Developing countries should have place at tax table

The United Nations (UN) Financing for Development conference in Addis Ababa, which concluded yesterday, was supposed to plot a path for developing countries to generate the money needed for their own development. It ended with adoption of the Addis Ababa Action Agenda, but drew sharp criticism from civil society and a muted response from many developing countries.

The agreement contains some positive elements – on the role of technology, some good text on gender, on inequality, but ultimately the Addis conference failed to find answers to the key issues of global economic governance that prevent poor countries from developing.

Perhaps more significantly, it also raised serious concerns around rich countries’ commitment to multilateralism and the United Nations.

For all of its weaknesses, the UN’s Financing for Development conference is the only truly global forum at which developing countries participate on an equal footing with rich countries, and where global systemic issues can be debated.

The failure, therefore, to secure agreement on key issues such as establishing a global sovereign debt resolution mechanism, and on the governance of international tax, exposes the perennial challenge of achieving progress on issues that require unprecedented and deep levels of international co-operation.

The stand-off in Addis between the G77 and OECD countries over the establishment of an intergovernmental body on tax under the auspices of the UN – which was the negotiations most contested issue – embodies this challenge.

The G77 group, which includes the poorest countries in the world, as well as the emerging powers of Brazil, India, South Africa and China, made the establishment of an intergovernmental tax body a priority. For the poorest countries of this group, having a seat at the decision-making table, apart from being more democratic, would allow them to influence the rules that could close the loopholes that enable multinational tax dodging.

But this has been absolutely opposed by OECD countries – including Ireland – committed to ensuring that the rich-country- dominated OECD continues making the rules for everyone else.

The compromise reached in Addis on this issue, which involved very minor changes to the composition of an underresourced and impotent UN Tax Committee, drew sharp criticism from civil society amid accusations of developing countries having been aggressively lobbied by OECD members to back down.

Compromise

Regardless of the compromise, the issue of equal participation of all states in setting global tax rules is something that will continue to simmer into the future.

Many experienced observers and participants in UN negotiations viewed Addis as further evidence of a growing trend of rich countries trying to sideline the UN, removing and neutralising its role as the primary normative and standard-setting body.

Manuel Montes of the South Centre, and former head of policy analysis at UN Department of Economic and Social Affairs (UNDESA), pointed to the intense resistance to an international tax body from OECD countries as evidence of increasing efforts to push the UN further from the centre of decision-making.

“Rich countries find the UN inconvenient. They would rather negotiate between themselves, and want their operations with the rest of the world to be based on their magnanimity, rather than based on an obligation to the other party, which is what it would be under the UN,” Montes said .

Helen Clark, administrator of the UN Development Programme (UNDP), also acknowledged that multilateralism is under pressure and called on developed countries to “allow the give and take between states that will enable these great UN institutions to work”.

Challenge

It is perhaps this growing fracture that may represent the biggest challenge to the international community in finding solutions to questions of global economic governance that prevent developing country progress. Without global institutions in which all countries participate on an equal footing, countries on the margins – which inevitably are poor countries of the global south – do not have the policy space in which to pursue their particular developmental needs. They simply do not have a voice.

Meanwhile, focus now turns to the two other international conferences of 2015 – the UN sustainable development goals meeting in New York in September, and the climate conference in Paris in December.

That the international community managed to agree a document in Addis, however imperfect, does at least generate momentum in support of successful outcomes at these conferences. But the evidence from Addis also suggests that the international community’s ability to respond to an increasingly multipolar world, and to find developing countries’ place within that, will again be profoundly tested.

Sorley McCaughey is head of advocacy and policy for Christian Aid Ireland