Increased pressure for Global Tax Body

Global Tax Body

At the 71st UN General Assembly Guillaume Long, Ecuador’s Minister for Foreign Affairs and Human Mobility, proposed the creation of a global tax body. This proposed UN body would consist of member states and concern itself with international tax issues, like clamping down on tax evading multinationals, shutting down tax havens and exposing the corrupt elite who are hiding their money overseas to avoid paying taxes.

But before you get too excited, the same proposal was blocked at a UN meeting to discuss finance for development in Addis Ababa last year. In the meantime there have been some new developments, like the Panama Papers and the European Commission’s decisions to fine companies like Starbucks and Apple for illegal state aid, which might persuade some politicians to listen to a demand for justice by their constituency. But whether these developments will be sufficient reason to sway enough votes in favour of this proposal remains to be seen.

The IMF estimates that tax dodging costs developing countries more than $200 billion a year, which is much more than the global total aid budget. And according to Oxfam wealthy individuals hold an estimated $7.6 trillion offshore, which could amount to $190 billion annually if that wealth were to be taxed. So if multinationals and the rich elite would be required to pay their fair share, these developing countries would be able to improve the living conditions for their citizens much faster, which would in turn decrease their reliance on foreign aid. In the end, everyone would benefit (except for those who are now abusing the loopholes of course).

Better international tax regulation would also help end the ‘race to the bottom’, which is the competition between many developing countries to attract multinationals and other large investors by offering lower tax rates, tax breaks and greater secrecy. These practices economically cripple entire regions and promote corruption and need to be stopped as soon as possible.

Under the current situation, the OECD is in charge of global tax rules. This is an organization which consists of 30 ‘rich countries’, but is also in charge of dictating the rules to developing countries. This of course does not make it hard to understand why these countries, most notably some European nations, were so vehemently against the proposal in Addis Ababa last year.

Long’s proposal to create a global tax body can certainly count on the full support of The Group of 77, which represents more than 130 developing countries. Only time will tell if they can find the support they need in the United Nations as a whole.