UN hopes 'tax inspectors without borders' will help combat tax evasion

UN Secretary General Ban Ki-moon wants world leaders to put aside "narrow self-interest" to break a deadlock over how to finance the organisation's new global development agenda.

ADDIS ABABA: Backers of a new initiative, dubbed “tax inspectors without borders”, say it can help poor countries crackdown on tax dodging and fund their own development, but advocacy groups on Monday were sceptical that it would work.

Nearly $1 trillion in illicit finance, stemming from tax evasion, crime and corruption, is estimated to leave poor countries each year, according to Global Financial Integrity (GFI), a policy research group.

Developing countries must stop these outflows if they are to achieve 17 new and ambitious development goals, experts said on the first day of a four-day financing summit in Ethiopia.

Under the so-called “tax inspectors without borders” initiative, released on Monday, experts from well-functioning states will help officials in poorer countries carry out audits to detect tax dodging, mainly by multinationals.

MULTINATIONALS

“For too long, some multinationals have used aggressive tax planning to reduce their tax bills, or avoid paying taxes altogether,”  said the Organisation for Economic Co-operation and Development (OECD) Secretary-General Angel Gurria. The organisation unveiled the initiative together with United Nations Development Programme.

“This simply cannot go on”, Gurria said.

Speaking at the opening the UN’s Third Financing for Development conference, Secretary-General Ban Ki-moon (pictured) called on world leaders to put aside “narrow self-interest” to break a deadlock over how to finance the organisation’s new global development agenda.

According to International Monetary Fund better tax systems would bolster budgets and give governments more funds to invest in social programmes. It says in many low-income countries, taxes as a per cent of Gross Domestic Product (GDP) are under 15 per cent against at least 24 per cent in advanced economies.

Pilots of the tax initiative have succeeded, Gurria said. In Colombia, tax revenue from transfer pricing audits increased 10-fold in three years to $33 million after OECD advice, Colombia’s Deputy Finance Minister Andres Escobar Arango said.

Mispricing exports and imports is one method some multinationals use to shift their profits to low-tax regimes, and deprive poor countries of money owed them. Advocacy groups were, however, sceptical that the OECD could act as an impartial adviser, given that some of its members are regarded as tax havens.

In the initiative’s pilot phase, Britain sent experts managed by accounting firm PWC, which helps multinationals lower tax bills, to help with auditing in Rwanda, European Network on Debt and Development’s Tax Justice Policy Manager, Tove  Ryding said.

“That’s a clear conflict of interest,” she said of the initiative.