Value Addition or Trade Misinvoicing: Coal Trading in the Asia-Pacific
By Manuel F. Montes and Peter Lunenborg
Statistics on coal trade between India, Singapore and Indonesia suggest that trade misinvoicing is used as a vehicle for illicit financial flows. At present this practice is not well addressed by the Organisation for Economic Co-operation and Development’s tax standards. Asia-Pacific countries should intensify cooperation on this issue. Other international organizations with a mandate in this area could also play a role, for instance the World Trade Organization. Ultimately, increased cooperation would help to achieve Sustainable Development Goal 16.4 which inter alia aims, by 2030, to significantly reduce illicit financial flows.
South Centre Statement to the Non-Aligned Movement (NAM) Ministerial Meeting
July 5-6, 2023
The South Centre supports developing countries with policy-oriented research, advice on international negotiations and capacity building. Since its inception, the South Centre has maintained a close relationship with NAM. We are strong supporters of its principles, appreciate its achievements, and believe in the central role that NAM can play in reforming the multilateral system.
The South Centre will continue to work with NAM and its member countries to support them in their efforts to shape a fairer multilateral system that is responsive to the needs of the Global South.
Illicit Financial Flows and Stolen Asset Recovery: The Global North Must Act
by Abdul Muheet Chowdhary and Sebastien Babou Diasso
Domestic resource mobilization is essential for developing countries to achieve the Sustainable Development Goals by the deadline of 2030. Concomitantly, Illicit Financial Flows (IFFs), which also lead to asset theft, are major means through which these countries are losing resources. This research paper analyzes the World Bank’s Stolen Asset Recovery (STAR) database and shows that countries from where assets have been stolen are mostly developing countries, and countries where the stolen assets have been hidden are developed countries. The paper also shows that regarding the pending or ongoing asset recovery cases, there is a clear pattern where the majority of countries waiting to have their assets returned are developing countries, and those who must return them are developed countries. There is an unexplained and unjustified delay by developed countries in the process of returning the frozen assets to developing countries which needs to be addressed as soon as possible. There is also an evaluation of international legal reforms which can be implemented to accelerate the asset recovery process. However, all these will need the full commitment of Global North countries where most of the stolen assets are hidden and which bear the brunt of responsibility for returning them to the developing countries.
Combating Illicit Financial Flows : “Now or Never”
Statement of H.E. Thabo Mbeki, Chairperson of the African Union High Level Panel on IFFs
“I fully support the creation of a globally inclusive, intergovernmental process at the UN. I urged all international organisations and Member States to resist attempts to block this important step forward, and thus call into question our global commitment to fighting illicit financial flows and corporate tax abuse in support of the Sustainable Development Goals.”
* H.E. Thabo Mbeki is also the Chair of the Board of the South Centre.
Second African Fiscal Policy Forum (Part one): Curbing Illicit Financial Flows from Africa and Accelerating Asset Recovery for Sustainable Development
Date: Thursday, 1st of December 2022 Time: 03:00 – 06:00 PM (Addis Ababa Time)
The event will be hybrid.
In person: Addis Ababa
Following the outcomes of the First Forum held in December 2021, this Second Series will be held in three iterations. This first part of the Second African Fiscal Policy Forum will bring together key stakeholders to discuss the current global processes towards combatting IFFs, the role of African regional institutions, and the importance of supporting Africa’s Domestic Resource Mobilization efforts.
Organizers: Coalition for Dialogue on Africa, CODESRIA, South Centre, Rosa Luxemburg Siftung
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.
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.
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
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.
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.
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.