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Focus on domestic taxation for SDGs shouldn't sustain ODA laxity
By Naresh Minocha
Feb 26, 2018

Naresh Minocha, a veteran journalist, specializes in governance, polity, macro-economic issues, telecom, energy, chemicals and agriculture. He has been working as Consulting Editor with since 2004. He writes and speaks with authority on any issue he picks up. In-depth research is his passion. In his over 37-years journalistic career, he has worked in different capacities for both Indian and foreign media organizations. He continues to enjoy endless, learning journey that he started during his university days in the seventies. He believes his quest to be a ‘Know-All' is boundless.

THE governments' urge to shore up tax revenues is universal. And this desire gets universal endorsement from multilateral development institutions (MDIs) when it comes to raising domestic resources for eliminating poverty& inequality on the earth.

But when the tax-raising objective gets subsumed into OECD's 15-Action Points Base Erosion and Profit Shifting (BEPS) project& related tax reforms, the world should take a hard look at the means to achieve inclusive development agenda.

Four MDIs have lately been goading developing countries especially the poorest ones to pull their taxation socks to achieve United Nations (UN)-mandated Sustainable Development Goals (SDGs) by 2030.

The four MDIs are the UN, the World Bank, International Monetary Fund and Organisation for Economic Cooperation and Development (OECD).

Is the focus on taxation a smokescreen to implement BEPS project from the standpoint of developed nations that want MNC investments and their tax revenue back home?

Is focus on domestic tax revenue as financier for SDGs a ploy to divert attention from the West's failure to comply with minimum level of official development assistance (ODA) that was globally agreed decades back?

Why the quartet can't hammer out a global agreement on levying global, innovative taxes as a new avenue for funding SDGs?

MDIs should address such concerns by focusing on all factors that directly or indirectly impact developing world's capacity to finance adequately execution of SDGs.

"Taxation has a key role to play in financing the SDGs,” stated the quarteton 16th February at the conclusion of first global conference on taxation & SDGs.

The quartet organized the event under the banner of The Platform for Collaboration on Tax (PCT). Launched in April 2016, PCT is the quartet's joint initiative to enhance cooperation among themselves on global tax issues.

As put by PCT's conference statement, "An era of unprecedented international cooperation on tax is underway with the implementation of Automatic Exchange of Information, the Base Erosion and Profit Shifting project, and the strengthening of the United Nations Committee of Experts on International Cooperation in Tax Matters—all creating new opportunities for the enhanced participation of developing countries in international tax policy discussions and institutions, but also new challenges to fully realizing the benefits of international cooperation on tax".

The issues discussed during the three-day conference at UN headquarters included effective taxation of multinational corporations (MNCs); checking illicit financial flows and prevention of corporate tax avoidance.

Increasing excise duty (sin taxes) on alcohol, tobacco, fossil fuels and sugary beverages to raise funds for SDGs investment and to improve health of citizens was also debated. So was discussed the role taxation plays in either improving or exacerbating equity challenges/wealth distribution.

At the conference, UN Secretary-General, António Guterres stated:"I call upon the international community to establish effective mechanisms to combat tax evasion, money laundering and illicit financial flows, so that developing countries could better mobilize their own resources".

IMF Managing Director Christine Lagarde struck a similar chord.She stated:"Countries themselves need to raise more revenue in an equitable way. And the entire international community needs to eradicate tax evasion and tax avoidance".

Research indicates that at least15 percent of GDP in revenue is necessary to finance the basic services envisaged by SDGs but, in almost 30 of the 75 poorest countries, tax revenues are below this 15 percent threshold.

In June 2014, a report from United Nations Conference on Trade and Development (UNCTAD) estimated annual investment requirement of $3.3 trillion to $4.5 trillion per year for implementation of SGD goals in development countries.

UNCTAD stated "At current levels of investment in SDG-relevant sectors, developing countries face an annual gap of $2.5 trillion”It added: “Bridging such a gap may seem a daunting task, but it is achievable".

The task appears impossible to achieve if we reckon the deficit in financing of system for collection and analysis of data on all aspects relating to SDGs.

As noted by OECD's Development Co-operation Report 2017 with focus on‘Data for Development', the continued lack of basic data, along with weak statistical systems, remains major stumbling blocks to achieving the SDGs. For example, there are no data for about two-thirds of the 232 SDG indicators, and 88 indicators have neither an agreed methodology nor data for measuring them.

The total cost for 144 developing countries to produce data for the SDG indicators is estimated at USD 2.8-3.0 billion per year up to 2030. The existing shortfall in funding statistical system is estimated at 685 million per year in developing countries.

The UN resolved for the roadmap for 17 SDGs during September 2015. This was preceded by an International Conference on Financing for Development held at Addis Ababa in Ethiopia during July 2015.

The Conference resolution, referred to as Addis Ababa Action Agenda (AAAA), incorporated comprehensive taxation reforms for mobilizing resources for funding sustainable development for all human beings.

SDGs can be perceived as hugely expanded version of eight Millennium Development Goals (MDGs).These were laid down in 2000 for attainment in 2015 - an objective that could not be achieved by many developing countries.

The 17 SDGs include: No poverty, zero hunger, good health and well-being, quality education, gender equality, clean water and sanitation, affordable and clean energy, decent work and economic growth, reduced inequality, climate action, sustainable cities and communities and peace & justice strong institutions.

AAAA urges donor/rich countries to increase their ODA to developing countries to 0.7% of their respective gross national income (GNI).

ODA from the 29 OECD Development Assistance Committee (DAC) member countries averaged 0.32% of GNI in 2016, the latest year for which ODA detailed data is available.

OECD data shows that 22 countries' ODA was below 0.7% of their respective GNI. Only six countries- Germany,Denmark, Luxembourg, Norway, Sweden and the United Kingdom met the UN target to keep ODA at or above 0.7% of GNI.

This was first agreed by the donor countries way back in 1970. It has been repeatedly endorsed without any timeline for its achievement.

According to a presentation by Asia-Europe Environment Forum (ENV forum), an affiliate of Asia-Europe Foundation (ASEF), traditional OECD DAC donors need to fulfill their ODA commitments.

"ODA has to be a catalyst to attract other sources of funding to developing countries", stated ENV forum in a presentation aptly captioned ‘Who will pay for the Sustainable Development Goals?'

The presentation, released during October 2016, pointed out that global and innovative taxes could raise USD 460–480 billion revenue annually. Such imposts can be carbon pricing levy, financial transactions duty, currency transaction tax, billionaire tax, solidarity air ticket levies and levy on sport revenues accruing from highly popular tournaments.

Innovative Taxation exclusively for SDGs also found mention in a brief prepared for MDIs' Inter-Agency Task Force on Financing for Development in August 2016.

The report observes: "A more far reaching and ambitious proposal would be to delink the raising of funds from annual budgeting processes or to earmark funds raised from a specific source. Existing examples include the solidarity levy on airline tickets, where resources raised are allocated to aid budgets in France and the Republic of Korea".

The report continues: "Such measures to automatically allocate resources raised by a specific tax, levies, royalties or other to aid are also sometimes discussed under the banner of innovative development finance. Other proposals include a financial transaction tax (10 members of the European Union are currently negotiating to introduce an FTT, and some have announced that they would partially allocate revenue to aid), a global lottery, and an international billionaire's tax".

This underscores the need for MDIs to simultaneously focus on all means to fund SDGs. Without holistic and multi-pronged initiative, SDGs would go the MDGs way.

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