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Overcoming obstacles on the path to the SDGs – why a depleted treasury does not make for good social progress

By and on June 8, 2016

Law and Development Research Group, Law Faculty, University of Antwerp
ITM

The influential global health scholar, Ilona Kickbusch writes and thinks a lot about “gridlock” in global health governance; living in strike-plagued Brussels these days is helping me to experience first- hand the implications of gridlock. When I decided to attend the Organisation for Economic Co-operation and Development (OECD)’s Forum 2016 ‘Productive Economies, Inclusive Societies’, I did not know that there would be a general strike in Belgium and ongoing strikes in France.  The normally smooth metro-train from home to Paris was struck by the chaos but I made it to the OECD – soaked – yes, in addition to strikes there have been torrential downpours and floods. So, why was a global health scholar so eager to face travels chaos to attend an OECD conference?  One answer is that the proverbial rich countries’ club is highly influential in setting global economic policy – so understanding the key thinking showcased at the conference might provide a glimpse into one piece of the “how” and “where” of the global health financing and policy for the SDGs.

Clearly, the OECD, with its mission of promoting policies that will improve the economic and social well-being of people around the world, remains a vital piece of the global health puzzle.  I was curious to hear about their priorities in the SDG era. We know that OECD-DAC (Development Co-operation Directorate) tracks trends in development assistance provided by wealthy countries (the elusive quest for the 0.7%) and although we rightly try to think and plan for a world “beyond aid”, clearly development assistance will remain part of the equation in many countries for the foreseeable future. But this conference was not about development. It focused on how global and national economies can work to foster inclusion – economic, social. I focused my limited time there on gauging the role of international taxation in this inclusion and, of course, the SDGs. Yes, I travelled to Paris to hear about international tax, specifically the OECD led Base Erosion and Profit Shifting (BEPS) Project. For the non-tax geeks, the progress of the BEPS Project is important because BEPS practices are conservatively estimated to result in an annual global tax revenue loss of USD100 to 240 billion – that buys a lot of social programmes.  For the extra-territorial obligations and tax geeks, proposals addressing the Westphalian grounding of the international taxation system is fascinating and may offer options for improving global equity through taxation.

Hard to believe, but the international taxation session with the sexy title “Income, Wealth and Tax” was one of the more interesting ones I have attended recently, but who would have thought that Panama would have been the Achilles Heel of offshore? The BEPS Project, discussed at length by Saint-Amans, has been working on one part of the “matching words with actions to deliver what is needed to advance on the SDGs” equation – in this case finding the money. Click the link for details of the 15 Actions in the BEPS Package.  South Africa’s Finance Minister, Pravin Jamnadas Gordhan, argued that those who keep money offshore limit the ability of governments to do what they should do – and that to make the changes necessary to stop these practices is a social justice issue.

Recall that the discourse and decisions taken at the Financing for Development Conference in Addis Ababa in July 2015, focused on shifting responsibility for financing to national governments. In a ‘world beyond aid’ this makes sense but in a world where national tax administrations are based on Westphalian logic, and often coupled with weak tax administrations, this shifts responsibility to an entity that is incapable of collecting sufficient revenue to fund a government’s obligations.  I have never considered the US IRS – Internal Revenue Service – to be weak but Saint-Amans noted $2.1 trillion of US corporate profit sits in Bermuda. With figures like that it becomes easier to see why the US Treasury does not have enough money to spend on infrastructure. That is why, as Minister Gordhan argues, this is a social justice issue.  Speaking with him later he stressed that a depleted treasury cannot fight HIV and AIDS in South Africa, cannot develop a strong education and health system and that multilateral cooperation on taxation is needed to address this global problem.

Global level tax avoidance and evasion affects everyone because in a globalized international economy it undermines the ability of governments to deliver on their promises, contributing to an unjust global system, increasing inequality on the global and national scale, eroding trust in government (and of course the expression of this frustration through wild and other strikes and support for anti-government types like Donald Trump or nationalist political movements in Europe). The loss in the legitimacy of a belief in a common good or in society – (yes, Maggie, there is such a thing) – sets us on a path to nationalism (or worse) and away from social solidarity. So, BEPS has great potential. But, will BEPS really deliver some of the change that is needed?  This comes down to implementation and political will. Broadening BEPS beyond OECD members was endorsed by the G20 Finance Ministers at their meeting on 26-27 February in Shanghai, China which means that all interested countries and jurisdictions, including developing economies, can now express their interest in joining the BEPS framework. So, I think that BEPS is an initiative that is worth monitoring and engaging with, even if it might only deliver some of what it attempts to do. However, whether BEPS and other initiatives (including corporate codes of conduct, the Optional Protocol to the International Covenant on Economic, Social and Cultural Rights) aimed at infusing more fairness into globalization (often voluntary with weak accountability mechanisms) will deliver sufficiently and quickly enough to reverse the seemingly unstoppable rise of populism, remains an open question.

The SDGs session, entitled “2030 Sustainable Development Agenda”, brought together, among others, the CEOs of big NGOs (Save the Children, ONE), a Slovenian Government Minister  and the President of the Pontifical Council for Justice and Peace – yes, the Pope endorses the SDGs. It focused on the importance of statistics in advancing the SDGs. The OECD’s Chief Statistician, Martine Durand, highlighted that the World will need granular data to monitor progress and hold governments accountable. She argued that the OECD is in a good position to provide this data and that for future monitoring the OECD will apply an SDG lens to OECD strategies and policy. ONE’s Michael Elliott linked back to the importance of accountability and argued that the BEPS Project is an example of one way to track progress.  Aart de Geus, of Bertelsmann Stiftung, announced that in cooperation with Bertelsmann and the OECD, the Sustainable Development Solutions Network – will produce an annual SDG dashboard and urged those interested to get involved from the start.

So, (a flooded) Paris provided a little more clarity on where the money to finance the SDGs may come from, but clearly implementation will be challenging. However, given the destabilizing impact of growing national and global inequity it is clearly in all of our interests, including the G20, to look for opportunities to shift the current trajectory because advancing the SDGs will require vast investments and a different approach to global engagement.

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