Inga Rhonda King, ECOSOC President, highlighted that what will impact the SDGs is not only how much tax we raise, but also how we raise taxes and how we spend them.
Janet Milne, Environmental Tax Policy Institute, said polluters should be made to pay in order to change their behavior and produce a greener fiscal system.
Natalia Aristizabal, UN Committee of Experts on International Cooperation in Tax Matters, reported on a forthcoming to guide governments in designing a carbon tax, its administration and revenue use.
29 April 2019: Governments, UN high-level officials and representatives of the private sector and academia highlighted that corporate tax reform must focus on developing countries’ needs and on combating inequality, while taxation should be used to finance the SDGs. Participants in the UN Economic and Social Council’s (ECOSOC) annual one‑day meeting on international cooperation in tax matters also addressed environmental and carbon taxation, and the digitalization of economy.
The special meeting took place on 29 April 2019, at UN Headquarters in New York, immediately following the 18th Session of the UN Committee of Experts on International Cooperation in Tax Matters, which convened from 23-26 April 2019. In an opening segment of the special meeting, ECOSOC President Inga Rhonda King highlighted that SDG outcomes will be affected not only by how much tax we raise, but also by how we raise taxes and how we spend them.
Delivering opening remarks, Elliott Harris, UN Chief Economist, stressed that effective tax systems are key to generating domestic resources for the SDGs. He noted that, given that economies are digitalizing rapidly, with companies able to sell products across borders without having a presence on the ground, taxation must be considered alongside other current challenges involving corporate tax rules and reform. He also emphasized that any reform of tax rules must pay special attention to the needs of developing countries, and must work towards a fair system that reduces inequalities. Furthermore, he said, climate action must be supported by effective measures that consider carbon emissions and related taxation initiatives, while environmental taxation should be aligned with the 2030 Agenda and used to shift consumption patterns, from transportation to plastic bag use.
On taxation of the digital economy, Irving Aw, IMF, said short‑term unilateral steps could be damaging in the long term and a more inclusive multilateral process is needed. Eric Nii Yarboi Mensah, Co‑Chairperson of Ghana’s Committee of Experts on International Cooperation in Tax Matters and the Revenue Authority, noted that the current tax rules requiring a physical presence in a jurisdiction are no longer applicable, and future efforts must consider a digital presence. Carlos Protto, Ministry of Treasury, Argentina, added that companies are reaching scale without mass, generating income across borders where they have no physical presence. He said the UN can play “a key role” in developing international standards to ensure no one is left behind. Marilou Uy, Intergovernmental Group of Twenty‑Four on International Monetary Affairs and Development (G‑24), said G‑24 launched a working group in 2018 to identify pressing issues, including digital economies and base erosion and profit shifting (BEPS). The Group intends to design simple measures to address such issues as fractional apportionment and withholding taxes in digital transactions.
Janet Milne, Environmental Tax Policy Institute, said polluters should pay, as a way to spur change in their behavior and produce a greener fiscal system. Kurt Van Dender, Organisation for Economic Co-operation and Development (OECD) Centre for Tax Policy and Administration, mentioned that, while there is a range of environmentally-related tax revenue in OECD countries, governments do not track the results. He added any discussion on taxes must also examine revenue use.
The tax initially generated modest revenues, but they are now decreasing, which demonstrates that emissions are dropping and thus the tax works.
Gervais Coulombe, Canada’s Department of Finance, presented the Canadian Federal Carbon Pricing System, which comprises a regulatory charge on fossil fuels and an output‑based pricing system. He said the fuel charge begins at USD 20 per ton of carbon dioxide (CO2) emissions, and affects 22 types of Canadian fuels. Consumers do not pay it directly, but it is embedded in the price of fuel, with the levy aimed at changing behavior, not raising revenue. Coulombe noted that, in developing the system, the Government had to address fairness and biomass issues, and underlined the importance of consulting stakeholders in imposing such a policy. He said the federal Government worked extensively with subnational entities, which have deep experience in the issue, and the proceeds are directed to the province or territory of origin, benefiting seven out of ten households.
Rodrigo Pizarro, Ministry for Environment of Chile, said in 2014 Chile introduced a reform bill placing three new taxes on: new cars; local contaminants; and CO2 emissions from boilers and turbines. Like Colombia, Mexico and South Africa, he explained that Chile chose the emissions‑based tax (rather than the fuel-based tax) because it encompasses stationary instruments such as boilers and turbines. He emphasized that even though the taxes initially generated modest revenues, they are now decreasing, which demonstrates that emissions are dropping and thus the tax works.
Natalia Aristizabal, UN Committee of Experts on International Cooperation in Tax Matters, recognizing that developing countries have been afraid to impose carbon taxes, said the Committee is creating a handbook on carbon taxation to guide governments in designing a carbon tax, its administration and revenue use. She said the handbook will provide a framework and practical advice.
In the ensuing discussion, noting that “calling a process inclusive does not make it so,” India called for a platform under UN auspices to give all countries an equal voice on tax matters. Palestine for the Group of 77 and China (G-77/ China), supported by Nigeria, said it is “counterproductive” to highlight the importance of domestic resource mobilization in developing countries while not tackling illicit financial flows (IFFs), as those impede developing countries’ capacity to capture necessary resources. Nigeria called for multinational companies to pay taxes where value is created, adding that the digital divide poses “a profound challenge” to tax collection in developing countries.
Thailand mentioned the need to “strike the right balance” between advancing gains on realizing the SDGs and ensuring that corporations prosper. He said tax rules must be “simple and practical,” particularly in developing countries where resources are limited, adding that global efforts should ensure compliance across countries and all stakeholders. On the digitalization of economy, Brazil highlighted that, as international taxation norms and standards undergo rapid transformation, developing countries need to be fully integrated, active participants in the discussion.
Romania for the EU noted the need for international cooperation to combat corruption and tax evasion. He presented the ‘Collect More, Spend Better’ European approach, which addresses both the revenue and expenditure sides of domestic public finance, with ‘Collect More’ closing tax compliance gaps and ‘Spend Better’ addressing efficient and effective public expenditure.
Norway expressed support for the establishment of an international tax system as the best way to enhance domestic revenue and achieve the SDGs. Affirming that the current financial governance system contributes to growing inequalities between people and countries, he said progressive tax policies can combat corruption and IFFs. [UN Meeting Coverage] [Special Meeting Webpage]