Agreements of the Group of Seven in its meeting early June has set the stage for even tougher fights ahead for tax justice advocates in Asia and around the world campaigning for an overhaul of tax rules to reverse growing inequality and deepening poverty.
“The G7 has decided on a tax deal among the richest 10 percent in the world for their exclusive benefit, aggressively eclipsing the global tax agenda ahead of the United Nations General Assembly, decried Lidy Nacpil of the Asian Peoples’ Movement on Debt and Development (APMDD), a member of the Tax and Fiscal Justice Asia (TAFJA) network.
“The much-vaunted pact hammered out by G7 finance ministers for a 15 percent global minimum corporate tax rate is nothing but an invitation to a race to the minimum,” says Hiroo Aoba who sits in the coordinating committee of TAFJA, representing Public Service International Asia- Pacific Office. He points out that business circles in such countries as Australia and Denmark have begun calling for lowering their corporate tax rates.
"The unacceptably low 15% minimum corporate tax rate seeks to disincentivize rich country corporations from shifting their profits from their home countries to low tax jurisdictions, but does not address the ability of the digital corporations to make tons of money in developing countries without paying corporate income tax there since they are supposedly not even present in those countries," explains Third World Network (TWN) tax lawyer Tony Salvador.
“The international tax justice campaign has long called for at least 25 percent as a global minimum. A higher minimum could generate resources necessary to tackle social-economic crises triggered by the Covid-19 pandemic and to provide essential public services to people,” Aoba adds.
Ah Maftuchan, executive director of the Jakarta-based think tank, PRAKARSA, notes that research from Tax Justice Network, a group advocating transparency in international finance, shows that a 25% minimum effective tax rate could raise US$780 billion in additional revenues worldwide.
“An alternative, fairer model for revenue-allocation proposed by civil society, known as METR, a Minimum Effective Tax Rate for multinationals, would provide non-G7 states with an additional US$355 billion,” notes Aoba.
A TAFJA member closely monitoring emerging rules on taxing the digital economy has raised another red flag. “We worry about the trajectory of the G7 statement, as it is consistent with efforts to GATTicize the power of sovereign nations to impose taxes, especially with respect to e-commerce and the digital economy. There are disturbing initiatives to impose an international tax legal framework where nations are forced to accept as normal the imposition of trade sanctions for simply exercising the sovereign right to tax. This is totally unacceptable,” says TWN’s Salvador.
He further emphasizes a fundamental principle: "The power of taxation is an essential attribute of a sovereign nation and its exercise emanates from its people and devolved upon the legislature of each nation. It should not be hindered even by international processes nor held hostage to the desires of big corporations domiciled in rich nations."
Lidy Nacpil is calling on tax justice advocates to press forward and fight for democratic mechanisms under the United Nation to address the global dimensions of tax abuses while upholding sovereignty of nations. “With countries of the Global South most severely encumbered by foregone corporate tax revenues, we reiterate our call for a UN Tax Body towards more just and fair international tax rules.”
TAFJA is a regional network of the Global Alliance for Tax Justice GATJ), a growing movement of civil society organisations and activists, united in campaigning for greater transparency, democratic oversight and redistribution of wealth in national and global tax systems.
GATJ executive coordinator Dereje Alemayehu earlier denounced the agreements forged by the G7. “It’s a déjà vu! The G7 strikes a deal among themselves and paves the way for a manipulated endorsement as an international agreement in informal platforms created by their OECD, outside the UN system.”
He warned that “developing countries are then locked forever into an ‘international agreement’ with ‘binding and non-optional dispute resolution’ arrangements which will continue to deny them their taxing rights on part of global profit generated in their economies.”
HOLDING THE G7 ACCOUNTABLE
The G7 Summit will be held this weekend - a regular meeting of the governments of the richest, industrialized countries in the world - the US, UK, Germany, France, Italy, Canada and Japan. This year’s meeting's supposed objective is “to unite leading democracies to help the world build back better from the COVID-19 pandemic and create a greener, more prosperous future.”
G7 summit scored on opening day for narrow, self-serving solutions, and prioritizing debt service over peoples’ rights and survival
[Manila, 11 June 2021—] Members of the alliance Asian Peoples’ Movement on Debt and Development (APMDD) today held various actions in the Philippines, Indonesia, India, Bangladesh, Pakistan and Nepal to demand for debt cancellation as the G71 Summit opens in the UK today. The call highlights the urgency of freeing up public funds and prioritizing peoples’ needs in the face of the multiple crises of public health economic recession and climate change.
As the G7 Finance Ministers’ Meeting in London concluded with exalted acclaim from its member states on the “groundbreaking overhaul” of global tax rules, movements raised alarm bells against the impact of the G7 commitment to a 15% minimum global corporate tax rate. Finance Ministers of the Group of 7 (G7) – composed of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – meet annually ahead of the G7 Summit attended by heads of state.
“The G7 commitment setting a global minimum corporate tax rate of 15% is a highly regressive and undemocratic blow to the clamor for tax justice by peoples in the Global South,” says Lidy Nacpil, coordinator of the Asian Peoples’ Movement on Debt and Development (APMDD). “90% of the world’s population stand to suffer the consequences of a decision by the richest 10%.”
APMDD’s statement follow the report released by the United Nations High Level Panel on International Financial Accountability, Transparency and Integrity (UN FACTI) in February 2021, recommending a global minimum tax rate of at least 25-30% of corporate profits to ensure a high enough amount for equitable redistribution of recovered revenues that can be used to fund essential public services and long-term sustainable development.
“Global South countries lose $427 billion in tax revenues and 52% of their combined public health budget yearly from corporate tax abuses, striking at a critical time for fiscal systems that are at near collapse due to debt for pandemic relief and the lethal costs of the vaccine apartheid engineered by countries in the Global North,” Nacpil adds, citing the findings of The State of Tax Justice 2020, a study documenting the tremendous disparity in the impacts of corporate tax abuses on public health systems between countries in the G7 and the developing world.
The UN FACTI Report also recommended the establishment of a tax body on the level of the United Nations where all countries are represented on an equal basis. Nacpil calls attention to the G7’s attempt to frame the agenda on global tax reform ahead of the UN Convention:“the G7’s systematic attempt to steer the direction of global tax rules to further their interests and benefits represents a blatant disregard for the disproportionate burden of foregone revenues borne by peoples in the Global South”
When asked on their proposed alternative to the G7 deal and the incoming G20 Summit, Nacpil reiterates APMDD’s longstanding demands. “We reject the rules set by an exclusionary rich man’s club’ for the rest of the world. We call on world leaders, leaders of developing countries, and civil society to fight for a just agreement through a UN Tax Convention and for an inclusive, democratic and transparent UN Tax Body.”