Latest news In Addis Ababa: Expanding the debate on tax reform

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On the eve of the United Nations Financing for Development summit, an all-star lineup of speakers took to the stage in Addis Ababa, Ethiopia on Sunday 12 July 2015, to debate needed elements for global tax reform.

In an event hosted by the Friedrich Ebert Stiftung [Foundation], members of the Independent Commission for the Reform of International Corporate Taxation and civil society exchanged views with Jane McCormick, KPMG Head of Tax for Europe, Middle East Africa and Pascal Saint-Amans, OECD Centre for Tax Policy and Administration.

McCormick acknowledged that “the world has changed and we need a new set of tax rules.”

Saint-Amans said “Do we need reform after BEPS? The answer is yes.”

Nobel prize winning economist Joseph Stiglitz noted that the work of the OECD on Base Erosion and Profit Shifting (BEPS) “is a move in the right direction, but we should be clear that it’s not enough. The transfer price system, the old system, might have worked in the world before globalization. But it is not ‘fit for purpose’ in the world of globalization… the OECD is trying to fix a system that cannot be fixed.”

Stiglitz and ICRICT chair José Antonio Ocampo both emphasized that the most viable alternative to the OECD will be to establish an inclusive intergovernmental tax body under the auspices of the United Nations. This is one of the key findings of the ICRICT report, and the priority demand of tax justice activists in the FfD negotiations.

Stiglitz said, “When it comes to taxes, the OECD is a club of the advanced countries. So the basic governing structure is flawed. So we ought to strengthen, not sideline the UN. The UN tax office is not well known – let’s elevate it, make it the voice of the global community.”

Winnie Byanyima, Executive Director of Oxfam, added, “We are here today at a Financing for Development summit, and the question to ask is: Will this BEPS process work to finance the development of poorest countries? Does base erosion and profit shifting matter for developing countries?  Of course it does, and in fact the recent report by the IMF indicates that developing countries are three times more vulnerable to base erosion and profit shifting activities of multinational companies than OECD countries.

“However, for many developing countries, base erosion and profit shifting is just one part of the story.  For instance, the issue of the race to the bottom on tax, where we see countries competing to offer more and more generous tax incentives to big companies and to lower their corporate tax rates ever further.  The BEPS process has touched on a tiny part of this problem.

“According to UNCTAD, developing countries as a whole lose around $100bn US Dollars in tax revenues each year as a result of corporate tax avoidance schemes that route investments through tax havens.”

ICRICT is a group of leaders from around the world who believe that, at this moment in history, there is both an urgent need and an unprecedented opportunity to bring about significant reform of the international corporate taxation system. The Commission, supported by FES, the Global Alliance for Tax Justice and partners, aims to promote the reform debate through a wider and more inclusive discussion of international tax rules than is possible through any other existing forum; to consider reforms from a perspective of global public interest rather than national advantage; and to seek fair, effective and sustainable tax solutions for development. The Commission is chaired by José Antonio Ocampo and includes Eva Joly, Rev. Suzanne Matale, Manuel Montes, Léonce Ndikumana, Ifueko Omoigui Okauru, Govinda Rao, Magdalena Sepúlveda, and Joseph Stiglitz.

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