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TAX JUSTICE

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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!

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APMDD Hawkers edit2

 

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

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 image g20 statement 2 rev7

 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.


READ MORE: Press Release – Civil society rejects “false solutions” in the OECD/G20 tax proposals

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new pillar prefinale
 

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.

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13 July 2021

 

Seen from an economic justice perspective, the results of the recently concluded meeting of G20 Finance Ministers and Central Bank governors in Venice are a huge disappointment. The G20 through its finance leaders resoundingly echoed the OECD tax proposals, considered by many leaders of developing countries and CSOs as “false solutions.”

“The G20 did not address the fundamental flaws in the international tax architecture nor respond to the needs, rights, and interests of peoples of the Global South,” said Lidy Nacpil of the Asian Peoples Movement on Debt and Development (APMDD). 

 

“The disappointing outcome of this latest G20 finance leaders’ meeting is perhaps not surprising. It simply underscores the longstanding objection of civil society organizations to the persistent hijacking by rich countries of the agenda to transform global tax rules that have historically benefitted multinational corporations residing within their jurisdictions,”  Nacpil added.

In a Communique issued after their meeting concluded last July 10, G20 finance leaders noted that the “global outlook” has improved but that the recovery has “great divergence” across and within countries. The so-called “historic agreement” of the G20 finance leaders is built upon a mere endorsement of the Two-Pillar solution on tax issues proposed by the OECD but widely criticized by CSOs and thought leaders from Africa, Latin America, Asia, Europe, and other parts of the world. 

 

"We endorse the core elements of the two pillars on the profit reallocation of multinational enterprises and the global minimum tax as set out in the statement released by the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS)," read the Communique of the G20 Finance Ministers and Central Governors’ Meeting on July 10. 

 

The core elements described by the G20 finance deal refer to the OECD’s global tax proposals contained in the statement “A Two–Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy.” Released just last 1 July 2021, the lnclusive Framework on BEPS in turn had strongly championed the earlier tax deal of the G7. In June of this year, the G7 countries, the world’s elite, agreed on the following: 1) on Pillar One, a global reallocation of taxing rights residual, non-routine profits of the largest 100 multinational companies; and 2) on Pillar Two, a  global minimum corporate tax rate of 15%. This rate is markedly lower than both the global average corporate tax rate at 25% and recommendations by the UN High-Level Panel for Fiscal Accountability, Transparency, and Integrity (UN FACTI).

 

Intense criticisms by civil society organizations worldwide concern the prospective impacts of these proposals on tax revenues of countries in the Global South. 

 

“To force through such an unfair reform, giving the lion’s share of revenue to the largest OECD members when lower-income countries lose the greatest share of tax revenue to corporate tax abuse, is shocking,” Alex Cobham, chief executive of the Tax Justice Network, said in a statement on the OECD’s proposal expected to be adopted by the G20 Finance Ministers.

Cobham denounced the timing of the proposal as a strikingly low global minimum corporate tax rate is set to generate a paltry amount of additional revenues for developing countries struggling to finance essential public services, as revealed in The State of Tax Justice 2020 report.

 

The Global Alliance for Tax Justice (GATJ) also raised serious concerns on the “unequal” distribution of revenues from taxed profits under Pillar One. “Far from ensuring the taxing rights of developing countries, the ‘solution’ will limit the right to tax of source countries to a small proportion of MNCs’ profits and entrench taxing rights to headquarter countries over global profits,” GATJ’s statement released on July 5 read. According to Dereje Alemayehu, chair of GATJ, this signifies that the proposals “evidently do not address the fundamental problems of the current international tax architecture and ignore the developing countries’ interests.”

 

These concerns are shared by many civil society organizations from developing countries whose governments are now under strong pressures by the OECD and G20 to endorse the proposals. 

 

Civil society organizations in Africa issued a statement decrying the proposals for reflecting the rich countries’ “self-interest,” given the history of tax abuses, environmental degradation, and labor rights violations by multinational corporations in the region. The statement criticized the skewed allocation of revenues from Pillar Two to countries where multinationals are headquartered. “Conveniently, these tend to be the finance capitals of the Global North which constitute most of the G7. The developing countries from which these profits are often extracted in the first place, and which are the most in need of fiscal resources to finance development and public services, are left by the wayside,” the statement added.

 

In Asia, the growing challenges in taxing digital services are expected to be compounded by the proposal to eliminate domestically-determined Digital Services Taxes (DSTs). A statement signed by civil society organizations from the Philippines called attention to the failure of the two-pillar solution to address these challenges since the proposed 15% global minimum corporate tax rate is “ridiculously low and utterly meaningless with respect to the billions of dollars earned by digital companies from developing and even some developed countries since these MNCs do not have nor need physical presence therein.”

 

Denouncing the “inequitable” and “undemocratic” process led by the G7 and the OECD, APMDD’s Lidy Nacpil issued a strong statement that “[s]etting new tax rules for the rest of the world must not be an initiative orchestrated by the richest 10% of the global population, whose multinational corporations have amassed billions in profit at the expense of natural resources and labor in developing countries.” For a global tax agreement that will adequately address the needs of peoples in Asia, APMDD firmly rejects the “false solutions'' proposed by the G7 and the OECD/G20, demanding governments in Asia to “fight for a just agreement through a UN Tax Convention and for an inclusive, democratic and transparent UN Tax Body.”

 

Developing countries whose governments are only participating in the OECD Inclusive Framework on the level of technical expertise are reportedly facing mounting pressure from OECD countries and similar informal groups to accept and ratify the G20/OECD proposals in their domestic legislation. 

 

In the lead-up to upcoming global meetings such as the UN General Assembly in September and the G20 Summit in October this year, CSOs and other tax justice advocates from different parts of the world are expected to continue rejecting the ‘Two-Pillar solution’, advancing a transformative tax justice agenda,  and clamoring for genuine solutions to address the multiple crises that continues to plague the world, deepening and widening inequalities. 

 

Authenticated by:

Lidy Nacpil

Coordinator

Asian Peoples’ Movement on Debt and Development (APMDD)

 

Contact persons: 

Becky Lozada

Communications , Development Finance Team

Asian Peoples’ Movement on Debt and Development (APMDD)
Email
Mobile 63 9175362638