My Message to World Leaders: To Finance Development You Must Tackle Tax

05/05/2015 01:11 pm ET | Updated May 05, 2016

Last month Oxfam's International Executive Director Winnie Byanyima was in Washington for the World Bank/IMF Spring Meetings, and then in New York for one of the drafting sessions ahead of the Financing for Development (FFD) Conference in Addis Ababa taking place in July.


In Washington and New York last month I had a clear mission: Firstly, I wanted to raise the profile of the forthcoming Financing for Development (FfD) conference taking place in Addis Ababa this July. We need the highest possible political attendance here if we hope to make progress towards the Sustainable Development Goals, or a deal on climate change. There are major summits on these issues this year, and the key question for both is: "Who will pay?"

Secondly, I wanted to stress the importance of tackling tax dodging and harmful tax competition in the context of this financing debate. Just last month a new report from UNCTAD estimated that developing countries lose hundreds of billions of dollars, because of tax dodging by multinational corporations. If these companies can run rings around our tax systems; If the privileged few can stash their earnings in tax havens; if countries continue to compete to offer the lowest tax rates and deals, in a sometimes misguided bid to attract investment; then poor country governments will never get the chance to raise the money they need to tackle poverty and inequality.

To address this, poor countries need a seat at the table and an equal say when global tax rules are being discussed. This is why we are calling for the Addis Ababa Financing for Development Conference to ensure that one of its official roundtables is on international tax cooperation. This would be a space where all countries could address the issue as equals. Ultimately, developing countries and groups like Oxfam want to see a new intergovernmental body on cooperation in tax matters under the auspices of the United Nations. Such a round table at the FfD could be an important step towards agreeing this.

So how did I do in my mission?

There were some encouraging signs. I was not the only one trying to increase the political profile of the Financing for Development Conference. Jim Kim of the World Bank and Christine Lagarde of the IMF both raised the importance of FFD in official interventions, made it central to a meeting of ministers discussing development, and organised several high level events on it (one of which featured my colleague Ray Offenheiser, President of Oxfam America).

Significantly The UN Secretary General, as well as the President of the UN General Assembly came to the Spring Meetings to lobby finance ministers for this very purpose. I was able to thank them for this when I later met them both in New York. They told me they see a growing momentum towards Addis but there remains a big risk that it will be the poorer countries that send their finance ministers, whilst the G7 send only junior ministers from development cooperation departments. This would betray a real double standard: The big guns will come to the Spring Meetings to talk about their own financial stability, but don't bother when it comes to the financial survival of some of the world's poorest economies. This is both unfair and unwise thinking, as ultimately the fates and fortunes of poorer countries may affect the long-term prospects of richer ones.

On tax, the picture is equally mixed. One highlight was Christine Lagarde calling for action on tax dodging at the Earth Day concert, to 250,000 people. I myself was honoured to facilitate an informal meeting between ministers and representatives from a range of governments, who all agree that tax must be a real priority for Addis. I saw that Scandinavian countries are leading the charge on this amongst rich donor countries. Brazil also wants to see action here, as do many developing countries, particularly in Africa where last year's African Union report by the Mbeki high level panel illustrated the impact of illicit financial flows. Developing countries are rightly demanding that they have the chance to influence the global tax rules that allow vast sums of money to be squirreled offshore.

But for the EU, US and others there is strong resistance to the idea of a truly global conversation on tax. They point to an ongoing OECD-led process to tackle tax dodging, but this is a process led by rich countries and focused on rich country issues. It is not addressing the specific needs of poor nations that produce so much of the raw materials but see so little of the proceeds that companies make from them. (As the President of the UN General Assembly said to me, the UK may be rightly concerned about getting the tax it is due from Starbucks, but the UK is a country in which no single coffee tree grows.)

So as I return I have cause for optimism, but many reasons for concern. I can see the political profile of the Financing for Development summit getting bigger, but not big enough. We have to use every moment between now and the summit in July to convince the world's leading economies to step up to the plate in Addis. In particular the meeting of the G7 in June is a chance to remind these countries of their responsibilities - to meet their long-standing development financing commitments - and to step up to the challenge of future financing.

On the question of what Addis will actually deliver, I can also see things moving in the right direction. Many donor countries like the sound of developing countries raising their own money. Everyone agrees that such "domestic resource mobilisation" must be a big part of the picture. But then these big economies need to realise that their tax rules, their tax treaties, and the actions of their companies are the biggest threat to this happening. Addis is a unique opportunity for poor countries to make this case and demand the right to keep the taxes they are owed. The least that G7 countries can do is support the call for tax to be placed firmly on the Financing for Development agenda, and allow developing countries to be heard.

Photo: Each spring, thousands of government officials, journalists, civil society organizations, and participants from the academia and private sectors, gather in Washington DC for the Spring Meetings of the World Bank Group and the International Monetary Fund. This year's Spring Meetings events took place in Washington, DC, April 17-19, 2015. Credit: Simone D. McCourtie/World Bank (CC BY-NC-ND 2.0)