India decries lack of progress on global cooperation on taxation

Calling for making the international financial system more democratic and responsive to developing countries, India has decried the lack of progress on international cooperation on taxation.

Not creating an inter-governmental body for cooperation in taxation "is a historic missed opportunity", Minister for State for Finance Jayant Sinha told the UN International Conference on Financing Development in Addis Ababa on Wednesday.

His criticism was levelled at the failure to upgrade the UN Committee of Experts on International Cooperation on Tax Matters into an inter-governmental body.

"If this is truly a universal agenda, then all of us must have an equal seat at the table to legislate on global issues," he said.

"In today's interconnected world, tax policy is a global public good, with ramifications far beyond national borders," Sinha added.

"We are deeply disappointed, however, that the spirit of multilateralism and universality did not go far enough when it came to global discussions on key issues like taxation."

Declaring that "our ultimate aim must be a world in which developing countries can generate the resources they need themselves", Sinha said: "We cannot expect countries to generate more tax revenues while stopping short of reforming international cooperation on tax matters."

A key taxation issue that affects developing countries is how multinational companies' profits from their operations their are taxed and what should be these nations' fair share.

The UN Conference on Trade and Development (UNCTAD) has estimated that developing countries lose development financing worth between $250 billion and $300 billion each year due to lost tax revenues and financial transactions involving multinational's profits. These amounts are several times the the estimated development aid of $135 billion that the developing countries need each year.

The Addis Ababa conference mapped out a plan for financing the Sustainable Development Goals (SDG), an ambitious agenda for eradicating poverty, that the summit of world leaders is expected to adopt at the UN in September.

The conference adopted an agreement, called the Addis Ababa Action Agenda, to fund the SDG, which will replace the Millennium Development Goals that were adopted in 2000 and expire this year.

UN Secretary-General Ban Ki-Moon hailed the financing programme as a "major step forward in building a world of prosperity and dignity for all, saying "It revitalizes the global partnership for development."

Critical of some developed nations' environment agenda, Sinha said: "Increased public support to climate change must be new, predictable and additional and not at the cost of assistance to the poorest developing countries and to social sectors like health and education."

For this he said, "Our actions must be balanced across the economic, social and environmental dimensions, not exclusively focused on one of them."

"Developing countries must have the requisite policy space to pursue their development objectives even as developed countries take the visible lead in addressing climate change and environmental concerns," he said.

Sinha held out India's development model of combining liberal democracy with an open economy as "a beacon of hope for other poor countries".

This development model has made India "one of the fastest growing economies in the world", he said.

"The combination of a large market-driven economy with enhanced investments in public goods such as education, health and basic infrastructure largely through domestic resources, has led to a stable and sustainable growth trajectory. It has helped India reduce mass poverty, malnutrition, reduce illiteracy and empower women."

(Arul Louis can be contacted at arul.l@ians.in)