Winnie Byanyima, Oxfam International’s executive director, wants heads of government to attend what the organisation is calling a World Tax Summit to ensure that tax issues are discussed thoroughly before any decisions are made on the next set of targets for global development.
The development agency says the leaders’ meeting should take place at the same time as the UN Financing for Development conference in Ethiopia in July, which will discuss the UN’s development agenda post-2015.
“Making tax fair is one of the issues most in need of global action if we’re to tackle the problem of inequality. Oxfam is calling for an unprecedented event, a World Tax Summit, where all countries come together to make tax fair and help close the gap between rich and poor,” Byanyima wrote in a blog post on the organisation’s website.
“When corporations pay less tax, their profits increase, and these profits end up overwhelmingly in the pockets of the top 10% and 1% of richest people,” she added. “At the same time, when companies don’t pay their taxes, it is left to us, citizens and small businesses to fill the gaps,”
Oxfam is reflecting a view that other non-governmental organisations (NGO) also hold, that the OECD-led BEPS project will not meet the needs of developing countries as they try to raise enough tax revenue to fund their public services sufficiently.
The idea that developing countries need more help if they are going to improve their ability to collect taxes won support from one of Africa's leading tax officials.
"We need to re write our tax laws and not just Africa but perhaps in many parts of the world to bring justice to taxation," Rished Bade, commissioner general of the Tanzania Revenue Authority told International Tax Review, so that tax is paid where it deserve to be paid. We are recipient of aid simply because we do not collect our due taxes."
Davos debate
Byanyima expanded on her ideas about the relationship between taxation and inequality during a panel debate with policymakers, academics and businessmen, entitled ‘A Richer World, but for Whom?’, held by BBC World, the broadcaster, at the World Economic Forum (WEF) in Davos last week. The Oxfam chief was one of the Forum’s co-chairs this year.
She pointed out that many of the countries where the poorest people in the world live are also commodity exporters and used a hotly-disputed statistic to explain the need to reform the international tax system for the benefit of these jurisdictions: “We know that $100 billion is lost to these countries every year through tax dodging and unhealthy tax competition. Unless we fix the global tax rules so that these countries can collect what is due to them, they’re not going to be able to lift their people out of poverty.”
IMF role
Christine Lagarde, the IMF’s managing director, another panellist, explained how the Fund contributes to tax policy [G4] and administration in these locations:
“We provide developing countries with technical assistance to reform their tax regimes, to improve their collection of revenue, to be more transparent about the relationships they have with the purchasers of those commodities, because there is leakage, there is base erosion, there is profit optimisation going on, that is often detrimental to the low income countries providing those commodities. But I would agree with Professor Shiller [of Yale University and also on the panel]. It’s complicated. It has to be done, it has to be improved, but there are no black and white solutions. It has to be really done properly.”
Business view
Klaus Kleinfeld, chief executive officer of Alcoa, the US multinational commodity producer, said investment decisions are not only about tax.
“In many of the businesses in which we invest, we stay there for the next 100 years,” he said. “I mean, we make decisions that impact communities over the very long term. Tax policy is usually very, very volatile. If I make a decision and base it purely on tax policy, I would not be doing a good job.”
However, he was quickly contradicted by the other business figure on the panel, Sir Martin Sorrell, CEO of WPP, the advertising and marketing communications multinational, who also made the case for low rates.
“We have to be honest, tax policy does influence investment decisions very, very significantly, so, to Winnie’s point, you have to have coordinated policy. It can’t be a race to the bottom. I mean, for example, one of the reasons the UK economy has been so effective and efficient, and that George [Osborne, the chancellor of the exchequer in the UK] has done such a good job as CFO of the UK economy, is because the tax rate is internationally highly competitive.”
Sir Martin had been reminded earlier in the discussion by Evan Davis, the host, that he had moved his company’s tax residency to Ireland from the UK in 2008 because of his unhappiness with reform of the controlled foreign company rules. The company returned in 2013.
The BBC debate brought together two of the biggest themes in global public policy at the moment: taxation and inequality. Oxfam is sure to pursue the relationship between both. The organisation also joined with similar groups such as ActionAid this week to launch a campaign to put pressure on the new UK government after the general election on May 7 to introduce a Tax Dodging Bill within the first 100 days of it coming to power.
