With the rubber stamp of the G7 and the G20’s finance ministers earlier this year, the world’s wealthiest countries are doubling down on efforts to enact an inequitable and undemocratic tax deal for all countries to adopt. It is imperative for civil society organizations and governments to strongly reject this “tax deal of the rich” and rebuild our broken tax and fiscal systems to make them work for people and the planet. This can only be done under the auspices of genuinely inclusive, democratic, transparent, accountable and transformative governance mechanisms.
Failing to heed the painful lessons of the pandemic, international financial institutions as well as many governments in the Global North and South continue to pursue the same neoliberal agendas that have privileged the interests of multinational corporations. Their policies have thus prioritized profits over people and the planet, and have caused the failure of public services that has led to more deaths and pandemic casualties.
To finance COVID-19 response programs, governments have turned to more and more loans on the one hand and adopted regressive and revenue-eroding tax policies on the other. We see an alarming trend towards reduced taxation of corporate profits and more generous tax breaks and fiscal incentives for multinational corporations. In the global battle to transform tax policy, we face the menacing threat of a ‘tax deal’ that will only benefit rich countries, MNCs and the global elite, with devastating consequences for the poor.
A year ago, while grappling with the pandemic’s immediate effects and the ‘new normal’ of pandemic-related lockdowns, we came together in collective action to demand for tax justice in the face of COVID-induced crises. Today the pandemic rages on and inequalities are widening. Government responses to deal with the multiple crises have not only been inadequate, they fail to address the systemic issues that have been part of the root causes of the multiple crises. To meet the urgent needs of our communities today, we need fiscal systems and global tax rules that serve to reduce the entrenched inequities and injustices of tax norms and rule-making at the national and global levels.
We demand governments in Asia to:
ADOPT tax and fiscal policies that truly respond to the needs of people and the planet, reduce unjust tax burdens on people, fairly tax the wealth of elites and corporations , and that serve to reduce inequalities and enable the realization of human rights and sustainable development. BUILD inclusive, transformative and sustainable economies that genuinely serve the needs, interests, and futures of people and the planet.
REJECT the OECD/G20 global tax deal and other initiatives that reinforce inequalities in decision-making around global tax rules or serve only the interests of multinational corporations and a few elite countries;
END the global race to the bottom of corporate tax rates , stop illicit financial flows, and fight for a more equitable distribution of taxing rights;
PUSH TOWARDS the formation of a genuinely inclusive, democratic, and transparent intergovernmental Tax Body under the auspices of the United Nations.
The Asian Peoples’ Movement on Debt and Development (APMDD) calls on its members, partners, and all tax justice advocates to scale up campaigning to push for national and global tax justice demands, and especially to join forces and launch coordinated actions and activities on September 23, 2021.
MAKE TAXES WORK FOR PEOPLE! REJECT THE TAX DEAL OF THE RICH!
Participants to a Webinar on Inequalities, Public Services and Tax Justice made the sign for equality to cap off a two-hour session that brought together organizations and communities in the frontlines of fighting inequalities and most affected by failing public services and loss of public revenues due to flawed fiscal and tax systems. Over 110 attended the webinar held 9 August 2021 to strengthen campaigns on tax and fiscal justice especially in light of developments in global, regional, and domestic policy-making.
The webinar aimed to
- Surface some of the most pressing issues faced by marginalised sectors and communities in the context of failing public services and deepening inequalities;
∙ Highlight the systemic barriers to making public services accessible and responsive to people’s needs and rights, drawing the links to gaps and flaws in fiscal and tax systems;
∙ Discuss and collectively analyze key developments in national, regional, and global policy fronts that impact inequalities and people’s access and right to public services; and,
∙ Facilitate sharing of strategies for advancing tax and fiscal justice agenda, with a focus on public services.
This comic strip is inspired by real stories of APMDD members across the region. As COVID-19 lockdowns brought already marginalized communities to extreme crises of survival, people came together in the spirit of solidarity. Community pantries
and kitchens, the delivery of basic necessities to the elderly and others who must keep indoors, among other community-led initiatives, are testament to peoples’ solidarity.
People’s solidarity, however strong and effective, is not a substitute for the State’s responsibility to provide essential public services, especially amidst widening inequalities in Asia. People living in extreme poverty, barely affording a single meal in a day, are estimated to have increased to over 100 million in Asia. Gender inequalities have also deepened with heavier demands
on women to provide a disproportionate amount of time on unpaid care work in the midst of greater female unemployment
and widening gender wage gaps. Ironically, Asia and the Pacific has also seen rapid growth in wealth by individuals
and corporations amounting to over US$ 7.5 billion in 2020 alone.
Governments have to step up to fulfil their core responsibility of providing #PublicServices, infrastructures and social protection. The impact of the pandemic could have been less horrific if governments had not been slashing essential services
to give way to privatized services and deregulation for decades. While the burden of financing these social services has been placed on regressive taxes that gravely affect women and other marginalized sectors, governments have lost billions in potential revenues for public services from policies that enabled corporate tax abuses and illicit financial flows.
The historical and structural roots of inequalities run deep, exacerbated and reinforced by flawed fiscal and tax systems, rules
that need to be ‘rewritten.’
It is time to #RewriteTheRules for #TaxJustice and #GenderJustice. Indeed, it is time to overhaul political and economic systems that bring crises worldwide and misery to millions of people. People’s solidarity is the key to advancing a transformative agenda
to overcome crises and take another path for #systemictransformation.
#GlobalGoals #MakeTaxesWorkForWomen #8for8
16 July 2021
Amidst the multiple crises in health, the economy, and the climate, peoples in Asia continue to bear the social and economic costs
of fundamental flaws in national and international tax systems. Illicit financial flows continue to strip away potential revenues critical for financing health and social services most needed for our survival, safety, healing and rebuilding. Tax competition, wide-ranging corporate tax incentives, and barriers to taxation of extractives and digital services remain rife in the region. The escalating race to the bottom in corporate income tax regimes combined with corruption, weak transparency frameworks and regulatory mechanisms have enabled multinational corporations and domestic elites to siphon hundreds of billions out of our countries.
The COVID-19 pandemic and its impacts present a historical opportunity to reform global corporate taxation and transform our tax systems to make them more responsive to the needs of people and the planet. It is tragic that the solutions offered by the world’s elite countries only serve to reinforce inequalities in the global tax regime that have long excluded the voice and interests
of developing countries and peoples in the Global South.
Finance leaders of G20, a forum among some of the world’s richest countries, recently endorsed the OECD’s Two-Pillar “Solution” under its Inclusive Framework on Base Erosion and Profit-Shifting (BEPS). The OECD/G20 tax deal rests on two pillars: Pillar One is intended to allocate taxing rights on “excess and non-routine” profits to countries where large multinational corporations locate and profit from sales, while Pillar Two stands on an unambitious proposal of setting the global minimum corporate tax rate
to a meager 15%.
Peppered with rhetoric about strengthening domestic resource mobilization in the Global South, the two-pillar approach is nothing more than an illusory fix that undermines our long-standing demands for a just and democratic transformation of the global tax policy architecture.
The extremely narrow base and the unjust allocation of revenues in Pillar One robs developing countries of our sovereign power to tax multinational corporations within our borders. Hidden beneath a complex technical facade is a deeply regressive arrangement that only covers the biggest 100 multinational corporations and their “residual profit margins''. The exceptionally high threshold set by Pillar One lets loose a vast majority of MNCs shifting profits out of developing countries. Furthermore,
by privileging countries where MNCs are headquartered and the taxation of profit margins from sales, the tax deal precludes
the taxation on profits from employment and assets which are central to value extraction of MNCs from the Global South.
It also creates an abstract and unrealistic separation between routine and residual profits, enabling multinational corporations to take advantage of loose regulations on transfer pricing for a lion’s share of profits generated globally.
The proposed global minimum corporate tax rate of 15% gravely falls short of the objective to raise revenues in developing countries. The UN Economic Commission for Asia and the Pacific (UN ESCAP) proposed that developing countries in Asia will need public investments amounting to USD 1.5 trillion every year to achieve the Sustainable Development Goals for Achieving
the 2030 Agenda. The OECD proudly declared that their proposed rate of 15% is set to generate USD 150 billion in annual additional revenues -- this is a measly figure beside an estimated USD 760 billion in additional revenues from a 25% global minimum effective tax rate. Noting the recommendation of the United Nations High-Level Panel on Financial Accountability, Transparency and Integrity (UN FACTI), setting a global minimum tax rate lower than 25-30% will fail to make any significant impacts on revenue generation in the Global South.
A deal anchored on a global corporate minimum tax rate of 15% sets a dangerous precedent for a global race
to the minimum. Justified as measures to promote “economic recovery”, several laws have been passed by governments in Asia since the beginning of the pandemic to further reduce baseline corporate income tax rates under the pretext of stimulating
the economy, but in reality, keeping pace with declining global and regional averages. Pillar Two will only accelerate this process under intensified pressure from domestic and multinational business lobbies. By setting a global minimum precipitously close
to nominal rates of tax havens, the G7 and OECD tax deal triggers an unambiguous policy signal to the rest of the world
that lowering corporate income taxes to 15% is not only acceptable but will be the gold standard.
Negotiations on global tax agreements have no place in the undemocratic and unequal platforms of the G7, the G20,
and the OECD. Because membership in these informal arrangements is decided entirely by countries’ gross national incomes,
it is not surprising that the benefits of the two-pillar proposal are highly skewed towards the interests of the Global North.
Rich countries and legislative lobbies for multinational corporations are attempting to expedite the ratification of the agreement
by governments in order to forestall demands for higher global minimum tax rates and a just allocation of taxing rights.
This underlines the urgent responsibility of governments in the Global South to assert equal rights to decide on global tax rules
in an intergovernmental platform under the auspices of the United Nations.
As peoples and organizations committed to the transparent, accountable, and just restructuring of tax systems, we call on civil society organizations and governments in Asia to mount a strong resistance against the growing pressures by the G7 and OECD
for the Global South to adopt the flawed, unequal, and regressive two-pillar approach.
We call on governments in Asia to:
REJECT the OECD/G20 global tax deal and other initiatives that reinforce inequalities in decision-making around global tax rules or serve only the interests of multinational corporations and a few elite countries
WORK FOR progressive, transparent, just, equitable and democratic tax systems and policies
PUSH TOWARDS the formation of a genuinely inclusive, democratic, and transparent intergovernmental mechanism Tax Body under the auspices of the UN.
On July 10 2021, the G20 Finance Ministers and Central Bank Governors concluded their third meeting with a resounding endorsement of the unambitious and undemocratic two-pillar solution of the G7 and the OECD. The G20 endorsement is the latest rubber stamp to the agenda dominated and led by the Global North to redefine global tax rules exclusively for their own benefit. While painting the illusion of plugging foregone revenues, the G20 and the OECD’S two-pillar proposal is a false solution that opens more loopholes for tax abuses than it closes. The consequence of the OECD/G20 agreement is strikingly simple – it undermines the calls of peoples from the Global South for a comprehensive, democratic, and just system of global corporate taxation.
The so-called “Inclusive” Framework rests on the preservation of skewed global tax rules that have long favored the profit-driven interests of MNCs and the agendas of the Global North where they are headquartered. It props up the pillars of inequality and exclusivity that deprive developing countries of the resources needed for sustainable and transformative development, denying their right to stand on equal footing in decision-making on global tax rules. The two pillars laid out in the OECD’s agreement consist of a proposed global minimum corporate income tax rate of 15% and a system for taxing large multinational corporations above a very high profit threshold, which gives priority of reallocating tax revenues to countries where MNCs are headquartered.
Setting the global minimum corporate tax rate at 15% only generates a paltry amount of tax revenues and largely benefits countries in Western Europe and North America, as the global average of corporate tax rates in developing countries is much higher at 25%. This triggers an even more dangerous race to the bottom where developing countries may be pressured to adopt the G20/OECD’s minimum rate, further eroding their rapidly dwindling tax bases.
Complementing this inadequate rate is another false solution that narrows its coverage down to a small number of large MNCs whose taxed profits can be redistributed to countries where sales are made. Not only does this provide a loophole for large MNCs to declare a lower share of their profits as “non-routine,” it also disallows developing countries where assets and labor of at least 6,000 multinational corporations are located from reaping their just share of taxed profits. The two-pillar ‘solution’ presented by the G20/OECD, an exclusive circle where the agendas of the Global North dominate, poses a barrier to the longstanding demands of developing countries for a just system of allocating taxing rights and for taxing multinational corporations’ profits.
That the G7, G20, and the OECD sing the same tune is unsurprising: not only do they represent the interests of the richest populations in the world, MNCs that stand to benefit from maintaining the highly unequal tax system also reside within their borders. Membership to the OECD’s so-called ‘inclusive’ framework is advertised to developing countries to present a semblance of diverse representation. However, the process and outcome of OECD meetings time and again reveal the fundamental flaws and power imbalances inherent to the framework.
Tax justice advocates from all countries must strongly reject this latest ‘false solution’ by the G20/OECD and other initiatives that stand in the way of thoroughgoing reforms needed to make tax systems and policies more responsive to people’s needs and rights. To dismantle the pillars of inequality and exclusivity, we must resolutely advance the agenda of transforming the global tax system and demand for a truly inclusive and democratic inter-governmental mechanism under the auspices of the United Nations where all countries stand on equal footing.