Substantive Preparations for the Mexico City High-Level Meeting
Session 2: Partnering for effective taxation and domestic resource mobilisation for development (Nigeria coordinating)
Core Team: AU/NEPAD, EU, OECD Rep, UCLG Inter-Parliamentary Union (IPU) representative, Representative of TUAC, Representative of Trade Unions (TUC); Steering Committee DRM Representative;
Consultations (planned or underway):
Africa High Level Panel on Illicit Financial Flows, UN Economic Commission for Africa (UNECA), G20 global focal point of work on illicit financial flows, Extractive Industry Transparency Initiative (EITI), OECD Informal Task Force on Tax and Development, Task Force on Financial Integrity and Economic Development, African Tax Administration Forum (ATAF), African Union; Civil Society Organisations, the Private Sector Representatives, the Parliamentarians.
Introduction:
Tax revenues already make up a significant proportion of developing countries’ GDP (13% on average in LICs and 22% in MICs, compared to 13% and 0.3% respectively for ODA), but have potential to contribute much more if they are mobilised effectively. In order to do so, countries must focus on improving their tax administration and management of natural resources, as well as ensuring that revenues generated within the country stay where they should be. This includes tackling illicit flows of finance out of developing countries, including transfer mispricing by multinational companies. Reform and action is needed both at national and international level in order to achieve these aims.
The Busan Partnership agreement is of the view that effective development cooperation will help to strengthen developing countries revenue collection and administration institutions, support accountability mechanisms and reforms in those institutions as well as to support strategies to combat illicit financial flows in all its ramifications so as to enhance domestic revenue mobilisation. The Global Partnership for Effective Development Cooperation’s first High-level Ministerial meeting in Mexico City in April, 2014, will be an opportunity for all stakeholders of inclusive development partnership: the providers of development cooperation, the recipients, the civil society, the parliamentarians, and the private businesses to reflect on issues and strategies to enhance domestic revenue mobilisation efforts in developing countries and come up with implementable modalities to achieve sustainable DRM in the coming years.
Potential sub themes for the Session
· Strengthening Institutional Capacity For Domestic Revenue Mobilisation In Both Executive And Legislative Branches:
This sub theme will focus on strategies to ensure systematic capture of state revenues and accurate disclosure of tax expenditures, including through a strengthened and transparent budget process. The theme will bring to focus the issues of technical support for institutional and organisational changes of revenue administrations, including computerization of tax collection; support to legislative policy formulation and long-term fiscal discipline and policy analysis; and the setting up of oversight mechanisms, internal audits and improved linkages to national budget processes.
· Promoting And Fostering Action Towards Increasing Transparency And Mutual Accountability
The focus of this sub theme will be on establishing and fostering legislative and administrative preconditions for transparency and accountability in public finance administrations. The theme will involve issues around extractive industries and multinational companies in order to come up with legislative frameworks that establish a common global playing field and particularly between origin and host countries; as well as promoting relevant existing initiatives and legisalations (such as EITI, EU Transparency and Accounting Directives (CBCR), US Dodd-Frank Act, TIWBs, etc) to ensure stronger application globally and by all partners.
· Supporting Efforts To Increase The Revenue/Tax Base
Supporting reforms that bring the informal sector into the tax net thus widening the tax base (for example, simplified tax regimes and incentive structures for small and micro enterprises); setting up clear tax incentives regulation and procedures; closing tax loopholes; improving/reforming investment agreements to establish fairer tax revenue from extractive industries; look at how aid can leverage national systems and help build domestic resources and accountability mechanisms at the sub-national governments and supporting PFM at the lower levels of government will be the major issues to discuss under this sub theme.
· Supporting Efforts To Combat Illicit Financial Flows At National And Global Level
This would focus on strengthening legislative frameworks to combat domestic (tax evasion and embezzlement of public funds for private investment) and cross-border illicit financial flows; improving exchange of information systems to facilitate coordination between national tax authorities; facilitating global agreement on issues related to illicit flows, particular tax evasion. And Developed countries to ensure that stolen assets are repatriated.
· Ensuring that DRM is Integrated into the Post-2015 Agenda
This focus of this sub theme would be on the possibility of setting targets and indicators to monitor progress based on country frameworks and channeling aid to assist conflict-affected and fragile states. The theme would also involve identifying concrete actions/decisions that can be supported by the GPEDC for implementation for results at global, regional and country levels, as well as understating how to use ODA to create positive incentives and avoid perverse incentives for DRM, especially in resource-rich countries.
Other Optional Themes???
Pre-Mexico events on DRM:
Already Held
o Side event on Domestic Resource Mobilization within a Future Global Partnership for Development at the 68th Session of the United Nations General Assembly in New York. Tuesday September 24, 2013
o Side event at the African Union Commission, Addis Ababa, Ethiopia, July 25, 2013
o Launch of report of Africa High Level Panel on Illicit Financial Flows, mid-2013.
o 4th Plenary Meeting, OECD Task Force on Tax and Development, 30-31 October, Seoul, Korea.
o Annual meetings of the Assembly of the Association of African Central Bank Governors, Port-Louis, Mauritius, August 19-23, 2013
o Joint annual meetings of AU Conference of Ministers of Economy and Finance and Economic Commission for Africa (ECA) conference of African Ministers of Finance, Planning and Economic Development, 25–26 March 2013, Abidjan, Côte d’Ivoire
o Reqional country consultations for East and Southern Africa on Development Effectiveness, 16 to 18 October 2013
Analytical Work Available to date that can serve as input for the session
· The OECD Task Force on Tax and Development has produced several publications, including Tax and Development: Aid Modalities for Strengthening Tax Systems (in partnership with the International Tax Compact), to further understanding of the interconnections between tax and development issues and to provide practical steps donors can take to support the development of tax systems in developing countries. The Tax Force has also developed a draft set of 10 principles to provide a guiding framework to international assistance providers on how to support developing countries in revenue matters (Draft OECD Principles for Effective International Engagement in Revenue Matters). This work contributes to the emerging body of evidence on what “good” co-operation for tax and domestic resource mobilisation looks like.
· Outcomes from the Collaborative Budget Reform Initiative (CABRI) programme
· UNODC/World Bank (2007), Stolen Asset Recovery (StAR) Initiative: Challenges, Opportunities and Action Plan, IBRD/The World Bank, Washington D.C.
· OECD/World Bank (2011), Tracking Anti-Corruption and Asset Recovery Commitments: A Progress Report and Recommendations for Action, OECD and the IBRD/World Bank
· Foreign Aid as a Catalyst to Improving Domestic Revenue Mobilisation. ECOSOC Analytical Study For the Luxembourg High-level Symposium “Working together to improve the development impact of aid” October 2011
· EU study on the vulnerability and resilience factors of tax revenues in developing countries November 2013
· EU study Study on the feasibility and effectiveness of tax policy changes to support inclusiveness and sustainability of growth to be finalized in February 2014
· EU study Transfer Pricing and Developing Countries July 2011
· AU\NEPAD and UN Economic Commission for Africa study on DRM in Africa
Additional Analytical Work to be conducted and Gaps to Fill
o How can DRM, illicit flows and development co-operation be addressed as part of the post-2015 framework for development? Main international and regional organisations could work together on this analysis.
o A synthesis or review of evidence with an emphasis on impact of investments. The OECD would be prepared to conduct this.
o How can ODA be genuinely used in a catalytic way to mobilise domestic resources?
o What are the best ways of effectively sharing knowledge and experience on tax reform and DRM?
Possible format for the session:
Facilitators: BBC World Presenter Zeinab Badawi; Al Jazeera journalist-Femi Oke
Ministers: Minister Ngozi Okonjo-Iweala;
Names of invitees for the session: H.E. Mr.. Thambo Mbeki, former President of the republic of South Africa, H.E. Commissioner for Economic Affairs, Dr. Athony Mothae Maruping, and H.E. Dr. Maxwell Mkwezalamba, former Comissioner of Economic Affairs and now Finance Minister of the Republic of Malawi, Director-General Ortega, Colombian Tax and Customs Administration, more names to be suggested,EU Commissioner Pieblags; someone from Asia is missing.
We propose three segments for the DRM session. The first segment of 40 minutes will be a panel discussion designed to bring up all the issues in a dynamic, challenging way.
The second segment of 60 minutes will be organised in workshop style, the room would be divided in a number of multi-stakeholder groups (organised around tables) addressing each theme on the agenda separately. Each group would appoint a rapporteur who would then report back to the plenary with concrete recommendations.
A third segment of 60 minutes would serve to hold a plenary discussion on the recommendation that will have been presented and to come down to a precise list of actionable things for all stakeholders to take home. A capable moderator with substantive knowledge of the issues will need to be identified to run this session
Possible session run through
The first 10 minutes will be used for the introduction of dignitaries, and this will be followed by 15 minutes opening remark by the Nigerian Co-Chair, Minister Ngozi. After the opening remark, the sessions will start with the help the Facilitators/moderators. There will be short video interviews (of 4 minutes each) in the Davos style of key stakeholders representing the private sector, the CSOs, parliamentarians, providers, recipients and providers, and recipients of development cooperation.
We propose that for the panel discussion, the Panellists – including Minister Ngozi – will be seated on a raised platform in front of a ‘theatre style’ audience. Panellists will either be seated in a semi-circle in soft chairs or in a row behind a long table. The audience will be seated in rows facing the panel, with VIP audience members in the first two rows.
Side Events:
Side-events will be subject to availability of space and not to be held at the same time as the main session so as to avoid repeating the main discussions. The side events will serve to showcase the best practices that might be available and also case scenarios that illustrate the difficulty (political, technical and so on) that some countries might have encountered in trying to improve domestic resource mobilization.