January 13, 2017
by Aurore Chardonnet
Sustainable development is about so much more than development aid: rich countries, development countries, civil society and the private sector need to work together to enable people and their governments to fight inequality and poverty. One key issue is tax justice: companies must pay their fair share, and governments must be in a position to collect the taxes they need to finance essential services such as healthcare and education. This is where the EU can do much more.
In its proposed new framework for development policy, the EU reaffirmed its willingness to ‘support developing country efforts to strengthen revenue mobilisation, debt and public expenditure management and develop tax systems’. Besides goodwill support, the EU needs to take action to make sure that the relevant information of companies is available to tax administrations and citizens both in developing and in developed countries.
Tax justice is a key element of sustainable development
When world leaders adopted the Sustainable Development Goals (SDG) last year, they acknowledged inequality was at the heart of the problem of poverty. Indeed, global wealth is concentrated in the hands of a very few: as Oxfam shows in its new report, just 8 people have been owning as much wealth as half of the world population. If more fairly distributed, this wealth could save lives.
Taxes play an important role in this struggle: not only helps tax to redistribute wealth and reduce poverty, it also provides the resources for much needed essential services such as education and healthcare.
However, tax revenues in developing countries continuously fall short of what could be obtained due to their economic performance. Without these resources, most developing countries will not have the necessary means to implement the SDGs.
‘Collect better, Spend more’
The EU is promoting an agenda to ‘Collect more, Spend Better’. This approach – which also features in the proposed new European Consensus for Development – aims at improving ‘domestic resource mobilisation; more effective and efficient public expenditure; and debt management’.
For this strategy to succeed, the European Commission will not only have to support governments in poorer countries to mobilize their own resources, but also their citizens so they are able to hold their decision makers to account on how they spend those resources.
Fighting tax dodging requires public scrutiny
Extreme inequality is a failure of government, a product of political and economic choices. Reversing inequality requires political power and citizens to be heard. Any development policy should therefore aim at speaking with those living in poverty, not to speak for them.
This is the role of civil society organisations that hold governments, and the private sector, to account. Improving tax systems not only requires boosting capacity and ability of local tax administration, but also involving local citizens groups. When it comes to taxes, this boils down to transparency tools, for instance making multinational companies disclose where they earn their profits and where they pay their taxes. Such rules, known as public country-by-country reporting (CBCR), are a great tool when it comes to accountability.
This blog is part of a series analysing the details of the proposed review of the European Consensus on Development. Read all our stories on the EU’s new development framework.Oxfam International EU Advocacy