Illicit Financial Flows (IFFs)

Book by the South Centre, 2019

International Tax Cooperation: Perspectives from the Global South

About the Book:

A substantive reform of the global tax system involving a variety of multilateral platforms is underway.  The question is not whether the tax standards and practices will change, but in which direction.

Developing countries have long sought changes in rules, standards and procedures shaping the allocation of taxing rights among sovereign states. In the wake of the 2008-2010 Great Recession, developed country governments engaged in massive public sector layoffs and channeling enormous public resources to bail out large financial companies and their wealthy investors.  The Panama Papers, the Paradise Papers, the Lux Leaks became household words in the United States and Europe because of the journalistic coverage.  Other scandals, such as the “cum/ex” fraud in Germany involving a loophole in the taxing of dividend receipts were less known but just as materially significant.  Tax reform, particularly as it applied to the treatment of corporations working in multiple tax jurisdictions, thus became not only a problem of developing countries but an issue of global concern.

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Statement, September 2019

South Centre Statement to the United Nations High Level Dialogue on Financing for Development

Four years after its adoption, Agenda 2030, “Transforming Our World,” the United Nations’ (UN) most recent and most ambitious development agenda, is off-track. Various estimates of the spending needed to achieve the Sustainable Development Goals (SDGs) range from $1 to $3 trillion. Domestically mobilized resources are critical to achieve these goals. A main source of the inadequate scale of public revenues are shortfalls in corporate tax collection, which are largely explained by international corporations hosted by or doing businesses in developing countries that take advantage of facilities offered by the international tax standards and practices to avoid full payment of taxes in those countries. A substantive global reform process involving a variety of multilateral platforms is underway.  The question is not whether the system of global tax standards and practices will change, but in what direction it will change.  Drawing lessons from the developing country context will be critical if the ongoing process of global tax reform will benefit developing countries and achieve substantial success in generating the income needed to effectively attain the SDGs.

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Tax Cooperation Policy Brief 6, January 2019

Illicit Financial Flows: Conceptual and Practical Issues

The issue of illicit financial flows (IFFs) is of great significance for many countries looking to mobilize domestic resources for achieving their development goals. The High Level Panel on Illicit Financial Flows from Africa, led by H.E. Thabo Mbeki, brought the issue into the global spotlight, notably since the release of exposés like the ‘Panama Papers’. This policy brief elaborates on the conceptual underpinnings of IFFs, its sources and the development costs they generate. Building on the report of the High Level Panel, it provides recommendations to stem IFFs from developing countries.

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Research Paper 87, November 2018

Stemming ‘Commercial’ Illicit Financial Flows & Developing Country Innovations in the Global Tax Reform Agenda

Illicit Financial Flows generated due to the commercial activities of multinational enterprises are quantitatively the most important challenge faced by developing countries in achieving the Sustainable Development Goals. Current efforts for stemming these illicit flows and reforming the international tax system are however being led by developed countries, with developing country interests poorly reflected in the reform agenda. This research paper highlights the tax issues of great priority for developing countries and how international tax cooperation can contribute to preventing such illicit flows.

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