Fiscal and Tax Cooperation is Key to Financing Development

Improving the domestic use of resources for development requires advancing towards greater fiscal and tax cooperation to control evasion, circumvention and illicit flows by perfecting taxation agreements and international coordination, authorities and experts indicated at the end of a two-day meeting on financing for development held at ECLAC’s headquarters in Santiago, Chile.

At the Latin American and Caribbean Regional Consultation on Financing for Development, ministers and authorities from various countries in the region, along with senior United Nations representatives and specialists from international organizations and civil society, agreed to take their proposals as the region’s contribution to the Third International Conference on Financing for Development, which will take place in July in Addis Ababa.

Authorities are expected to reach a global agreement there to boost fulfillment of the goals established for the post-2015 development agenda.

Those attending the meeting organized by the Economic Commission for Latin America and the Caribbean (ECLAC) and Chile’s government said that although the private sector’s participation in financing for development is important, incentives and public policies are needed to orient the allocation of private resources towards productive financing.

“The available resources must be prioritized to finance the most urgent needs of Latin America and the Caribbean and, in particular, they must be aimed at equality,” said Alicia Bárcena, ECLAC’s Executive Secretary, at the meeting’s final session.

“This includes closing the development gaps in our region and financing infrastructure and social inclusion projects,” she added.

Bárcena underlined the importance of ensuring that the voice of Latin America and the Caribbean is heard at international forums so that its view on financing for development may be incorporated. With regard to evasion, she explained that the rate of VAT tax evasion in the region equals between 1% and 2% of GDP, which is the same amount it receives annually in Official Development Assistance (ODA). Bárcena also said that illicit flows in Latin America and the Caribbean total 150 billion dollars, a figure that exceeds the income from foreign direct investment, is twice that of remittances, and fourteen times the size of ODA.

The United Nations Under-Secretary-General for Economic and Social Affairs, Wu Hongbo, recognized that meeting participants established Latin American and Caribbean priorities for a framework on financing for sustainable development.

“The countries are responsible for their own economic and social development, but the international community must give them support, enough space for policies and an adequate global economic environment. Matters such as tax cooperation, the resolution of sovereign debts, a fair trade regime and stability in the international financial system are critical elements for the region’s countries,” Wu stated.

In their deliberations, the participants in the Regional Consultation also emphasized the importance of including the gender perspective in this process, as well as strengthening banks for national and sub-regional development. In addition, innovative financing mechanisms and new forms of cooperation are needed, especially with the private sector, which complement traditional methods and enable the provision of stable and predictable financial flows to developing countries.