Global tax systems ‘must improve to achieve SDGs’

20 Feb 18

Countries around the world must strengthen the effectiveness of their tax systems to meet the Sustainable Development Goals and ensure inclusive growth, international organisations have said.

The UN, World Bank, International Monetary Fund and OECD also called for support to developing countries to address tax transparency and base erosion as well as profit shifting, at a three-day conference on taxation for SDGs last week, at the United Nations headquarters in New York.

IMF managing director Christine Lagarde said funding the global development goals has major implications for taxation.

She said: “Countries themselves need to raise more revenue in an equitable way. And the entire international community need to eradicate tax evasion and tax avoidance.”

According to the UN, domestic raising and spending of money remains a challenge for developing countries, which should aim to have a tax revenue of at least 15% of their gross domestic product to be able to provide basic services, such as healthcare, public safety and infrastructure.

In almost 30 of the 75 poorest countries in the world, tax revenues are below this.

“I call upon the international community to establish effective mechanisms to combat tax evasion, money laundering and illicit financial flows, so that developing countries could better mobilise their own resources,” the UN secretary-general, António Guterres, said at the opening of the forum.

Advanced countries should also pay “greater attention to spillovers” from their tax policies and step up support for stronger tax systems in developing countries, the UN said.

The international organisations called for countries to collaborate on building a fair and efficient international tax system.

The president of the World Bank said such a system “combined with good service delivery and public accountability, build citizen’s trust in government and help societies prosper”.

OECD’s secretary-general Ángel Gurría also said: “Effective taxation is essential to promote a more inclusive and sustainable growth. It is fundamental to making globalisation work for all.”

He added this is crucial for achieving the SDGs.

A report last month suggested an additional $1trn could be found through so-called blended finances to fill the funding gap for the SDGs, which is currently estimated between $2trn and $3trn a year.

David McNair of the ONE Campaign said last week the New York summit could offer an opportunity to “start the process of fixing the broken tax system”.

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