Options for strengthening global tax governance
By Wolfgang Obenland (Global Policy Forum)
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The importance of international—or even better, global—cooperation on tax issues is becoming more and more evident in the light of tax evasion and avoidance scandals during the last few months and years. Countries in the global North and South were shown to offer preferential treatment to foreigners—from Panama to Luxemburg from the Cayman Islands to Hong Kong. Individuals as well as huge transnational corporations are using a fragmented and inconsistently regulated global system of trans-border taxation to evade and/or avoid taxes. The sums lost amount to hundreds of billions annually. Depending on the model of estimation, developing countries are losing more than one trillion US dollars per year in illicit financial flows, the majority of which can be attributed to the abuse of transfer pricing rules. A panel of the UN Economic Commission for Africa chaired by former South African president Thabo Mbeki estimates the losses of Africa alone at approximately 50 billion US dollars per year. The Organisation for Economic Co-operation and Development (OECD) puts global revenue losses from Base Erosion and Profit Shifting at an annual 100 to 240 billion US dollars.
Countries in the global North as well as the South are losing money they urgently need to finance basic social services, or better put, to finance their human rights obligations, find ways out of problematic levels of sovereign debt, and contribute to their international responsibilities in financing the goals, targets, and means of implementation of the 2030 Agenda for Sustainable Development adopted by the members of the United Nations in September 2015.
Unsurprisingly, there have been a whole set of reforms and new initiatives in international cooperation on tax at national, regional, and global levels, building on already existing work by various institutions, but still evading some critical issues.