The Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, advocated today for reform of the multilateral tax system in the framework of the United Nations, during the Jobs Reset Summit, organized by the World Economic Forum (WEF).
ECLAC’s highest authority participated in a session entitled “A New Global Tax Agenda,” debating how a reform of the international tax system can contribute to a sustainable and egalitarian economic recovery, along with Alex Cobham, Chief Executive of the Tax Justice Network, and Stephen Carroll, Business Editor at France 24.
In her remarks, Bárcena highlighted that “a new global tax agenda gains more relevance upon recognizing the importance of fiscal policy for promoting sustainable and inclusive development. The crisis prompted by the COVID-19 pandemic has demanded significant fiscal efforts to mitigate its effects, which will probably have to be sustained in the coming years. Likewise, achieving a recovery that moves towards development models that are compatible with climate change requires public policies that promote investment in those sectors. Also, the fight against inequality requires more progressive tax structures that help with income redistribution.”
“For a reform of the global tax system to incorporate the needs of developing nations and emerging economies – especially Small Island Developing States (SIDS), for example – the United Nations should be the main space for that discussion,” she emphasized.
With regard to the tax situation, Alicia Bárcena stressed that in a globalized world, reducing evasion and avoidance necessitates global agreements that would keep multinationals and individuals from evading through tax havens and transfers of benefits. In Latin America and the Caribbean, ECLAC estimates that evasion of income tax and the value-added tax generated a loss of $325 billion dollars in 2018, equivalent to 6.1% of the region’s GDP. Furthermore, ECLAC’s estimates of illicit financial flows derived from fraudulent billing in the region suggest that many of these flows are linked to products that form part of global value chains, which points to possible abuses related to transfer pricing.
In this sense, she expressed support for a proposed multilateral agreement that would establish a minimum global rate for corporate income tax that would ensure taxes are paid where the value is added and that would help close spaces for tax evasion and avoidance by multinational corporations, improving the equity and transparency of the global tax system.
ECLAC’s Executive Secretary also argued that the time has come for a global and regional tax agreement on extractive industries between corporations and governments of developed and developing countries, to stop pressuring developing countries for lower royalties as a competitive advantage and to avert a “race to the bottom” with tax incentives and exemptions, which limit public revenue from royalties and related instruments and investments on a country level.
The region’s tax revenue from natural resources – oil and gas exploration and production and mining – oscillated between 0.1% and 7.3% of GDP in 2019, which represents between 0.1% and 22.4% of total public revenue. “Given the importance of these resources and the extraordinary profits they can generate, we must seek to establish fiscal frameworks that would allow for capturing more of the value created based on their extraction,” Bárcena contended.
To address inequality, she advocated for a wealth tax and other taxes on property, which would contribute to improving the distribution of wealth and reducing inequality gaps, while at the same time providing additional revenue.
At the event, participants also discussed the negotiations taking place at an international level this week in the framework of the G7 and G20 to agree to improved tax cooperation and thereby promote fairer competition worldwide. On this point, Alicia Bárcena indicated that “it is critical that these discussions advance on reducing evasion and avoidance, increasing the transparency and exchange of information, and the permanent implementation of a solidarity tax to achieve a fair and more transparent tax system that would contribute to the global economy’s transformation.”