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Developing countries protest tax agreement

Saturday July 23 2016
G77

Members of the civil society protest outside the UNCTAD conference at the Kenyatta International Convention Centre in Nairobi on July 21. PHOTO | SALATON NJAU

Despite playing host to the United Nations Conference on Trade and Development (UNCTAD) conference for the first time in three decades, African delegates left the summit deflated after failing to push through a new order for monitoring tax dodging by multinationals.

The 70 ministers holding the talks failed to come to an agreement as JUSCAN (Japan, the US and Canada), the European Union, and former Soviet Union countries (Group D) rejected proposals from the Group of 77, led by China with African and other developing countries in tow.

Contentious issues on taxation and debt management led to a stalemate: A section of the civil society protested outside the Kenyatta International Convention Centre when it became apparent that developed countries had gotten their way on the tax, trade, investment and debt texts in the draft documents that were to be adopted at the end of the meeting.

In the pre-conference negotiating text, UNCTAD had proposed joint global action on illicit financial flows, tax evasion and avoidance.

The G77 wanted the text to exclude tax avoidance, which under most jurisdictions is legal.

In debt management, UNCTAD had sought to widen its mandate to offer technical assistance and formulate policies for prudent sovereign borrowing. Developed countries, however, did not want to be restrained from taking in more debt, but to be encouraged to focus on better management of the debt.

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The developed nations said having UNCTAD play a role in global taxation rules would conflict with the recent mandate given to the Organisation for Economic Co-operation and Development Base Erosion and Profit Shifting (BEPS) rules that aim to save the G77 countries an estimated $150 billion in tax losses.

African and developing countries had banked on the conference in Nairobi to push for a consensus on how to deal with tax evasion that has seen them lose more than $100 billion through dubious actions by multinationals.

UNCTAD Secretary General Dr Mukhisa Kituyi said there was consensus that the organisation would continue to have advisory roles on international economic co-operation outside of the taxation role.

On the sidelines of the conference, Tax Justice Network Africa Executive Director Alvin Musioma said that developed countries appeared keen not to allow a stronger mandate for UNCTAD.

“This shows their non-commitment in helping Africa address the tax evasion leaks, which is costing these countries a lot of revenue,” Mr Musioma said.

In a statement, a caucus of 400 civil society groups said that the developed nations were reluctant to address Africa dependency.

“The hypocrisy of their efforts is intended keep developing countries in a debt trap without escape. After this conference, no country from the EU or US or other members of JUSCAN can claim to be in favour of developing countries’ escaping the debt treadmill,” the group said.

Dr Kituyi said that Africa’s external debt ratios appear manageable. “Borrowing can be an important part of improving the lives of African citizens, but we must find a balance between the present and the future, because debt is dangerous when unsustainable,” he said.

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