World leaders met in Addis Ababa, Ethiopia, from 13-16 July to discuss ways to finance the new United Nations development agenda, the Sustainable Development Goals (SDGs). Key aspects addressed at the “Third International Conference on Financing for Development” included the issue of tax evasion and tax avoidance as well as promoting private-sector investment in developing countries.
Achieving the SDGs is expected to cost around USD 4.5 trillion annually over the next 15 years. Current financing arrangements leave a gap of USD 2.5 trillion a year, according to the United Nations Conference on Trade and Development (UNCTAD). The non-governmental organisation Open Society Initiative for West Africa (OSIWA) reckons that West African countries lost more than USD 190 billion between 2002 and 2011, with the lion’s share of this being attributed to international corporations. The NGO Oxfam Deutschland claims that, taking all developing countries together, an annual USD 100 billion is lost through international corporations not paying tax. This is up to 50 per cent more than what the developing countries receive in Official Development Aid (ODA).
In Addis Ababa, the G77 group of developing countries reiterated their demand for a tax body at UN level to counter tax evasion and tax avoidance by multinational corporations. The motion was sharply rejected by the G7 group of industrialised countries, whereupon the G77 threatened to break off negotiations. However, Chief Negotiator Tedros Adhanom Ghebreyesus, Ethiopia’s Foreign Affairs Minister, urged her colleagues to withdraw their threat given the negative impact that a failure of the conference would have had. The participants eventually agreed on providing the already existing UN Committee of Experts on International Cooperation in Tax Matters with more support and having it meet more often.
However, regulations on international tax issues remain the responsibility of the Organisation for Economic Co-operation and Development (OECD) and the G20 group of wealthier countries. “More than half of all countries continue to be excluded from decisions on global tax standards,” criticises Klaus Schilder of Germany’s relief organisation Misereor.
Germany’s Minister of Development Gerd Mülle called on the “developing countries and emerging economies to make a greater effort” to combat corruption and assert human rights. These were the preconditions needed to attract foreign investment and boost economic growth. Germany urged the launch of the “Addis Tax Initiative”, an international effort to support tax authorities in poor countries with the aim of increasing tax revenue for them. To address the issue of technology transfer, a multi-stakeholder forum has been set up at UN level with representatives of industry, the private sector, science and civil society.
Commenting on the conference, Eva Hanfstängl, development finance expert of the German NGO “Brot für die Welt”, said that rather than focusing on combating world-wide absolute poverty, promoting private-sector initiatives was centre-stage. But such initiatives were not automatically conducive to development because they rarely benefited poorer regions or less profit-yielding sectors such as education and health.
Mike Gardner, journalist, Bonn/Germany