Sep 15, 2015

Jayant Sinha Expresses Disappointment on FfD Not Delivering on a Global Tax Body

Ajay k Jha, 15th July, Addis Ababa

In the 3rd Conference on Financing for Development (FfD), Indian state minister for finance Mr. Jayant Sinha expressed deep disappointment over the Conference not taking up the issue of an intergovernmental tax body, which India espoused strongly on behalf of the G-77. He hailed 3rd Conference on FfD as landmark event and the SDGs as being ambitious and extensive scope and for their depth to address “poverty, which remains the single largest challenge for the humanity.”

The Minister also said that India’s development agenda is very similar to the SDGs and that India’s vision of development is the development of the antyodaya or the poorest of the poor.

World leaders are meeting here at the Ethiopian capital at Addis Ababa from 13th to 16th July to discuss how sustainable development goals, which have high priority on the post 2015 development agenda of the United Nations can be financed. In September this year, the United Nations and the international community will adopt the Sustainable Development Goals during the United Nations Summit on Sustainable Development. The SDGs are a set of 16 goals and indicators having been arrived at through an intergovernmental process since Rio+20 Conference on Sustainable Development.

The Conference on financing for development begins on a note of failed promise of the developed world to provide 0.7% of their Gross National Income to the poor and developing countries (known as the overseas development assistance or the ODA) in the spirit of international solidarity, as decided in the Mexican town of Monterrey in 2002. The second Conference on financing for development at Doha held in 2008 strengthened this call, however, till date developed countries have been able to allocate only 0.29% of their GNI (USD 135 Billion) to the poor and developing countries in 2014. The ODA target of 0.15-0.20% to the LDCs dropped by 15% to USD 25 billion. Among the developed countries only 5 including the Denmark, Luxemburg, Norway, Sweden and the UK have met their ODA targets. Only few of the 70 odd High Income Countries provide ODA, some other developed countries do provide some development assistance, but authentic data on these development assistance remains difficult to find and much of these also include humanitarian assistance and climate finance, which should have been in addition to the development assistance, which need to focus on poverty eradication as committed earlier.

While for the poor and developing countries the conference is an opportunity to mobilize commitments of rich and developed countries for providing finance, technology and capacity building assistance for a sustainable and low carbon development pathway; in contrast for developed countries the conference turns out to be an opportunity to ho to repudiate their earlier commitments. The entire debate on the SDGs and post 2015 development agenda of the United Nations has been characterized by deep differences between developed and developing countries represented by G-77 and China. While developed countries have insisted that financing development is primarily the responsibility of respective countries and they should increase their GDP tax ratio and strengthen South-South cooperation and attract private finance. They also insist that ODA should be directed to leverage private finance towards sustainable development. However, in contrast, developing countries have been shrilling their demands to developed countries to fulfill their ODA commitments, plug loopholes in taxation and illicit financial flows from developing countries, technology and capacity building cooperation, and climate finance, which they insist is in accordance to the historical responsibility of the developed countries also known as common but differentiated responsibility or CBDR. However, despite these demands, the outcome document of the Conference is highly skewed in the favour of developed countries with little reference to the issues critical for developing and poor countries except a half hearted Technology Facilitation Mechanism body at the UN. G-77 and India faces increased pressure from the US, EU and the host Ethiopia to accept the outcome document, (as it is) in order to save the Conference from an obvious failure.

The sticking point in the negotiations is that while developed countries want developing and middle income countries to increase their domestic resource mobilization and enhance institutional capacity to increase their GDP tax ratio, they fail to acknowledge that it is not possible without plugging the loopholes in taxation and illicit financial flows from developing and poor countries to rich countries. According to an estimate against the USD 135 Billion of ODA, the capital flight from the third world to the developed world runs into Trillion Dollars in forgone taxation to the big TNCs, trade mispricing and illicit financial flows. India have been championing a demand for intergovernmental tax body, which should allow the international taxation rules to be made by member countries rather than under the domination of the OECD and other developed countries, however reportedly it might have to compromise its stance under the international pressure.

With the end of the Conference coming closer and no sight of developed countries committing to fulfill their ODA commitments and shortfalls, the Conference might meet the same insignificant fate as the previous. With declining political will and finances and without any dent in the inequitable global economic and political architecture, poor people in the world will have to hang on to their dreams of having a sustainable life. Till the life allows!


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