Closing tax havens will create fairer global society: U.S. economist

Stopping abuse of tax havens and promoting global tax cooperation will help create a fairer global society, Jeffrey Sachs, U.S. economist and UN special adviser on the Sustainable Development Goals (SDGs) told reporters here Wednesday.

Sachs made the statement at a press conference here on the sidelines of a UN event on SDG-10, which aims to reduce inequality within and among countries.

When countries could not raise enough taxes, said Sachs, they were unable to provide many of the services required for achieving the 17 Sustainable Development Goals, approved by world leaders in September 2015, including health, education, nutrition and a safe environment.

"There are many countries in the world that are deficient in their tax raising effort," he said, "this comes at a very high cost and usually high inequality because the poor become highly vulnerable."

For many developing countries tax revenues are very low, and this can be made worse when multinational corporations illegally move money to so-called tax havens to avoid paying taxes in the countries where they operate.

"International cooperation is necessary so that we don't race to the bottom of countries that are offering certain kinds of impunity or hidden secrecy or cuts in taxes to try to attract capital," said Sachs.

According to the UN Economic Commission for Africa (UNECA), African countries lose at least an estimated 50 billion U.S. dollars each year to illicit financial flows, although this is considered a conservative estimate. The amount lost to illicit financial flows almost doubles what African countries receive in aid money from rich countries.

The Group of 77 plus China (G77+China), which represents 134 countries, called for an intergovernmental body for tax cooperation to be established to help fund the Sustainable Development Goals at the Addis Ababa Financing for Development Conference in June 2015.

However, agreement was not reached by the international community at the meeting and the body was not established.

"Addis Ababa meeting had a lot of debate on tax cooperation issues and as a result we are now discussing how we can strengthen the existing mechanism that deals with international tax issues," said President of the UN Economic and Social Council (ECOSOC) Oh Joon, who also spoke at the press conference.

"We haven't reached an agreement on how we will specifically go about it but I think that we will have that soon but definitely the mechanism will be strengthened compared to previous years," said Oh, the UN Ambassador of the Republic of Korea.

Sachs added that addressing other issues such as governance and transparency is also important.

"Cracking down on corruption is vital as well because corruption is one of the important reasons for high inequality," he said. Enditem