and offshore tax havens have contributed to the so called, ‘shadow banking system’ and the problem of illicit capital flight, arguing that ‘well regulated economies have to be protected from those that are under- or unregulated.’
In a challenge to the G20′s crack down on offshore tax havens, the Stiglitz report notes that the worst offenders are not the remote island states, but financial centres in Nevada, Delaware, London, New York and Zurich.
The commission calls for a truly multi-lateral agreement, enforceable by international courts, which would remove tax secrecy and ringfence ‘rogue centres’ in both developed and developing economies that do not comply.
Thoughts from United Nations Headquarters in New York on the UN Conference on the World Financial and Economic Crisis and Its Impact on Development:
United Nations HQ is an odd place. A huge somewhat dated building full of bureaucrats and security guards trying at every stage to stop you from getting things done. Some would say it is a metaphor for the UN itself.
But the UN is crucial. For the reality is that there is no other truly representative international organisation where developing countries have a fair say over how the world is governed. I have come to the UN conference on the financial crisis and it’s impact on development.
Negotiators from around the world meet months in advance to agree on a consensus document on how the UN will take the process forward. This is finalised at the conference.
Negotiations usually run to the 11th hour, and civil society representatives (like myself) run around frantically meeting officials and ministers, grabbing a moment in a lift or a coffee shop to try to persuade countries to push for stronger commitments.
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