First Global Conference of the Platform for Collaboration on Tax - Tax and the SDGs

Opening Session (Plenary): Financing for Development (FFD) and the SDGs

Purpose of the session

The panel will provide a high-level discussion of the linkages between the Sustainable Development Goals (SDGs) and Financing for Development (FFD). The changing roles within FFD of Official Development Aid (ODA), private investment, and taxation will be examined. The panel will also introduce the scope of the problems facing developing countries as they try to achieve sustainable development.

In September 2015, member countries of the United Nations adopted a “far-reaching and people-centered set of universal and transformative Goals,” the 17 SDGs. The agenda is to be implemented by 2030. The details of problems vary across countries, but the global scope of current problems is vast and affects both developing and developed countries. Achieving the SDGs will require large-scale FFD, which in turn will demand intense attention to tax policy and administration, both within individual countries and through worldwide cooperation.

Revenue growth is necessary in most countries, but not all growth will be available to achieve SDGs. Furthermore, tax policy and administration can help or hinder the achievement of many SDGs. Obvious examples include, but are not limited to, Goal 1 to end poverty, Goal 8 to promote sustainable growth, Goal 10 to reduce inequality, and Goal 13 to combat climate change. The complex interactions among these issues will be examined and discussed by panelists who will bring expert, ministerial, and private sector perspectives to the topic.

Background

This panel follows the four Platform Leaders’ video messages and a three-minute opening video that will introduce the Platform and the subject of the conference. There should be about 55 minutes available to the panel, including questions and answer (both among the panel and with the audience). The panel is intended as a high-level “Davos-style” moderated discussion.

The panel can elaborate on the themes introduced in the opening videos (which will be provided to the panelists prior to the conference). It should bring in the different stakeholders in FFD. This session should be distinct from, but set the stage for, Session 1 (Plenary) “Setting the Stage: Perspectives on Taxation's Role.” (Session 1 will focus on the taxation pillar of FFD, rather than discussing FFD more broadly.)

A brief discussion of the role of the Platform for Collaboration on Tax (PCT) should be included in this panel discussion. In addition, it should be noted that the role of the PCT will be discussed more fully in the Closing Session, which will also start building a “To Do List” for the Platform, based on the discussions that will have taken place at the Conference.

Last Updated: Feb 14, 2018

Session 1 - Setting the Stage (Plenary): Perspectives on Taxation's Role  

Purpose of the session

The session will elicit different country views on the role of taxation in helping them to achieve the SDGs. It will focus on both raising sufficient revenues to support SDG programs and how tax policy and implementation can promote (or impede) SDG priorities such as inclusive growth, gender and income equality, and human development. In the relationship between taxation and SDG, are there win-win situations? Where are there tensions between taxation and SDGs. What compromises are necessary?

Background

This session should be more focused than the Opening Session. It should focus on taxation and the SDGs, while the Opening Session looked at Financing For Development (FFD) more broadly.

Low income countries on average have done well in mobilizing tax revenues over the past 15 years—with the average ratio of tax revenue to GDP rising by some 5 percentage points, to nearly 15 percent. Nonetheless, nearly half of low income countries still fail to achieve a tax ratio of 15 percent of GDP—a level frequently pointed to as the minimum necessary to support development. Further, tax competition in many forms, particularly through the grant of tax exemptions and incentives to attract investment, increasingly undermine revenue realization. Fragile states typically fall in the set of countries with very low revenue ratios.

Panelists

Session 2 (Plenary): DRM, Fiscal Sustainability and Growth: Evidence to Date

Purpose of the session

Domestic Revenue Mobilization (DRM) has increasingly become the key source of funding for national development plans. However, increasing DRM remains a challenge for many governments, particularly in low-income countries that are heavily dependent on volatile natural resource revenues. This session will examine the role of taxation in promoting macroeconomic stability and equitable growth in different developing countries.

A key topic will be the difficult trade-offs each country faces when attempting to balance the often-competing objectives of tax policy (revenue, efficiency, equity and effectiveness). Policy or administrative options that improve one goal may harm others. The panel will also examine how international tax competition (generated by the increased importance of intellectual property and other changes to supply and value chains) makes sustainable DRM and economic growth more difficult, and how different countries have addresses these difficulties.

Background

The SDGs have been launched at a time when global growth and productivity gains are slowing down, which limits the resources available to help the world’s poorest and most vulnerable. Yet, people’s demands for services, infrastructure, and equitable institutions continue to rise. It is unlikely that development aid can keep up with the needs of developing countries, and dependence on aid can pose difficult social and economic problems. A successful tax regime can address developing countries’ needs in two vital ways. First, a successful tax regime can efficiently generate necessary domestic revenues to support government development programs. Second, a successful regime can promote economic growth and address equity concerns. Balanced economic growth raises living standards and generates additional revenues to support SDGs.

Building a successful tax regime requires strong support from multiple stakeholders, including government authorities, legislators, private business, civil society, and the population at large. Obvious barriers to success include parochial politics and entrenched corruption. Unless entrenched interests and corruption are limited, success will be very difficult to achieve and maintain. In addition, many developing countries have faced the “natural resource curse”— the paradox that countries with abundant natural resources often face slower growth and worse development outcomes than countries without resources. Good governance will be required to achieve the transformational vision of the SDGs.

Speakers

Session 3-A (Parallel): Resource Abundance and Taxation: Avoiding the Curse

Purpose of the session

This session will explore the complexity of taxing natural resources, focusing on petroleum and mineral extraction. Key issues include determining the appropriate government share of resource profits, while encouraging investment in exploration and development; ensuring that the system is designed to respond to volatile changes in resource prices and project outcomes; striking the right balance between other tax revenues and receipts from natural resources; and appropriately designing the regime to minimize negative impacts on the population and the environment.

Background

About a third of the world’s countries —mostly developing countries—derive a significant portion of their government revenue from natural resources. Such resources generate location specific economic rents, which should be captured—at least in part—by the country in which those assets, representing the public patrimony, are located. Numerous variations exist in fiscal regimes designed to capture those rents, while still allowing private sector partners to recover their investment, including an appropriate return, from developing and extracting the resource. The role of royalties, of rent taxes, of the normal corporate income tax, and contractual schemes such as production sharing contracts are some of the moving parts involved. Countries are well advised to create a uniform framework for regimes in specific minerals—oil, gas, various hard minerals—rather than discretionally negotiating each contract from scratch, resulting in variations not based on solid economic rationales from the country’s point of view. It is critical for country governments to be able to model the returns—to them, and to partner companies—under multiple scenarios, especially in the face of variations in world prices for the resource in question.  Countries must also ensure that they have adequate institutions and capacity to administer regimes and collect revenue from these sectors where issues of base erosion and profit shifting by multinationals loom large. Upon collection of revenues, the most appropriate ways to spend, or invest, the government returns must also be considered. Finally, transparency in regard to fiscal regimes, reporting of revenue flows and returns to governments and investors is critical as well.

Speakers

Session 3-B (Parallel): Taxation for Better Gender Equality

Purpose of the session

This session will focus on the gender implications of tax systems in developing countries. It will examine both how existing provisions of tax policy and administration may sometimes reinforce existing gender inequities, and how reform can help reduce those inequities. The session will examine examples of both explicit gender bias and implicit biases. In addition, since women are particularly vulnerable to poverty, the session will examine how the distribution of tax burdens across taxpayers indirectly influences gender equity.

Background

Most analysis of tax equity examine income or wealth distributions of tax burdens. This session aims to broaden that discussion by examining gender-differentiated impacts of taxation, and discussing how those different impacts could and should become part of tax policy and administration reform. Not only is gender equality one of the SDGs (Goal #5), but lack of attention to gender issues can also undermine the effectiveness of many policies whose objective may have not be aimed directly at gender equity.

Gender inequalities have been persistent in almost all societies. Gender bias in taxation is an outgrowth of broader bias in the society, but bias in the tax system also reinforces persistent inequalities. Two forms of bias are of concern, explicit and implicit bias. Explicit gender bias is the existence of specific provisions in tax law or regulations that treat men and women differently. Implicit (or de facto) bias is the existence of provisions in tax law or regulations that consistently have different impacts on men and women, because of different social and economic roles individuals typically play based on their gender.

Gender equity and traditional equity analyses overlap in one key respect. Women are particularly vulnerable to poverty, especially so for single women with young children. How a tax system distributes tax burdens across income or wealth classes will have additional implications for gender inequalities.

Speakers

Session 3-C (Parallel): Fiscal Policy for Sustainable Development: Environmental Taxes

Purpose of the session

Several SDGs focus on issues in affordable, clean energy (SDG 7), ensuring sustainable consumption (SDG 12), and action to combat climate change and its impacts (SDG 13). This session will explore how fiscal policy can contribute to achieving these goals, including issues relating to local pollution and negative externalities in addition to climate change issues. through the lens of environmental taxation and fiscal frameworks to enhance resilience to climate risk in vulnerable countries. These SDGs pose many issues ranging from tax policy, to administration, to coordination among government agencies within countries, to assessing the burden of higher energy taxes or prices on vulnerable households and firms.

Background

There is already much experience at national and subnational levels with carbon taxation, permit trading systems, and broader energy price reforms; and considerable work has been done to assess the appropriate prices for energy to offset both global and local externalities. Most countries have made mitigation pledges under the Paris agreement—yet it is not clear how such pledges will be met, at the technical and political levels. Much work remains to be done in considering the fiscal aspects of necessary adjustment to climate change. And there are many issues regarding the size and appropriate use of revenues from taxes on emissions and other environmental taxes. This session will consider questions in all these areas.

Speakers

Session 4 (Plenary): Tax Administration: How Tax Administration Can Contribute to Achieving the SDGs

Purpose of the session

Effective tax administration institutions are essential, not only through their effect upon the relations between governments and their citizens, but directly through their effect on the level of revenue raised under any given tax policy framework. And a, if not the, main factor in tax revenue performance in the modern world of self-assessment is the level of taxpayer compliance that the administration is able to achieve. Many factors influence that level, ranging from citizens’ belief that the institutions and employees are honest and that government will spend the money wisely on their behalf, to the credibility of the administration to ensure that taxpayers that cheat or avoid payment of their due taxes have a substantial chance of being caught and fined or punished, to the administrative ease—or lack thereof—with which taxpayers who want to comply can comply with their obligations.

Background

There are many types of and areas for tax administration reform that have a major impact on compliance levels: the structure of the organization itself; management of its operations; management of information (including but by no means limited to IT issues); and relationship management with taxpayers and other stakeholders. Some countries have done well in reforming their tax administration institutions and operations, while others have struggled. This session will examine what causes such differences—what allows some reforms to succeed while others do not do so well? Further, how can such differences be quantified, or at least systematically benchmarked?

Speakers

Session 5 (Plenary): International Tax, BEPS and the SDGs

Purpose of the session

The session will discuss both the challenges and opportunities around ensuring the taxation of MNCs contributes towards meeting the SDGs. It will hear a variety of viewpoints, on the challenges of implementing an effective tax regime in a globalized and increasingly digital age, how the universal approaches envisaged by the SDGs apply to international taxation, and what approaches have been/could be most beneficial for developing countries. The session will explore the balance between creating an environment that encourages investment to grow the economy and ensuring sufficient distribution of the benefits of growth so that SDG outcomes can be realised.

Background

The 2014 UNCTAD World Investment Report highlighted the investment gap in developing countries, around $2.5 trillion, if the SDGs are to be realized. This scale of investment requires both private and public investment, and as such there is a need to both encourage investment, and ensure a taxation regime that is able to generate revenues to increase public investment through an adequate policy framework, as called for in the Addis Ababa Action Agenda.

For many developing countries the current situation is marked by the widespread use of inefficient tax incentives that are of limited value in attracting investment, and dramatically reduce revenues raised on investment.  Developing countries are also particularly vulnerable to corporate tax avoidance. They are estimated to suffer most from BEPS activity, due to their existing capacity to collect taxes and higher proportional reliance on corporate income tax. 

There has been intense activity in recent years with respect to international taxation, most notably in the area of BEPS. This has included the G20/OECD project on BEPS and relevant outputs, the establishment of the Inclusive Framework on BEPS and the work of the UN Tax Committee on issues relevant to protecting and broadening the tax base of developing countries.  This has broadened participation of developing countries in the international dialogue and decision making on taxation, a shift that contains the potential for international taxation to embody the universal agenda of the SDGs.

As a result of that recent activity, developing countries may now rely on  new tools in order to collect taxes, such as the outputs from the BEPS project, the Platform toolkits and the results of the work of the UN Tax Committee. Though, developing countries also face the biggest challenges due to their capacity constraints. Improving the capacity of developing countries to tax MNCs effectively is therefore a key challenge, and may require developing countries to adapt and supplement the approaches adopted by developed countries. 

Speakers

Session 6-A (Parallel): Transformational Development: Taxing to Improve Health and Human Development

Purpose of the session

The purpose of this session is to deepen understanding of the role of an efficient, fair and transparent tax system and a well-designed and implemented tax policy on improving health and human development outcomes.

Increasing tax revenue is essential for covering Human Development related expenditures such as health and education in a sustainable manner. The returns on raising revenue for investment in health and education are large (see Sheehan et al. 2017). For example, better health contributed  one-quarter percent point to annual economic growth in East Asian and industrialized countries during  1965-1990 (Jamison, Lau and Wang 2004). 

In addition to the revenue aspect, tax policy and practices can play an important role in influencing people’s behavior towards choices that impact human development. For example, by improving incentives for female participation in the labor force, increased household investment in early childhood education, and incentives for smoking cessation and improved diets.

The discussion will cover health-related taxation, such as excise taxes on alcohol and tobacco (“sin taxes”), fuels, and sugary beverages, which can have important impact on health outcomes. It will also cover less direct impacts, such as the impact of taxation on poverty, education, or other factors that in turn affect human development.

The session will discuss how countries can improve their tax systems with a view to better human development. Several questions are relevant: What are possible trade-offs and what are the possible limits of taxes aimed at human development, such as sin taxes? What are the most effective tax instruments? Should a country try to raise taxes to have a greater budget for issues (such as early childhood development) or should it taxes be designed to drive improved incentives, which could bypass public-sector bureaucracy? Often, this distinction is seen as a win-win situation—taxation can both increase revenue and provide incentives for better behavior—is this the right way of looking at the challenge? Is earmarking – the linking of specific revenue with a specific expenditure – a necessary evil (or unambiguous good) to garner political support to tax health compromising products and goods? (For example, the Philippines successful linked their additional tobacco tax revenue with higher spending on its national health insurance scheme.) Throughout, the panel will examine lessons learned from what has worked and what has not in various developing countries, as well as the role that the PCT, its member organizations and other stakeholders can play.

Background

This session will start with a 15-minute slide presentation by one of the panelists (Dean Jamison), addressing use of taxation to improve health and human development. The presentation will be followed by discussion, comments, and questions from the other panelists, before a question and answer session with the audience.

Speakers

Session 6-B (Parallel): Revenue leakages: Illicit Financial Flows

Purpose of the session

SDG 16 includes the following target: “by 2030 significantly reduce illicit financial and arms flows, strengthen recovery and return of stolen assets, and combat all forms or organized crime”.  This session will focus on illicit financial flows, in particular those caused by tax evasion and corruption.  Different stakeholders will look at the issue of IFFs from different viewpoints, highlighting both the actors involved and the measures that can be taken to reduce IFFs.

Background

There has been significant focus on IFFs in recent years, most notably with the High Level Panel on Illicit Financial Flows from Africa chaired by President Thabo Mbeki.    Estimates of the scale of IFFs vary, as do definitions of what activities are incorporated in IFFs.  Currently, there is no agreed indicator to monitor progress towards meeting the target on IFFs.  There is, however, common agreement that the scale of IFFs is significant (likely several times the ODA flows). The impact of IFFs is broader than the scale of the financial flows: they deprive countries of domestic capital and revenues for investment, undermine the functioning of the markets, enable and potentially magnify the effects of corruption, and constitute obstacles to transparency and accountability.

As emphasized in the Addis Ababa Action Agenda, addressing IFFs require many different actors because of the different countries involved and because different tools have traditionally been used to try to deal with IFF with respect to different types of activities.  There have been a number of significant developments in recent years that have the potential to reduce IFFs if widely implemented and utilized, including the Automatic Exchange of Tax Information and improved standard on the collection, storage and sharing of information on the beneficial owners of companies and other entities.

Speakers

Session 6-C (Parallel): DRM and State Building: Taxation for Better Governance 

Purpose of the session

This session will examine the role of DRM in state-building by enforcing a social contract between citizens and the state. This session is based on the fundamental premise that it is not just how much revenue is raised that matters for development and growth, but also how that revenue it is raised. Strong tax systems are required to achieve equitable treatment of taxpayers, which in turn enhances state-building. In particular, the session will focus on development and implementation of specific tax policy measures and administrative and institutional frameworks designed to counter abusive tax practices, whether committed by taxpayers or government. It will address both domestic and international tax issues, including transfer pricing capacity, the design and implementation of tax treaties, and exchange of information among governments. Participants will discuss how improvements in tax systems can improve government credibility, reinforce government institutions, and improve government effectiveness in a way that is measurable over time.

Background

There is a growing consensus that increasing domestic resource mobilization can contribute to state building and enhance public accountability. There are at least two components to this process: building trust in the tax system itself; and establishing a clear and credible link between the tax revenue raised and the public goods and services that tax revenue pays for. This session is designed to address the first component.

Building trust in the tax system can promote the wider legitimacy of the state, but too often, weak tax systems have instead undermined state building. Governments often do not trust taxpayers to behave honestly, and taxpayers often have little incentive to do so. Reversing this vicious cycle by strengthening tax capacity can be critical to improving governance and accountability.

Equity plays a central role in the relationship between the populace and the tax system. Distributional objectives for lower-income households are often best achieved on the spending side, but distributional objectives for higher-income and wealthy households are best achieved through taxation. Failure to equitably tax high-income and wealth households will generate distrust in the tax system and the state. Recent public document disclosures (e.g. the “Panama Papers” and “Paradise Papers”) have re-emphasized that equity must also be seen in an international context. This is particularly true for developing countries, where much of the business tax base in held by foreign corporations or individuals. Reform of international rules will need to be appropriate for circumstances and priorities of developing countries.

Speakers

Session 7 (Plenary): Equity Challenges: Taxation for Better Income Distribution

Purpose of the session

This session will examine existing and growing equity challenges worldwide, and the role taxation in improving (or exacerbating) those problems. By looking at country examples, the session will examine some of the linkages between taxation and equity, including how a tax regime:

·         Distributes tax burdens across a country’s population

·         Encourages (or discourages) work and accumulation of human capital

·         Generates resources to fund public goods, services, and programs that raise the standard of living of lower-income households

·         Collects appropriate levels of revenue from high-income earners and foreign enterprises.

While tax provisions to address equity are well known and studied, best practices are often not adopted or fail to achieve their stated goals. Failures (or successes) are often a consequence of political considerations. The panel will examine country-examples of how proposed or enacted policies would harm (or benefit) the interests of political actors who have the power to block (or promote) those tax provisions. The country experiences should provide lessons for how to make more effective any fiscal policy designed to promote equity.

Background

The societal benefits from provision of public goods and services to provide equal opportunities for all and to reduce poverty are clear. Public goods and services and social programs protect the most vulnerable and allow low-income individuals to increase their human and economic capital. Protecting the most vulnerable, avoiding extreme inequality, allowing for economic (and social) mobility generally promotes more peaceful and stable societies, for the benefit of poor and rich alike.

Yet, while none of the four frequently cited goals of good tax policy (revenue, efficiency, equity and effectiveness) are simple or straightforward to achieve, equity is probably the most difficult to achieve. In most countries, there is little agreement on what distribution of income or wealth is desirable, let alone how much the government should do (through taxes and expenditures) to address inequalities. There is often less willingness among voters for their governments to make significant expenditures addressing global inequality. Even when there is some social agreement in principle that some income/wealth redistribution is appropriate, few individuals volunteer to have a significant share of their own income or wealth retributed to others. Rather, privileged groups typically defend their self-interest, either explicitly or indirectly. Thus, efforts to address equity within a tax (and spending) system are typically very political.

The session will need to examine data on inequality and techniques for addressing inequality, but ultimately it will need to address politics and social contracts to make progress on successfully promoting more equity.

Speakers

Session 8 (Plenary): Tax Capacity Development 

Purpose of the session

This session will examine what has (and has not) worked in improving the tax capacity of developing countries. It will seek to identify lessons learned from experience, highlight the progress made in the implementation of the recommendations of the Platform for Collaboration on Tax that were included in the report Enhancing the Effectiveness of External Support in Building Tax Capacity in Developing Countries, and identify areas where further work is needed. It will also discuss tax capacity development in the context of the wider picture of effective development cooperation, the SDG 17 goal on partnerships for development, and how tax capacity development ultimately feeds through to SDG outcomes across the board.

Background

Capacity challenges are one of the biggest obstacles faced by the tax systems of developing countries and much of the development assistance on tax is targeted at capacity building.  There has been a strong focus on this in recent years, as evidenced by the following SDG 17 target: “Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection”. In the Addis Ababa Action Agenda, countries agreed to build capacity in developing countries to improve the fairness, transparency, efficiency and effectiveness of tax systems (para 22). On this basis, the members of the Addis Tax Initiative committed themselves to doubling the funding available for tax capacity building between 2015-2020.

Even with funds increasing, development assistance aimed at improving tax capacity remains a tiny fraction of the overall Official Development Assistance (around 0.15% of ODA in 2015). Ensuring the effectiveness of development assistance is therefore crucial.  This was the main focus of the report Enhancing the Effectiveness of External Support in Building Tax Capacity in Developing Countries (see above).  The main recommendation of that report was the to encourage the adoption of countryowned Medium Term Revenue Strategies (MTRS), which set out an overall plan for the development of the revenue system. This approach should help to gather political support within countries and should provide a mechanism to facilitate improved donor coordination.

Given the universal nature of the SDGs, there is a need to consider capacity development, as well as actions that support it, that would go beyond the provision of technical assistance in developing countries.  This need for policy coherence is part of the commitment made by Addis Tax Initiative signatories and a number of examples of possible actions can be seen in the 2011 Platform Partners’ report entitled “Supporting the Development of More Effective Tax Systems.”

Ultimately, progress towards meeting he SDG target on tax capacity building will translate into progress with respect to other SDGs because tax revenues allow government spending in the areas covered by these other SDGs.  Integrating tax capacity development into the development of the wider fiscal system is therefore a key part of maximizing the role of tax in delivering the SDGs.

Speakers

Session 9 (Plenary): The Way Forward: Rising to the Challenges of the SDGs, and Role of International Support and Collaboration  

This session will close the Conference with a discussion on how possible tax reforms can contribute to accomplishing the SDGs and on the complementary role that international tax cooperation may play. It should cover the work of international and regional organizations, as well as other relevant international initiatives. The session will cover Automatic Exchange of Information (AEOI), regional agreements, among others.