Tax Haven Listing in Multiple Hues: Blind, Winking or Conniving?
By Jahanzeb Akhtar and Verónica Grondona
Tax havens are among the biggest challenges faced by developing countries in achieving their national development goals. States, international organisations, multilateral agencies and non-governmental organisations have all made several efforts at compiling ‘lists’ of tax havens at the multilateral and national levels, with varying levels of seriousness and outcomes. This research paper examines these efforts by analysing the objectivity of criteria used and the clarity of the final outcome in a comparative manner. The paper is organized into four sections dealing with the tax haven blacklisting by the Organisation for Economic Co-operation and Development (OECD), the countries of the South, the European Union (EU) and an analysis across lists. The concluding section offers some suggestions.
Preserving Special & Differential Treatment in WTO: statement by Ambassador Zhang Xiangchen of China at the General Council Meeting
There remain significant gaps between developing and developed WTO Members in terms of economic and social development, and developing Members still face tremendous capacity constraints in participating in the multilateral trading system. The fundamentals for the application of special and differential treatment in favor of developing Members remain unchanged. US Communications WT/GC/W/757/REV.1 and WT/GC/W/764 neglect this. Below is the statement by H.E. Mr. Zhang Xiangchen, Permanent Representative of China to the World Trade Organization (WTO), at the General Council Meeting on Communications of Development on 28 February 2019. (more…)
Developing Countries and the Contemporary International Tax System: BEPS and other issues
By Marcos Aurélio Pereira Valadão
This policy brief addresses the design of international taxation and tax cooperation in the context of issues presented in the Organisation of Economic Co-operation and Development (OECD)/Group of Twenty (G20) Base Erosion and Profit Shifting (BEPS)Project. It further considers their significance for developing countries and provides the Brazilian approach to those issues. The brief concludes by exploring the importance of regional cooperation vis-à-vis international organizations and highlights relevant considerations for developing countries engaging with the contemporary international tax system.
Illicit Financial Flows: Conceptual and Practical Issues
By Hon. Irene Ovonji-Odida and Algresia Akwi-Ogojo
The issue of illicit financial flows (IFFs) is of great significance for many countries looking to mobilize domestic resources for achieving their development goals. The High Level Panel on Illicit Financial Flows from Africa, led by H.E. Thabo Mbeki, brought the issue into the global spotlight, notably since the release of exposés like the ‘Panama Papers’. This policy brief elaborates on the conceptual underpinnings of IFFs, its sources and the development costs they generate. Building on the report of the High Level Panel, it provides recommendations to stem IFFs from developing countries.
The Definition and Treatment of Tax Havens in Brazilian Tax Law between 1995 and 2015
By Alexandre Akio Lage Martins
Over the years, a number of ‘tax haven lists’ have been created at the national and international level, with varying definitions and criteria used to identify jurisdictions falling under their scope. This policy brief presents the experience of Brazil in compiling their national list of tax havens, the road map they followed for its implementation, and the impact that it has had on their foreign investment flows. It also provides the lessons learnt from this experience, which can be positively utilized by other developing countries.
Stemming ‘Commercial’ Illicit Financial Flows & Developing Country Innovations in the Global Tax Reform Agenda
By Manuel F. Montes, Daniel Uribe and Danish
Illicit Financial Flows generated due to the commercial activities of multinational enterprises are quantitatively the most important challenge faced by developing countries in achieving the Sustainable Development Goals. Current efforts for stemming these illicit flows and reforming the international tax system are however being led by developed countries, with developing country interests poorly reflected in the reform agenda. This research paper highlights the tax issues of great priority for developing countries and how international tax cooperation can contribute to preventing such illicit flows.
A Human Rights Based Approach to International Financial Regulatory Standards
By Daniel D. Bradlow
Globalization and information and communication technologies pushed national financial regulators to establish international standard setting bodies (SSBs) which promote non-binding international financial regulatory standards. However, finance inevitably has social and human rights impacts and the SSBs and their members are not meeting their responsibility to account for these impacts in their international standards. This failure means that financial regulators and institutions may underestimate the risks associated with their operations leading to misallocations of credit, less safe financial institutions and less efficient and transparent financial markets. To avoid this problem, SSBs should adopt a human rights approach to standard setting. The benefits of doing so will exceed the costs. (more…)
The Causes of Currency Turmoil in the Emerging Economies
By Yuefen LI
Many emerging economies and developing countries are facing strong economic headwinds. Currency depreciation pressure is mounting for some countries. Argentina and Turkey are coping with currency crises, massive capital outflows and hyperinflation. To say their crises are completely self-inflicted is not correct. The exogenous shocks have played an important role. Other emerging economies and developing countries as a whole should be vigilant and try to defend their currencies and maintain financial stability. It is also high time to try to fix the flaws in the international financial system.
Exchange of Information: Indian Experience, Developing Country Implications
By Jahanzeb Akhtar
Exchange of tax-related information between countries is a critical tool for addressing information asymmetries between governments and taxpayers that facilitate tax evasion/avoidance. However, the existing system of information exchange has been essentially designed and implemented by the OECD, without the participation of developing countries. This policy brief thus discusses India’s experience with implementing information exchange for tax and other purposes, with lessons being drawn for other developing countries grappling with base erosion and profit shifting.
Interaction of Transfer Pricing & Profit Attribution: Conceptual and Policy Issues for Developing Countries
By Dr. Vinay Kumar Singh
Till 2010, model tax conventions treated profit attribution to permanent establishments and transfer pricing under different articles, and profit attribution under Article 7 allowed sales to be taken into account both in the direct accounting method as well as the indirect apportionment method. However, the revised Article 7 in the 2010 update of the OECD Convention approximated profit attribution with transfer pricing and omitted the option of apportionment, thereby undermining sales and contributions made by market jurisdiction to business profits. When a tax treaty retains Article 7 based on the UN Convention or the earlier OECD Convention, Contracting States can take sales into account and also opt for apportionment. Developing countries need to fully understand these implications of Article 7 in their tax treaties, and opt for informed choices for transfer pricing and profit attribution to permanent establishments, including apportionment that takes sales into account.
Digital economy is a given, as much as industrialization was inevitable on invention of means of incorporating steam and later fossil fuel and electric power into manufacturing. It is not a matter of being for or against it. It is about what kind of digital economy we should have. A development agenda for digital economy needs to be articulated, based on a narrative that takes proper account of developing country interests. (more…)
There are increasing warnings of an imminent new financial crisis, not only from the billionaire investor George Soros, but also from eminent economists associated with the Bank for International Settlements, the bank of central banks. The warnings come at a moment when there are signs of international capital flowing out of some emerging economies, including Turkey, Argentina and Indonesia. Some economists have been warning that the boom-bust cycle in capital flows to developing countries will cause disruption, when there is a turn from boom to bust. All it needs is a trigger, which may then snowball as investors in herd-like manner head for the exit door. Their behaviour is akin to a self-fulfilling prophecy: if enough speculative investors think this is the time to move back to the global financial capitals, then the exodus will happen, as it did in previous “bust” phases of the cycle. (more…)
