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The eighteenth SDG

One of the key outcomes of the 2015 Addis Ababa meeting on Financing for Development was an emphasis on the crucial role of the domestic resources of developing countries in financing development, yet ensuring that countries have a fair and equitable tax system is not mentioned in the Sustainable Development Goals. Jack Aldane looks at efforts by the UN and OECD to help governments recover tax, and asks what more could be done to make multinationals pay a fair contribution towards domestic resources

Benjamin Franklin once said nothing in this world is certain except for death and taxes. This was when the Cayman Islands were a refuge for survivors of the Spanish Inquisition, rather than a haven for more than US$1.4 trillion in tax-sheltered assets.

How the global tax system should be made fairer, more transparent and more certain is a question few have answers to. Whether it should however is, by now, hard to deny. The Panama Papers, released on 3 April 2016, contained 1.5 million leaked documents of financial and attorney– client information for more than 214,488 offshore entities. Mossack Fonseca, the Panamanian law firm whose services the papers exposed, helped its clients avoid taxes by creating shell corporations that could operate without direct legal liability. The front companies of multinationals and other parent firms were registered everywhere, from the British Virgin Islands to Uruguay, Malta to Wyoming.

One company in Uganda used Mossack Fonseca to avoid paying US$400 million in taxes after changing its address from one tax haven to another. The amount it saved equalled 1.4 trillion Ugandan Shilling, more than six and a half times the country’s budget for underfunded sectors that year.

The scandal represents an overwhelming problem for both rich and poor countries, which could explain why fairer tax doesn’t feature in the United Nation’s sustainable development goals (SDGs). Of the 17 goals the UN hopes to achieve by 2030, Peace, Justice and Strong Institutions (goal 16) can mean several things. It can mean fairer law courts and a more open press, but it can also mean better tax administrations that generate more domestic revenue for a country’s economy. In fact, an equitable and efficient tax system–at least in terms of multinational corporations–could be a development goal in itself.

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