11 November 2015: Experts and UN Member States identified resources and challenges to domestic resource mobilization (DRM) for financing sustainable development during the joint meeting of the UN Economic and Social Council (ECOSOC) and the UN General Assembly’s (UNGA) Second Committee (Economic and Financial), which addressed the theme ‘Domestic Resource Mobilization: Where to go after Addis?’

The meeting took place on 11 November 2015, in New York, US.

Andrej Logar, Permanent Representative of Slovenia and Chair of the Second Committee, underlined that all sources of finance, public and private, are needed to achieve the 2030 Agenda for Sustainable Development. Noting that the tax-to-GDP ratio is very low in developing countries, and that the institutions responsible for domestic resources are very underfunded, he stressed that taxation is critical for achieving sustainable development and invited Member States to look at international tax cooperation as a development issue.

Oh Joon, Permanent Representative of the Republic of Korea and ECOSOC President, explained that many countries are hindered in their efforts to collect taxes because business models and value chains have become more international, integrated and dependent on intangibles, which has given rise to “loopholes.” He added that discussions on the current landscape of international tax cooperation can help identify priorities for reform and provide concrete suggestions for improved international cooperation. Oh announced that the UN Committee of Experts on International Cooperation in Tax Matters (Tax Committee) will meet twice a year, and will increase its engagement with ECOSOC through the Special Meeting on International Cooperation in Tax Matters.

Alexander Trepelkov, Director of the UN Financing for Development Office (FFDO/DESA), said the Tax Committee’s 11th session, held from 19-23 October 2015, in Geneva, Switzerland, focused on tax treaties, extractive industries taxation, exchange of information and capacity building.

David Rosenbloom, New York University, said international taxation is very fragmented and heavily influenced by local policies and politics. The complexity of the rules of the Organization for Economic Cooperation and Development (OECD), which are set by individual countries, is not very helpful and will not go away, he said, and called for education and expertise so developing countries can better understand international tax laws and norms in order to defend their interests. Noting that developing countries place their trust in the UN, he suggested the UN get involved in training as well as perform a clearinghouse function. Tatu Blunga, Oxfam, highlighted that taxation institutions differ between regions, but accountability is paramount in all cases. He stressed the need for a dialogue inclusive of all governments, so that all countries have a say in tax matters that affect them.

Victoria Perry, International Monetary Fund (IMF), spoke about IMF’s Fiscal Assessment Tools. She highlighted the proliferation of incentives that erode countries’ tax bases as a critical area for South-South cooperation, not only for redressing the incentives, but also for bolstering the tax base. Blanca Moreno-Dodson, World Bank, stressed the need for multinational corporations to report country-by-country, and for DRM to generate fiscal revenue without distorting economic activities or income distribution. She highlighted the World Bank and IMF’s tools as “global goods,” especially for developing countries.

Gail Hurley, UN Development Programme (UNDP), highlighted UNDP’s participation in the OECD’s ‘Tax inspectors without borders” initiative, which aims to build capacity on tax audit and related issues, and will become operational in January 2016. Noting that tax avoidance and evasion are especially problematic in countries with weak administrative capacities, she said the tax inspectors work alongside tax officials on pre-audit risk assessment, audit cases, anti-avoidance rules and other sector-specific challenges, like extractive industries taxation. The pilot phase in Colombia and other countries found high demand from developing countries for such assistance and that the initiative can have a high impact at a very low cost.

Hurley also said that international public finance and development aid remain very important for landlocked countries (LLDCs), small island developing States (SIDS) and similar countries, where DRM may not be practical or cost effective, and which are unlikely to attract private investment.

In the discussion that followed, countries highlighted the need for capacity building for DRM and for strengthening tax administration systems, with Ethiopia calling for attention to how domestic resources are spent after they have been mobilized.

Many developing countries, including South Africa for the Group of 77 and China (G-77/ China), Maldives for the Alliance of Small Island States (AOSIS) and Trinidad and Tobago for the Caribbean Community (CARICOM), stressed that official development assistance (ODA) remains the main source for development for many developing countries, and called for developed countries to fulfill their ODA commitments.

CARICOM identified challenges in DRM: recessionary environments; trade mispricing; high debt and high cost of debt servicing, which reduces space for financing for development; and vulnerability to exogenous financial developments. He stressed the need for assistance in procurement and, supported by the G-77/ China, for addressing illicit financial flows (IFFs).

Member States also raised the need for the reform of the international financial system, and the lack of capacity of many developing countries in negotiations. The EU stressed the need to close the dual tax gap: the policy gap and the tax compliance gap. [IISD RS Sources] [UN Press Release] [Event Programme] [Concept Note] [ECOSOC President Remarks] [UN Tax Committee] [Tax Inspectors without Borders] [Joint Meetings of Second Committee and ECOSOC]