Four tax-related initiatives launched in 2015 have built capacity, strengthened and expanded governance structures and normative tools in order to advance the implementation of the 2030 Agenda.
The work of ECOSOC on tax matters is also contributing to advancing progress on target 17.1.
The 2030 Agenda for Sustainable Development marks a shift in international development, moving beyond a donor-recipient approach and emphasizing each country’s primary responsibility for its own development. The Addis Ababa Action Agenda (AAAA), which provides the framework for the means of implementation (MOI) of the Sustainable Development Goals’ (SDGs), emphasizes the importance of domestic resource mobilization in this regard. Within this context, taxation plays a central role.
Taxes provide domestic revenue that can be used for delivering public services such as health, education and social protection. Domestic resource mobilization is also a critical component of SDG 17 (partnerships for the goals), which, together with MOI targets under each SDG, addresses the MOI for all the SDGs. SDG target 17.1 calls to “strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection.”
Several major global initiatives on tax have been created since the adoption of the AAAA, in support of target 17.1. These initiatives include:
- The Addis Tax Initiative, primarily geared towards enhancing technical cooperation on domestic resource mobilization;
- Tax Inspectors Without Borders, focused on in-country support for tax audit capacities;
- Base Erosion and Profit Shifting (BEPS), created to harmonize and strengthen international normative tools on tax cooperation; and
- The Platform for Collaboration on Tax, aimed at increasing coordination among the UN, the World Bank, the International Monetary Fund (IMF), and the Organisation for Economic Co-operation and Development (OECD).
This policy brief examines some of the latest developments in these four initiatives, as well as deliberations in the Economic and Social Council (ECOSOC). The brief provides an overview of the existing mechanisms and tools that countries currently have at their disposal to enhance their domestic resource mobilization efforts.
Addis Tax Initiative (ATI)
The ATI was launched at the Third International Conference on Financing for Development (FfD3), in Addis Ababa, Ethiopia, in 2015. ATI brings together more than 40 countries and international organizations in a global effort to increase domestic resource mobilization and improve the transparency, fairness, effectiveness, and efficiency of tax systems, with the broader aim of supporting countries in achieving the SDGs.
Since the ATI’s creation, development partners have committed to collectively double technical co-operation in the area of DRR by 2020. In 2016, Georgia, Namibia, Paraguay, Rwanda, and Slovakia joined ATI, bringing the total number of members to 40. The Asian Development Bank (ADB) and the Center of Excellence in Finance joined as supporting organizations. The Group of 7 (G7) leaders and Group of 20 (G20) Finance Ministers released declarations of support for ATI.
From 14-16 June 2017, ATI and the International Tax Compact (ITC) organized the ‘Tax and Development Conference’ in Berlin, Germany. The Conference brought together 130 representatives from 40 countries and 35 organizations, to discuss ways to advance the three ATI commitments: doubling support to domestic resource mobilization in partner countries; stepping up domestic resource mobilization; and ensuring policy coherence for development.
Tax Inspectors Without Borders (TIWB)
The OECD and the UN Development Programme (UNDP) launched TIWB in 2015, also during FfD3. TIWB aims to address widespread tax avoidance by multinational enterprises in developing countries through enhancing those countries’ ability to bolster domestic revenue collection by strengthening tax audit capacities, with the broader aim of supporting the SDGs. The programme deploys tax experts to countries that request assistance with ongoing audits of multinational companies. The projects focus on revenue recovery and improving local audit capacity, while promoting the need for tax compliance.
Since the TIWB launch, the pilot tax projects have reported over US$278 million in additional tax revenues in countries in Africa, Asia and Latin America. Projects are currently underway in 22 countries: Botswana; Cambodia; Costa Rica; Egypt; Ethiopia; Georgia; Ghana; Jamaica; Kenya; Lesotho; Liberia; Malawi; Nigeria; Peru; Senegal; Sri Lanka; Uganda; Viet Nam; Zambia; and Zimbabwe. TIWB projects are supported by a range of organizations, including revenue authorities in the Netherlands, Spain and the UK, the African Tax Administration Forum and the Paris-based TIWB Secretariat.
According to the TIWB first annual report 2016/2017, in 2016 the Initiative established a Governing Board and the Secretariat expanded and developed a multi-lingual website. To deliver on TIWB’s target of 100 deployments by 2020, UNDP began to strengthen the links with its country offices and secure financial resources for TIWB programmes. Two of the TIWB priorities are to secure more formal partnerships with regional tax organizations and to continue building South-South programmes – the first South-South TIWB programme was launched in December 2016 between Kenya and Botswana.
Base Erosion and Profit Shifting project (BEPS)
In November 2015, the G20 leaders committed to implementing the BEPS Action Plan, which aims to close gaps in tax regulations that facilitate the disappearance of corporate profits or that enable corporations to shift to low- or no-tax environments. At the 2015 Leaders’ Summit in Antalya, Turkey, G20 leaders also requested the OECD to monitor progress toward a transparent tax system and to develop an inclusive framework for addressing tax avoidance.
The BEPS Inclusive Framework brings together 100 countries and jurisdictions to collaborate on the implementation of the OECD/ G20 BEPS Package. The Package comprises measures that countries committed to implement with the aim of ending double non-taxation and ensuring that income is taxed at least one time but not more than once. The package provides ‘15 Actions‘ that equip governments with the domestic and international instruments needed to tackle BEPS.
During the first two meetings of the BEPS Inclusive Framework, which took place from 30 June-1 July 2016, in Kyoto, Japan, and from 26-27 January 2017, in Paris, France, members took several decisions to tackle BEPS. On governance, the Framework established a Steering Group at Committee on Fiscal Affairs (CFA) level. The Steering Group reflects a geographical balance as well as a balance between types of economies, and supports the implementation of the BEPS measures. The Steering Group has now 94 members. The 2016 Kyoto meeting also mandated the development of the monitoring and review processes on the implementation of the four minimum standards: compulsory spontaneous exchange of information on tax rulings (Action 5); preventing the granting of treaty benefits in inappropriate circumstances (Action 6); country by country reporting (Action 13); and making dispute resolution mechanisms more effective (Action 14). When countries become members of the BEPS Inclusive Framework, they commit to implementing these minimum standards and to participating in the peer reviews on them, for which the OECD Secretariat provides guidance.
A third meeting of the BEPS Inclusive Framework took place from 21-22 June 2017, in Noordvijk, the Netherlands, and approved the first BEPS monitoring report, which was submitted to the G20 Leaders for the 2017 G20 summit in Hamburg, Germany.
Also during the meeting in the Netherlands, Belize, the Cayman Islands, Colombia, Haiti, Pakistan, Singapore, and the Turks and Caicos Islands signed the Multilateral Competent Authority Agreement for Country-by-Country Reporting (CbC MCAA), bringing the total number of signatories to 64. The CbC MCAA is a mechanism that allows signatories to bilaterally and automatically exchange Country-by-Country Reports with each other (Action 13), enabling tax administrations to obtain a better understanding of how multinational enterprises (MNEs) structure their operations. Such reporting is expected to enhance tax transparency and contribute to tackling illicit financial flows (IFFs), which are a major barrier to development and the SDGs.
In July 2017, OECD published the updated ‘Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations,’ the ‘Inclusive Framework on BEPS: Progress Report,’ and the ‘Report from OECD Secretary-General Angel Gurría to G20 Leaders.’ The OECD Secretary-General’s Report provides the latest updates in key areas of OECD-G20 tax work, including on movement towards automatic exchange of information between tax authorities and implementation of measures to address tax avoidance by multinationals. The Report notes progress in international collaboration on tax, particularly through the ongoing movement towards greater transparency facilitated by the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes. The Forum has 142 members and manages the worldwide implementation of the OECD Common Reporting Standard and the first automatic exchanges of financial account information (AEOI), which will take place in September 2017. According to the report, through the Global Forum: 2,000 bilateral exchange relationships have been established for AEOI; 500,000 people have disclosed offshore assets; and €85 billion in additional tax revenue were identified as a result of voluntary compliance mechanisms and offshore investigations.
Platform for Collaboration on Tax
The Platform for Collaboration on Tax was launched in April 2016 as a joint effort by the IMF, the OECD, the UN, and the World Bank. The Platform aims to intensify cooperation among these organizations on tax issues through: formalizing regular discussions on the design and implementation of standards for international tax matters; strengthening their ability to provide capacity-building support to developing countries; and supporting them to deliver jointly-developed guidance.
The Platform is tasked to, inter alia, deliver a number of publications designed to help developing countries implement the measures developed under BEPS, among other international tax issues. A first publication on tax incentives was launched in November 2015, followed by a second one on capacity-building, published in July 2016. In June 2017, the Platform released a toolkit that provides guidance to developing countries on better protecting their tax bases.
UN Economic and Social Council (ECOSOC)
The work of ECOSOC on tax matters is also contributing to advancing progress on target 17.1. In October 2016, ECOSOC adopted a resolution on tax matters in which it emphasized that the UN Committee of Experts on International Cooperation in Tax Matters should enhance collaboration with other organizations working in international tax cooperation, including the IMF, the World Bank and the OECD, as well as regional and sub-regional bodies. It also stressed the need for adequate funding for the Committee’s subsidiary bodies.
The 14th session of the Committee took place from 3-6 April 2017. During the session, ECOSOC published the updated edition of the UN ‘Practical Manual on Transfer Pricing for Developing Countries.’ The 15th session of the Committee of Experts on International Cooperation in Tax Matters will convene from 17-20 October 2017, in Geneva, Switzerland.
The UN Secretary-General is invited to seek additional nominations from governments of developing countries for the UN Committee of Experts on International Cooperation in Tax Matters, through the intergovernmentally agreed conclusions and recommendations of the ECOSOC Financing for Development Forum (22-25 May 2017).
On 11 July 2017, ECOSOC also published the ‘UN Code of Conduct on Cooperation in Combating International Tax Evasion.’ The code of conduct aims to ensure that all States following it provide high levels of transparency and exchange of information in tax matters and are adhered to automatic exchange of information. The code of conduct also aims to ensure that States assist in the development of international norms, practical steps and capacity-building programmes that those States may follow, with a view to preventing and combating international tax evasion and protecting their tax bases from non-compliance with their tax laws.
Progress on SDG target 17.1 is difficult to assess because, as noted in the UN Secretary-General’s Report titled, ‘Progress towards the Sustainable Development Goals,’ there is not an agreed methodology and baseline data. However, governments and international organizations are mobilizing efforts to increase international support to developing countries to improve their domestic resource mobilization capacities. In turn, enhanced mobilization capacities will support domestic revenue collection and the delivery of essential public services such as health, education and social protection.
The four initiatives launched in 2015, after the adoption of the AAAA and the SDGs, have built capacity, strengthened and expanded governance structures and normative tools in order to advance the implementation of the 2030 Agenda. Together, these initiatives are creating and coordinating tools to support a growing number of countries to implement the SDGs.