Financing Development: Did Addis summit meet expectations?

Activists from different civil society organisation (CSOs) on tax matters have slammed last week’s third International Conference on Financing for Development (FfD) held in the Ethiopian capital Addis Ababa as a failure. The conference brought together high-level politicians, including heads of state and government, ministers of finance, and foreign affairs as well as relevant institutional stakeholders and non-governmental organisations. Deliberations from the four-day gathering climaxed with the passing of a ground breaking agreement reached by 193 UN member states providing a foundation for implementing the global sustainable development agenda that world leaders are expected to adopt in September. Currently, the United Nations is in advanced stages of a process aimed at defining a post-2015 development agenda which will be launched at an upcoming summit in New York, set for September 2015, the target date for countries to have realised the MDGs targets. The post-2015 sustainable development agenda is about what will happen after the deadline for the Millennium Development Goals (MDGs) due in September. Civil society organisations are part of the various stakeholders involved in the process of arriving at post-2015 development agenda, whose inputs have so far agreed on a set of Sustainable Development Goals (SDGs). The SDGs include pledges to end hunger, AIDS, malaria, and ensure that all children complete secondary school. Last week’s conference in Addis was an advance fundraiser of sorts where the UN was drumming up support from its developed and wealthier members to commit more of their budgets to financing these post-2015 SDGs in poorer countries, especially in Sub-Saharan Africa. “We need trillions, not billions of dollars to accomplish these goals, and the money will come from many sources: developing countries, private sector investment, donors, and international financial institutions,” World Bank president Kim Yong Kim told the summit. In Addis, World Bank and other multilateral development institutions, including African Development Bank, hinted they would mobilise more than $400 billion to finance SDGs until 2018. Estimates suggest that development financing currently receives up to $135 billion annually in Official Development Aid (ODA) which benefits mainly poor and low developed countries. The Addis conference called on developed nations – the main sources of the aid – to give more to this cause. Pressing needs such as infrastructure, a key area that can help countries anchor their development reportedly require a whopping $1.5 trillion to support that agenda, annually, for both emerging and developing nations. Taxation vs aid But a school of thought has emerged, sponsored by civil society organisations on tax and opposed to the tendency of heavily depending on aid and grants from richer countries to fund the development agenda of poorer countries. While in Addis, these tax CSOs aggressively tried to push through a proposal that would have led to the establishment of an intergovernmental UN body on tax matters whose purpose would be to empower poorer countries to better mobilise domestic taxes to fund their own development. The argument of the tax CSOs is that poor countries need to get better at raising tax, and multinational firms need to get better at paying it; this would raise more domestic resources with which to finance their own development without overdependence on aid. But the proposal was shot down, leaving the Organisation for Economic Cooperation and Development (OECD) as the only intergovernmental body that adopts global standards on tax matters. As a consolation, the CSOs were promised that a few changes would be introduced to the existing UN expert committee on the matter, to take in their concerns. The CSOs issued a joint statement after the failed negotiations on July 15, under the title; Failure in Addis Ababa: Trouble ahead for development. In the statement, they slammed the UN for turning down a proposal that would have literally helped developing countries to own their development financing destiny in the long run. “It is a tragic day for all of us, because a global tax system where half of the world’s countries are excluded from decision-making will never be effective,” said Alvin Mosioma, the executive director of Tax Justice Network Africa. “As long as our governments keep failing to cooperate on tax matters, multinational corporations will be able to dodge taxes; in the end, the Addis Ababa failure will impact us all.” A recent panel commissioned by the African Union and chaired by former South African President Thabo Mbeki found that Africa loses a minimum of $50 billion annually in Illicit Financial Flows (IFF) mainly in form of tax evasion practices by multilateral corporations. ‘Stop the bleeding’ Last month, civil society organisations launched a campaign dubbed ‘Stop the bleeding,’ aimed at capturing the attention of influential international organisations such as UN to intervene with policies that would put an end to IFF from Africa. “This came down to power. The powerful simply didn’t want to cede one ounce of their authority to the rest of the world, and they succeeded in preserving their control,” Mosioma added. Pooja Rangaprasad, of the Financial Transparency Coalition, said the failure of the new proposal helped rich countries to maintain a status-quo where money goes from south to north, but the rules follow the opposite route. “Developing countries have fought hard for this body but today’s agreement will do nothing but keep them in a patronising system where a group of 34 countries hold all of the power,” Rangaprasad said. Jorge Coranado, the president of Latin American Network on Debt Development and Rights, also voiced his dismay pointing out that rich countries had connived with their multinational corporations to oppose reforms in the global tax policies. “This is a dangerous failure of multilateralism and a triumph for a few. This will simply continue to allow the powerful to dictate taxation rules for the entire globe,” said Coranado. Tove Maria Ryding, with the European Network on Debt and Development (Eurodad), also expressed her anger saying it was a painful moment to see the developed countries celebrating the fact that nothing will change about global taxation rules. “Tahis sets a terrible precedent for the post-2015 and climate negotiations. This was never a negotiation in good faith, and the developed countries have consistently refused to even discuss the issues on the table,” said Ryding. On average, developing countries collect just 13 per cent of their GDP in tax compared with 34 per cent in the developed countries because of weak tax administration and huge revenue losses through tax evasion practices by multinationals. Among the targets reportedly floated in Addis was how low income countries can be helped to increase their tax collection to at least 20 per cent of their GDP on account that it would help them to invest in education, health and infrastructure, hence promoting growth. That’s basically what the CSOs were pushing for in their proposal – the establishment of an intergovernmental UN body on tax matters. However, the refusal by the Addis conference to support the proposal is likely to cultivate some suspicion as to whether there is political will in the international community to empower poor countries to a position where they can fund their post-2015 sustainable development goals. editorial@newtimes.co.rw

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Financing Development: Did Addis summit meet expectations?