Less than 1 per cent of global illicit financial flows is currently being seized and frozen, according to the report Estimating illicit financial flows resulting from drug trafficking and other transnational organized crime. “Tracking the flows of illicit funds generated by drug trafficking and organized crime and analysing how they are laundered through the world’s financial systems remain daunting tasks,” acknowledged Yury Fedotov, Executive Director of UNODC.

Launching the report in Marrakech, Morocco, during the fourth session of the Conference of the States Parties to the United Nations Convention on Corruption, Mr. Fedotov said that the Conference served as an apt reminder that corruption could play a major role in facilitating the entry of illicit funds into legitimate global financial flows, adding that investments of “dirty money” could distort the economy and hamper investment and economic growth. The aim of the study is to shed light on the total amounts probably laundered across the globe and to advance research on the topic. “But as with all such reports, we will continue to refine the figures to provide the truest possible estimates,” said Mr. Fedotov.

The UNODC report estimates that the total amount of criminal proceeds generated in 2009, excluding those derived from tax evasion, may have been approximately $2.1 trillion, or 3.6 per cent of GDP in that year (2.3 to 5.5 per cent). Of that total, the proceeds of transnational organized crime – such as drug trafficking, counterfeiting, human trafficking and small arms smuggling – may have amounted to 1.5 per cent of global GDP, and 70 per cent of those proceeds are likely to have been laundered through the financial system.

The illicit drug trade – accounting for half of all proceeds of transnational organized crime and a fifth of all crime proceeds – is the most profitable sector. The study paid particular attention to the market for cocaine, probably the most lucrative illicit drug trafficked across borders. Traffickers’ gross profits from the cocaine trade stood at around $84 billion in 2009. While Andean coca bush farmers earned about $1 billion, the bulk of the income generated from cocaine was concentrated in North America ($35 billion), followed by West and Central Europe ($26 billion). Approximately two-thirds of that total may have been laundered in 2009. The findings suggest that most profits from the cocaine trade are laundered in North America and in Europe, whereas illicit income from other subregions is probably laundered in the Caribbean.

Once illegal money has entered the global and financial markets, it becomes much harder to trace its origins, and the laundering of ill-gotten gains may perpetuate a cycle of crime and drug trafficking. “UNODC’s challenge is to work within the United Nations system and with Member States to help to build the capacity to track and prevent money-laundering, strengthen the rule of law and prevent these funds from creating further suffering,” said Mr. Fedotov.

Gunnar Stølsvik, of the Norwegian National Advisory Group against Organized IUU-Fishing, chaired the panel “IUU Fishing: Consequences for the Environment, Conflict and Human Rights” at the conference.

The study on transnational organized crime in the fishing industry  and the CCPCJ resolution 20/5

The United Nations Office on Drugs and Crime (UNODC) is the guardian of the UN Convention against Transnational Organized Crime (UNTOC) and the UN Convention against Corruption (UNCAC).

UNODC conducted a study on transnational organized crime (TOC) in the fishing industry which was presented in April 2011 during the meeting of the Commission of Crime Prevention and Criminal Justice (CCPCJ). CCPCJ is the governing body of UNODC and guides the activities of the UN in the field of crime prevention and criminal justice. It takes action through resolutions and decisions and adopted in April 2011 a resolution on TOC committed at sea.

Viton / flickr*

UNODC issue paper: Transnational Organized Crime in the Fishing Industry

The study considers the involvement of the fishing industry in different forms of TOC (human trafficking, migrant smuggling, and drug trafficking) and links to other forms of criminal activity (marine living resource crime, corruption, piracy and other security related crimes).

UNODC found that “the perhaps most disturbing finding of the study was the severity of the abuse of fishers trafficked for the purpose of forced labour on board fishing vessels. These practices can only be described as cruel and inhumane treatment in the extreme. Fishers are held as de facto prisoners of the sea, and the study documents several instances of reported deaths, severe physical and sexual abuse, coercion and general disregard for the safety and working conditions of fishers. A particularly disturbing facet of this form of exploitation is the frequency of child trafficking in the fishing industry.” [1]

The study also found several reported instances where human trafficking in persons on board fishing vessels were linked to marine living resource crimes and believe that “transnational organized criminal groups are engaged in marine living resource crimes in relation to high value, low volume species such as abalone. This criminal activity is moreover linked to illicit traffic in drugs, as a barter arrangement for marine living resources. The study also found that some transnational fishing operators are engaged in marine living resource crime. Investigation and prosecution of the criminal activities of these transnational fishing operators has proved to be challenging.” [2]

UNODC also considered corruption in relation to fishing operations and fishing fleets’ access rights. One particular finding relates to corruption in relation to the ship registers. The study found that “[s]hipping registries are in some States operated by corporate entities, ie commercial registries. Many of these commercial registries are associated with flag States that are unable or unwilling to exercise their criminal enforcement jurisdiction. There would seem to be instances where these corporate registries are alleged to be involved in corrupt dealings or attempts at impropriety to obtain a license to run the register…” and continues: “corrupt relations between ship registers and flag States may in these instances have a potentially detrimental effect on the proper functioning of the international legal framework pertaining to the law of the sea, as well as investigations and prosecutions of transnational organized crime such as trafficking in persons and marine living resource management and conservation efforts.” [3]

Furthermore the role of fishing vessels in criminal activities was considered throughout the study. The study found that fishing vessels are used for the purpose of smuggling of migrants, illicit traffic in drugs (primarily cocaine), illicit traffic in weapons, and acts of terrorism. Furthermore UNODC conclude their summary by noting “that although fishers are often recruited by organized criminal groups due to their skills and knowledge of the sea, they seldom seem to be regarded as the masterminds behind organized criminal activities involving the fishing industry or fishing vessels. It is therefore unfortunate that fishers, rather than the true masterminds behind the criminal activity, are likely to be targeted when criminal activities involving fishing vessels or the fishing industry are investigated and prosecuted, particularly in light of the possibility that some of these fishers may be victims of human trafficking.” [4]

Resolution 20/5 Combating the problem of transnational organized crime committed at sea

In the resolution “Combating the problem of transnational organized crime committed at sea” CCPCJ seconded the concerns of the General Assembly (A/RES/65/38) and was “[c]oncerned that transnational organized criminal activities at sea are diverse and may in some cases be interrelated and that criminal organizations are adaptive and take advantage of the vulnerabilities of States”. In the operative paragraphs CCPCJ:

Requests UNODC to “continue providing technical assistance to States.

• Urges States to strengthen international cooperation at all levels.
• Encourages States to take appropriate measures to strengthen law enforcement.
• Encourages UNODC to cooperate with Member States, relevant United Nations bodies, international organizations and other bodies and mechanisms.
• Invites States to share their experiences and concerns with other States and UNODC on the possible gaps and vulnerabilities faced in tackling TOC activities at sea, bearing in mind research conducted by UNODC on transnational organized crime committed at sea” (with reference to the study: Transnational Organized Crime in the Fishing Industry Vienna, 2011).
• Requests UNODC to convene an expert meeting to survey the challenges to the criminal justice system in the investigation and prosecution of cases arising from TOC activities at sea with a view to identifying specific areas where UNODC may facilitate the investigation and prosecution of such cases by States.

Next steps

•  the findings and recommendations of the UNODC report should be carefully considered,
•  marine living resource crimes should be recognised as predicate offences of up- and downstream crimes such as money laundering, corruption, handling of stolen goods and tax- and customs fraud,
•  take into consideration trafficking of fishers for the purpose of forced labor on board fishing vessels and the link to marine living resource crime; and
•  improve international cooperation to combat marine living resource crime and other transnational organized crimes at sea

[1] See Transnational Organized Crime in the Fishing Industry (Vienna, 2011) page 3

[2] Ibid page 4

[3] Ibid page 122

[4] Ibid page 131

* Image license:  Some rights reserved by Viton

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

David Spencer, a Senior Advisor to the Tax Justice Network, has just delivered a hard-hitting speech at a major United Nations meeting on transfer pricing, an arcane-sounding but extraordinarily important issue in the field of international tax.

Spencer’s speech is here. It is an outspoken document, couched in diplomatic language, which contains too much important stuff for us to summarise in detail on this blog – so here is a short summary. Read the whole document for the full effect.

Companies can manipulate their internal trade (“transfer”) prices to shift profits and cut their tax bills. Governments try to stop them – but this is a highly complex area, and the dominant standard model for checking these internal prices is the the OECD’s furiously defended model known as the ‘arm’s length rule’ – whereby internal prices are supposed to be set according to supposedly independent, ‘arm’s length’ prices reflecting their real value. The trouble is, the arm’s length rule is hopeless in the modern global economy, enabling corporations to run rings around governments – and especially those of developing countries.

In essence, international rule-setting is dominated by the Organisation for Economic Co-operation and Development, a club of rich countries. It is so dominated, in fact, that the OECD substantially influences – or perhaps ‘interferes with’ would be more appropriate term – the UN Tax Committee, which is supposedly independent of the OECD and is the appropriate forum for reflecting the interests of developing countries in particular: as the UN has said, the UN Tax Committee is tasked to “give special attention to developing countries and countries with economies in transition.”

Spencer makes seven key points, summarised below:

• The arm’s length rule generates such complexity that even sophisticated developed countries struggle to implement it. What chance do developing countries have?
• The OECD rules on ‘arm’s length’ pricing rely on finding comparable transactions in the market. But typically, no comparables even exist. Developing countries are powerless here.
• Information on what corporations are up to is hard to find. The OECD should therefore support country-by-country reporting, a core TJN project.
• Alternative approaches such as safe harbours and the profit-split method should be actively considered. These would typically be more appropriate and easier to administer for developing countries than the OECD’s method.
• The UN Tax Committee’s Transfer Pricing Manual does not adequately address the issue of tax havens, which assume critical importance in this area.
• The UN Tax Committee doesn’t seem to be living up to its mandate to look after the interests of developing countries. As Spencer memorably puts it: “by focusing solely on the OECD’s arm’s-length principle, the Subcommittee could be considered to be prolonging the life of an ill patient, rather than trying to analyze and resolve the underlying problem: the disease of transfer mispricing.”
• On the seventh point, it is worth simply quoting Spencer in full:

A significant source of support, for the OECD Transfer Pricing Guidelines and its Arm’s Length Principle comes from people who have a significant vested interest in the continued use of those Guidelines and the Arm’s Length Principle: auditing firms and law firms and economic consulting firms which derive substantial income from advising and consulting about those Guidelines. The more complex those rules are and the more difficult to administer those rules, the more money those firms make.

And employees of governments and international organizations who have developed expertise in the OECD Guidelines and whose careers depend to some significant degree on the OECD Guidelines also have a vested interested in the continued use of the OECD Guidelines and the Arm’s-Length Principle. To quote Martin Sullivan, a distinguished economist: “There is the small but influential army of private-sector pricing consultants– many of them former [U.S.] Treasury officials and U.S. Internal Revenue Service officials–who have built careers around the arm’s-length method.” Therefore, there should be more involvement by disinterested academics and NGOs in the development of the Manual and transfer pricing rules, especially for developing countries.

Strong, and important, words. He also mentioned the OECD’s strange behaviour with respect to international financial transparency and information exchange – something that TJN wrote about in the Financial Times recently, and which we have commented on many times.

Finally, we would add one other thing, highlighting further how significantly the United Nations Tax Committee is overshadowed by the OECD. As a recent communication to TJN put it:

One thing that needs to be done is to modify the membership of the UN committee. The OECD has the usual 10 votes from OECD developed countries and then has additional votes from OECD developing countries (Korea, Mexico, Chile). That gives a voting majority, not even counting eastern European countries. The committee membership is changed every 4 years. OECD grabbed control of the committee some years ago in the transition from a UN group to a committee when the Secretariat lost control of the selection process with the retirement of Hamid Bouab.

A month ago we wrote an article “Developing countries are finding their voice” which noted encouraging signs that developing countries are becoming more active in this arena. As recent UN discussions were summarised, there were strong opinions voiced from developing countries:

“that the OECD should not try to dominate the development of international tax issues: no more Rule Makers forcing Rule Takers to accept what the Rule Makers decide. I was quite surprised by the vigor of their argument.”

We hope and believe that we are seeing the beginning of the emergence of something new and profoundly important. Fragile green shoots.

To solve this problem, economists have tried other measures of well being—for example the Human Development Index (HDI), which the United Nations uses to measure development. The HDI assesses countries on three dimensions—income (measured in GDP), health (measured in life expectancy at birth) and education (measured in mean years of school and expected years of schooling). The HDI has gone far to push our traditional understanding of wealth and development and certainly gives a more comprehensive view of these issues. But the HDI does not solve many of the short comings of GDP. It does not include, for example, environmental goods—like clean air and water, which certainly have economic value—or governance values of human rights or freedom from corruption.

To that end, the OECD has just introduced a new index of national well-being called the Better Life Index, which allows users to visualize and compare key factors that contribute to well-being in member countries. Unlike the HDI, this index does include measures of well-being beyond health and education, as well as: housing, jobs, governance, health, community, safety, life satisfaction, work-life balance, and the environment.

The Better Life Index does not provide a rank, but rather is interactive so that each user may rank countries according to their own priorities. Suppose, for example, I value governance and community over safety and life satisfaction, my rankings could reflect my disequal weights accordingly. It is visual, which might help it appeal to a broader audience. Steve Landefeld, Director of the Bureau of Economic Analysis, has commented that political issues like well-being are “left to those responsible for guiding social movements and legislative policy. Economists’ contributions must continue to focus on what economists can uniquely provide; the objective impacts of such programs.” Which is why the folks at the OECD have kept it interactive.

This is a helpful step in the right direction. Economic well-being is not the same as GDP. GDP does not include all of the aspects of an economy that have value.  I am a fan of this new index, which goes a step further in acknowledging these facts. On the other hand, there will always be criticisms. I have a couple. The governance topic, for example, includes only voter turn-out and transparency in rule-making, but not corruption or other governance issues. The environmental topic only includes air pollution, not water quality, wildlife diversity, or forest resources. On the other hand, to include every measure of economic value would be monumental to the point of infeasible.

This measure will not replace GDP. Even the OECD has admitted much of its work will still focus on GDP. All told, I would say this index is a useful tool for policy analysts and it shines a light on an important issue in international statistics, but it does not represent a significant step forward for researchers looking for a quantitative benchmark of national well-being.

Statement by Norwegian State Secretary Ingrid Fiskaa

Thank you, Mr President

The fourth UN conference on the least developed countries is an important opportunity to renew and revitalise the global partnership for our common good. I would like to thank the Government of Turkey for hosting this conference and for the leadership it has shown in the preparations.

Climate change represents a serious challenge to sustainable development. It is a global challenge that we all have to face, but we know that LDCs are particularly vulnerable in this regard – not least related to food security.

The link between climate change, development and sustainable growth is vital. We need to work hard to sufficiently reduce emissions to limit climate change to an increase of two degrees Celsius. Many of the LDCs have hardly any emissions to reduce, and we as donors can make it attractive to choose a more climate-friendly course of development.

But even if we do manage to meet the two degrees Celsius target, climate change will still have severe consequences, especially for the poorest countries. And women will suffer the most. There is a huge need for climate adaptation funding. Norway’s climate adaptation aid will focus on increased food security and disaster risk reduction.

In the preparations for this conference, the LDCs have stressed the need to focus on economic growth and infrastructure. We fully support that. Access to energy for all, both at household level and for industrial purposes is vital for economic growth in these countries. This is not least important for women. Norway is currently preparing for an international conference on access to energy for all to be held in Oslo in October. We have substantially increased our ODA allocation for renewable energy initiatives, mainly for hydropower, but also for small-scale power plants based on wind and solar power as well as other renewable sources.

However, aid alone will not be sufficient to fund development of renewable energy. It is crucial to find ways of using aid money to stimulate private–public partnerships in the renewable energy sector. Access to energy and private sector development is key to fight poverty and ensure sustainable development. This must be combined with equitable distribution of wealth and opportunities. Decent jobs for both women and men, and predictable tax systems, combined with good public health, education and other social services are also key factors.

Aid has been, and will continue to be for a long time, an important source of revenue for LDCs. The Norwegian Government is committed to allocating at least 1% of GDP to ODA. However, we also need to examine other financial flows in and out of poor countries. Developing countries probably lose at least ten times the amount they receive in aid through illicit financial flows. This money is mainly generated by trade mispricing and tax evasion, but also trafficking, the drugs and arms trade, and corruption. And it usually ends up in a tax haven. These financial flows represent a serious crime against the world’s poor and against the governments trying to promote development in their countries. Well functioning tax systems, dedicated police forces and judiciaries, and international action against tax havens and bank secrecy are important elements in the global fight against poverty and for justice.

Tax systems are crucial not only to secure increased revenues, but also to build citizenship. When you pay tax, you also take on a larger stake in the development of your country.

The size of the poverty challenge also requires us to scale up innovative financing. During the opening week of the 65th General Assembly, several countries, including Norway, agreed to work towards introducing a levy on financial transactions. The levy would be applied on a large scale, and to a wide range of transactions, and could provide stable and substantial financing for development.

International trade is also a potential engine for growth, provided developing countries gain access to markets and the know-how to negotiate the best possible agreements. We know, however, that formal market access is insufficient for many LDCs with weak productive capacities. Norway supports Aid for Trade through a number of multilateral initiatives. There is also need for a more fair international trade system, where countries can find policy space for their own development strategies.

Excellencies,

Emerging economies have changed the picture of international financial flows and international trade since the conference in Brussels. We are pleased to welcome middle-income countries into our common partnership for the LDCs. A number of emerging economies are providing a substantial amount of aid to LDCs. Whether we are discussing aid, debt relief, trade or investments, it is clear that partners in the South are crucial for the future success of our efforts. At the same time, we need to strengthen our global systems for financing development. More than anything we need to broaden the financial basis of the United Nations funds and programmes. The more multilateral, and thus less “Western” they become, the more sustainable they will be. There are many competitors out there. Let us all join together to address global problems with global solutions – through multilateral structures.

Excellencies,

We know that the political and economic empowerment of women is the single most important catalyst for change and development. Therefore, investing in women and girls opportunities is crucial. For example, the UN estimates that we can lift 150 million people out of poverty if women gain better access to land and equipment in the agriculture sector.

In a multilateral context we have made important progress in this area over the last 30 years. However, during the preparation for this conference, we have been very concerned about attempts to take us back in time. In this day and age, any suggestion that the empowerment of women is problematic is simply anachronistic. Development can only happen when a country can tap its full potential, including women.

Finally Mr President,

The Istanbul Programme of Action will reach beyond 2015. It must therefore be our shared responsibility to secure an outcome that will serve as a sound building block for our continuing efforts to fight poverty. We need to build further on the crucial factors for reaching the Millennium Development Goals, namely political will, good governance, protection of human rights, and particular focus on education and health, women and young people. At the same time, we must increase our focus on the structural causes of poverty: climate change, armed conflicts and illicit capital flows out of developing countries.

We look forward to working with our partners on all of these issues, and to securing a successful outcome of the fourth LDC conference.

Thank you.

-

Source: Norwegian Ministry of Foreign Affairs

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

The document puts forth an action agenda for achieving the MDGs by 2015; the agenda includes tackling the issue of illicit financial flows as one of the action items.

So what are those goals?  And how well have we been doing?

The MDGs include specific goals under more general banners (which you can read about here).  The general MDGs are: end poverty and hunger, provide universal education, achieve gender equality, improve child and maternal health, combat HIV/AIDS, create environmental sustainability, and achieve a global partnership.

As you’d expect with such ambitious goals, the results have been mixed, both within regions and within nations. Going into the summit, many researchers have noted that most countries in sub-Saharan Africa are not on-track to achieve even a portion of the MDGs. However, a couple African countries, most notably Ghana and Ethiopia, have had undeniable success.  Ghana is set to become the first country in Africa to halve poverty and hunger before 2015 and Ethiopia has increased its primary school enrollment by 500%.

Other success stories, as identified by the Center for Global Development, were Honduras, Kyrgyz Republic, Vietnam, Laos, Cambodia, Nepal, Burkina Faso, Bolivia, Nicaragua, and Armenia. The countries that have made the least success include the Democratic Republic of the Congo, Burundi, Zimbabwe, Nigeria, Haiti, Liberia, Papua New Guinea, and the Central African Republic.  Most countries fall somewhere in the middle.

Recent events have made matters worse.  The global financial crisis, the Indian tsunami in 2004, the Haitain earthquake and the flooding in Pakistan have all set back progress.  Looking to the future, global climate change is expected to make matters worse.

But other researchers have cautioned that it might be misleading to write off the MDGs as unsuccessful, after all, it is a matter of perspective.  The MDGs were set out as global goals, but many commentators and researchers divide the goals on the country level, as I just did.  This was not the original intention, noted Dr. Liesbet Steer, who led research with the Overseas Development Institute on the progress of the MGDs.  In her research, Steer also observed that many African countries started from “a very low base” which means that if we “look at absolute reduction…huge progress is being made.”

Going into the summit, watch for the potential of innovative financing as a way to pay for the next decade of MDGs, which has a projected budget shortfall of $324-336 billion a year from 2012 to 2017 (for more information on innovative financing and development, see this blog).  Following the report on innovative financing in July, sixty nations, backed by the EU, will present a declaration to implement an international currency transaction tax to the summit. Taxing five cents on every $1,000 exchanged could bring in $30 billion a year, a significant step towards closing the budgetary gap.

It will be interesting to see the results of the summit.  With the global recession, and many countries facing significant government deficits and high unemployment, the political climate towards development financing is mixed at best.  Many politicians, whether right or wrongly, believe the relative suffering of their own citizens should come before the suffering of another’s.  But they will do well to remember—should they remain unswayed by morality—that in today’s world our fates are so interlinked that we cannot afford not to approach development worldwide as though we were all one.

Eurodad Director Núria Molina will chair a panel discussing the links between illicit financial flows and the Millennium Development Goals at the Task Force’s 2010 annual conference in Bergen, Norway, September 28-29. She will be joined by Gail Hurley from the United Nations Development Program.  Registration for the conference is still open until the end of this week by clicking here.

Photo: Andy Mettler / World Economic Forum

BRUSSELS—The High Level Plenary meeting on the Millennium Development Goals (MDGs) will gather in the UN headquarters in New York from 20 to 22 September with a view to assess and accelerate progress towards the achievement of the MDGs.

Prospects for such progress look gloomy since all MDGs are currently off-track.  Heads of State and Government will need to move a step forwards and adopt ambitious commitments in order to meet the 2015 deadline. However, according to sources involved in the negotiation of the summit’s final outcome, this agreement is more likely to be a new compilation of abstract commitments than a solid basis for getting the MDGs back on track, particularly with regard to MDG8 “A global partnership for development”, including taxation and domestic resources mobilisation for development.

The final document is expected to acknowledge the necessity to crack down on tax havens, tax evasion and illicit financial flows, which so negatively impact on developing countries’ capacities to mobilise resources to achieve the MDGs, through implementing  measures to enhance international cooperation on tax matters, transparency and disclosure of financial information and to fight corruption and recover stolen assets.

In doing so, the final declaration would hopefully adopt a holistic approach based on the thesis that mobilising financial resources for development through tackling illicit financial flows would go beyond MDG8 and would decisively contribute to achieving all MDGs.

Regrettably, it is highly probable that the final agreement will not be accompanied by concrete proposals.

At a minimum, for the final declaration to be meaningful in the area of taxation and domestic resources mobilisation for development, it should include the following concrete measures:

• Strengthening the UN Committee of Experts on International Cooperation in Tax Matters by giving it a political mandate as the most inclusive and representative forum to address global tax issues.
• Enhancing tax transparency and tackling tax evasion by calling for new international accounting standards based on the principle of country by country reporting and the disclosure of financial information by firms operating in developing countries. The US recently passed legislation on the extractive industries to this effect. Similarly, The European parliament has repeatedly called for such a standard. The World Bank too has publicly supported such a measure in its recent submission to the International Accounting Standards Board.
• A commitment to work towards the adoption of a multilateral and automatic information exchange agreement on tax matters, a necessary measure for achieving a truly transparent international tax environment, as stated in the Civil Society Agenda for the OECD.

It is time for the Heads of State and Government to move from words to deeds. The 2015 MDGs clock is ticking.