Poor Nations Push for Global Agency to Cut Company Tax Avoidance
Developing nations and advocacy groups at a United Nations conference in Ethiopia are pushing for a new global body to tackle tax avoidance by companies, a move opposed by richer nations.
Responsibility for tax standards should be moved to the UN from the Organization for Economic Co-operation and Development, a group of 34 rich countries, according to a position paper endorsed by 142 civil-society groups. The new agency should be mandated to address issues including corporate-profit shifting, increasing transparency and tax and investment treaties, according to the paper, released in the Ethiopian capital, Addis Ababa, before the four-day conference.
Poor countries lose more cash to tax avoidance than they receive in aid, according to Tove Maria Ryding from the European Network on Debt and Development, a group of European civil society organizations. The network estimates that $190 billion in tax revenue is lost every year because of money hidden in tax havens.
“Our global tax decision-making system is anything but democratic, excluding more than half of the world’s nations,” she said in a July 11 interview in Addis Ababa. “This is not only unfair, it’s also one of the key reasons why multinational corporations can keep dodging taxes.”
Talks on a global tax agency will form part of discussions at the UN Financing for Development conference, attended by global leaders, finance ministers and executives from multilateral lenders such as the International Monetary Fund. The meeting aims to find ways to pay for development goals, such as ending poverty by 2030.
Tax Manipulation
“More than half of the world’s countries have made it clear that they don’t want to leave this conference without seeing this new body established,” Ryding said. “However, the rich countries are insisting that global tax standards should only be set by the OECD.”
Joseph Stiglitz, a Nobel-prize winning economist who sits on the Independent Commission for the Reform of International Corporate Taxation, is pushing for the end to transfer pricing, where multinational companies manipulate tax payments by moving income and expenses between subsidiaries.
Businesses with multiple units should be treated as one entity and their economic activity assessed to decide how much tax they pay and where, Stiglitz said in an interview in Addis Ababa on Sunday. He also called for the introduction of a global minimum tax to end harmful competition between countries.
“It’s not perfect but it’s so much better than the transfer-pricing system that is totally broken,” he said.
High profile corporate tax scandals and the need to boost fiscal revenues in developing countries because of tighter donor budgets mean there is growing momentum for a new tax body, Stiglitz said.
“You can’t solve global tax avoidance by having the club of rich countries get together,” he said.
