Illicit Financial Flows (IFFs)

Tax Cooperation Policy Brief 24, 29 July 2022

A Global Asset Registry to track hidden fortunes and for asset recovery

By Ricardo Martner

Financial opacity and offshore hidden wealth have become a major economic and political problem. Tax havens continue to exist and provide financial secrecy services that allow the richest individuals in the world to hide their wealth from national tax authorities. Implementing a Global Asset Registry could help tax authorities to identify, record and tax all wealth, regardless of where it is held. It would also be a critical tool in efforts to recover stolen assets of countries suffering from widespread corruption.

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Research Paper 161, 26 July 2022

Two Pillar Solution for Taxing the Digitalized Economy: Policy Implications and Guidance for the Global South

by Irene Ovonji-Odida, Veronica Grondona, Abdul Muheet Chowdhary

The taxation of the digitalized economy is the single most important topic in international tax negotiations today. The OECD has devised a “Two Pillar solution” to the problem. Pillar One is focusing on a reallocation of taxing rights to market jurisdictions, which are largely expected to be developing countries, and Pillar Two is instituting a global minimum tax. The Pillar One solution, known as Amount A, will be codified into a Multilateral Convention (MLC) and is expected to be placed before countries for signature in early 2023. The solution ushers in a new paradigm in the taxation of multinational enterprises but has immense complexity and likely minimal revenue gains for most developing countries. It will also require them to give up the right of unilateral tax measures on all out-of-scope companies, meaning they will only be able to tax the fewer than 100 companies likely to be in-scope, if at all. The decision to sign or not is thus a historic one, as it will lock developing countries into a constricted new framework, at a time when revenue needs are especially critical to recover the economies from COVID-19 in the context of a turbulent state of the global economy.

However, the United Nations too has a solution, known as Article 12B. This operates in a different manner and is a minor modification to the existing decentralized international tax system which is based on bilateral tax treaties, and which developing countries are more familiar with. It is also likely to generate far higher revenues than Amount A, and does not restrict any of their sovereign taxing rights. This Research Paper assesses the various implications for developing countries from adopting the OECD’s or the United Nations’s respective solutions and concludes with a possible global South response to the Two Pillar solution.

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Outcomes – CoDA-South Centre Dialogue Series on IFFs, 1 June 2022

Outcomes and Recommendations of the CoDA-South Centre Dialogue Series on Illicit Financial Flows (IFFs): Comparing Tax Revenues to Be Raised by Developing Countries from the OECD and UN Solutions for Taxing the Digital Economy

The Coalition for Dialogue on Africa (CoDA) and the South Centre co-organised the first of a series of dialogues on Illicit Financial Flows (IFFs) on 1st June 2022. The dialogue was convened mainly to launch and discuss a research paper jointly commissioned by CoDA and the South Centre titled ‘A Tough Call? Comparing Tax Revenues to Be Raised by Developing Countries from the Amount A and the United Nations Model Treaty Article 12B Regimes’.

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Contributions on taxation, IFFs and human rights to IE report to UNGA 77, 30 May 2022

South Centre Contributions on ‘taxation, illicit financial flows and human rights’ to the report of the Independent Expert to the UN General Assembly, 77th session

The South Centre offers its comments to the report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights to the General Assembly, 77th session.

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Statement to G24, 19 April 2022

STATEMENT BY DR. CARLOS CORREA, EXECUTIVE DIRECTOR OF THE SOUTH CENTRE, TO THE MINISTERS AND GOVERNORS MEETING OF THE INTERGOVERNMENTAL GROUP OF TWENTY-FOUR (G24)

April 2022, Virtual Meeting

The lingering COVID-19 pandemic, monetary tightening and increasing geopolitical tension have slowed down the global economic recovery. Projections for the 2022 global GDP growth have been slashed by about one percentage point by major international institutions. Together with inflation, especially spikes in food and fuel prices, and ongoing supply chain disruptions, uncertainty and fragility are looming over the two-speed world economic recovery. This has dimmed the hope to halt or reverse the trend of the rapidly increasing number of people falling into extreme poverty and suffering from hunger. While the COVID-19 virus continues to mutate, the access to vaccination continues to be a major world concern. Developing countries’ supply and financing constraints for vaccines and critical medical products must be addressed.

In view of the multiple challenges faced by developing countries, the efforts of G24 in helping to coordinate the positions of developing countries on international monetary and development finance issues remain critical. The South Centre will continue to support those efforts.

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Outcomes – FIRST AFRICAN FISCAL POLICY FORUM, 16 December 2021

Outcomes and Recommendations of the FIRST AFRICAN FISCAL POLICY FORUM

South Centre and Coalition for Dialogue on Africa

The Coalition for Dialogue on Africa (CoDA) and the South Centre co-organized the First African Fiscal Policy Forum on 16 December 2021 with the theme “Inequalities in Taxing Rights”. It was the first of a series of dialogues aimed to bring together key stakeholders from Africa and the Global South on tax matters, to examine the legitimacy of the international tax reform processes and illicit financial flows and the place and role of Africa in the processes. The dialogue discussed contents of the Two-Pillar Solution of the Organization for Economic Cooperation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and its implications for African countries. It analyzed other alternatives to the Inclusive Framework, including recommendations of institutions such as the United Nations High-level Panel on Financial Accountability, Transparency and Integrity (UN-FACTI) and Article 12B on Taxation of Automated Digital Services of the UN model Tax Convention. The forum sought to discuss the reasons some countries such as Nigeria, Kenya, Pakistan, and Sri Lanka did not endorse the Inclusive Framework proposals and made recommendations for African countries.

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First African Fiscal Policy Forum, 16 December 2021

First African Fiscal Policy Forum

Inequalities in Taxing Rights

Thursday, 16 December 2021, 02:00 PM (South African Standard Time), Virtual Meeting

The Coalition for Dialogue on Africa (CODA) and the South Centre, together with other key stakeholders are co-organizing a series of dialogues to discuss and address the issues related to stemming IFFs from Africa.

The main objective of this dialogue series is to bring together key stakeholders to discuss the current global processes towards combatting IFFs, re-allocation of taxing rights, the role of African regional institutions, the importance and place of Africa’s voice and representation in these processes.

The dialogue series will examine the legitimacy of these processes, including the nature of Africa’s representation in the global conversations and the outcome of the processes with respect to Africa’s interest.

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SouthViews No. 223, 14 July 2021

Financial integrity for sustainable development: Importance of developing country joint action on tax, corruption and money-laundering 

By Dr. Ibrahim Mayaki

Countries are beginning to realize that the landmark agreement on the Sustainable Development Goals will be unrealized if financing is not found for the agenda. Much of that financing can be found if illicit financial flows are stopped. In March 2020, the Presidents of the United Nations General Assembly and Economic and Social Council convened a High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) to review global cooperation and recommend further actions by the international community as a contribution. Dr. Ibrahim Mayaki, the Co-Chair of the FACTI Panel, outlines the measures that the FACTI Panel recommended to combat tax abuse, corruption and money-laundering. He emphasizes the importance of developing countries taking a leading role in proposing solutions, and the value of inclusive international institutions. The text below is based on remarks that were made at a briefing to the Group of 77 and China in Geneva in April 2021, jointly organized by the FACTI Panel Secretariat and the South Centre. The Panel’s full report can be read at: http://www.factipanel.org/report.

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Submission on on Challenges and Measures to Prevent and Combat Corruption and Strengthen International Cooperation, June 2021

Submission to the Special Session of the General Assembly on Challenges and Measures to Prevent and Combat Corruption and Strengthen International Cooperation

South Centre, 28 May 2021

The South Centre submission to UNGASS2021 highlights the need for strong inter-institutional and cross-sectorial coordination and more effective and open government tools.  The UNGASS2021 should support the implementation of the FACTI Panel recommendations as means to enhance States’ effort to combat corruption. 

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SouthViews No. 219, 31 May 2021

Opportunities and Challenges: Tax Cooperation and Governance for Asia-Pacific Countries

 By Sakshi Rai

An informal technical meeting was organised on April 8th 2021 by the Secretariat of the High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) for tax officials from the Asia-Pacific, to discuss the relevance of the Panel’s recommendations in the context of the region as well as to familiarise tax officials with its final report.

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SouthViews No. 217, 14 May 2021

Financing for development from the perspective of the right to development

 Summaries of two reports by Saad Alfarargi, Special Rapporteur on the right to development

In 2020, the United Nations (UN) Special Rapporteur on the right to development, Saad Alfarargi, submitted two reports, one to the UN Human Rights Council (HRC) and the other to the UN General Assembly, on the issue of financing for development (FFD) from the perspective of the right to development (RTD). The first report (A/HRC/45/15) analyzed national-level FFD, while the second report (A/75/167) focused on the international dimension of FFD. In both reports the Special Rapporteur highlighted relevant challenges, with a particular focus on how to ensure the meaningful participation of rights-holders.

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