Financing the sustainable development goals will rely heavily on the tax factor
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Version 0 of 1. As the third UN financing for development (FFD) conference gets under way in Addis Ababa today, all the talk in the world of international development is of whether the meeting will be a “success” or a “failure”. And people’s views depend, inevitably, on their expectations. If you thought Addis Ababa was going to deliver the extra hundreds of billions of dollars needed to fund the ambitious sustainable development goals, then you are going to be disappointed. There is nothing in the outcome document, or in the various initiatives that will be announced on the sidelines, that comes close to the scale of ambition required to finance the SDGs. Related: Make poverty history? A decade on from Gleneagles, it is a genuine possibility | Adrian Lovett Just when the world needs leadership from its most powerful countries, our leaders seem to have gone to sleep. But, to be fair, the FFD process has never really been about making concrete commitments, let alone pledges of money. Since it began in Monterrey in 2002, it has been about setting the financial framework, and updating the rules of global development finance in a fast-changing era. So if your expectations were that this third FFD summit would reflect the significant changes we have seen in development finance, then your analysis may be somewhat more positive. While the era of the millennium development goals was dominated by an emphasis on aid, there is, today, ever more recognition of the importance of other crucial sources of finance for development. Perhaps most strikingly, tax was mentioned just four times in the Monterrey consensus, an astonishing oversight given the critical role it plays in building the basic services that the MDGs were all about. In contrast, tax is mentioned 32 times in the Addis draft outcome document, which is still being haggled over. Word counts are not always good indicators of change, but in this case, it does illustrate how significantly the narrative of development finance has moved towards a focus on building national treasuries of public money, rather than working around their non-existence as if aid could overcome entrenched barriers that have only ever been conquered by increased national spending. There are other areas where the narrative has progressed, from a heavy focus on sustainability to greater concern for industrialisation, technology and infrastructure; and from the emergence of equality as a key theme to the now constant (and correct) refrain that we need better data. But if Addis is to be remembered for one thing, it may be this final recognition of strong public finance capability as the beating heart of development progress – a new “social compact” is called for to ensure that money raised is spent fairly on those who most need it. The narrative of development finance has moved towards a focus on building national treasuries of public money Two caveats. First, this does not mean that aid – and south-south cooperation – is less important now. The fact that there is money available from many other sources, including the private sector and remittances, does not mean it will be useful for all the things that aid does best, from supporting weak public services to providing incentives for progress in green infrastructure to humanitarian relief. The failure of western countries and the emerging economies to lead a renewal of aid pledges has been one of the regrettable themes of this round of negotiations. Second, there can be a tendency in some quarters to imply that this refocus on domestic revenues could be accompanied by a reduced international responsibility for development progress. Some richer neighbours are tempted to holler, “Hey, poor countries, sort yourselves out” in an attempt to get themselves off the hook. In fact,the reforms required to enable low- and middle income-countries to bolster their tax revenues in order to spend them on the poorest are ambitious and will need the international community to pull together in a bold new way. These reforms include tackling illicit financial flows and other shady dealing, currently facilitated by anachronistic aspects of our global financial architecture; introducing a progressive mix of incentives and regulations to make sure foreign investment promotes equality and sustainability as well as growth; creating a new mechanism for countries to exit fairly from debt crises; and much else besides. They will require as much generosity from the international community as the traditional promise of more aid. Crucially, we need a revolution in global governance arrangements to reflect the scale of the development challenge and new geopolitical realities. Poorer countries are still holding out for a new intergovernmental body to decide on global tax matters. This power currently resides with the OECD and the G20, exclusive clubs of powerful countries that do not necessarily respond to the urgent needs of much poorer nations. But rich countries are, predictably and unimaginatively, refusing this request – they prefer not to cede power and use the excuse of “inefficiency”, always the trade-off with inclusivity. For all the welcome focus on tax, domestic resources and fiscal self-reliance, this conference should not squander the opportunity to ring in this historically significant procedural change. A planned “Addis Tax Initiative”, which seeks to support developing country attempts to raise tax revenues, is an example of how developed countries are mobilising around this theme and is to be welcomed, but it is no substitute for necessary procedural reform. This is one of many fertile areas to which our advocacy should now turn, if we are to convert a more progressive but still quite detached development narrative into concrete policy change and actual progress. |