Addis Financing for Development Conference Failed in Many Ways, But the Fight for Tax Justice Continues


Oxfam went to the UN's Financing for Development Conference in Addis Ababa with the sincere hope that the governments of the world would take the bold steps necessary to rebalance the global development financing system so it works to help end extreme poverty and tackle inequality. Instead, the Addis Ababa Action Agenda (AAAA) only confirms that the rules of the game remain the same.

Rich country governments have fiercely resisted any moves that would harm their short term commercial and national interests at the expense of the world's poorest people.

That's not to say that rich countries were given an easy ride of it in Addis.

Negotiations in Addis went up to the wire with the final stand-off between rich and poor countries on the creation of an UN inter-governmental tax body. A global tax body would give all countries - not just the rich and powerful - an equal say in how the global rules on taxation are designed. The rich countries refused to give way on steps that would democratise the global economic governance of international tax cooperation. In the face of enormous pressure, 134 developing nations stood firm on their demands.

The battle over the global tax body became as much about the demand from developing countries for systemic change and a shift in political governance and power imbalance, than about the creation of the body itself. Yet rich countries got their way in the end. Developing countries could not countenance an international conference being a failure on African soil, nor risk that indecision on such a key issue might sound the death knell of the momentous Monterrey consensus on international development which was agreed at the first Finance for Development Meeting in 2002. Their hands were tied.

On the positive side, Addis has brought the urgent need for international reform of tax rules to the forefront of all governments' minds, and it has underlined the need for those reforms to involve all countries, and all countries interests. The people are mobilized on this issue too. Nearly 200,000 people took action calling for a global tax body. Over 50 groups from 40 countries were part of a global week of action for Tax Justice. Tax was not high on the UN agenda before - together we have all put it there.

This tax issue is not going to go away, and developing country governments must have the courage to continue to argue their case. A global initiative is needed on the back of Addis to reform the governance of international tax cooperation.

UN sponsorship and leadership is necessary to help ensure representational legitimacy, but such an initiative should involve all international organizations whose mandates cover tax matters, including the IMF, the World Bank, UNCTAD, the OECD and the regional tax bodies like Africa Tax Administration Forum (ATAF) and the Inter-American Center for Tax Administrations (CIAT).

The other disquieting outcome of Addis
is the 'no questions asked' attitude towards private finance. In particular, encouraging the use of Public-Private Partnerships (PPPs) and using public finance - like aid - to leverage additional private finance. Private finance is going to be needed if we are to meet the sustainable development challenge head on - especially for large-scale infrastructure projects, such as roads, railways, power and telecommunications. But private finance is not a panacea and can never be a substitute for public finance.

There has been a proliferation of PPPs in developing countries with investments in them peaking at over US$134 bn in 2012. Yet there is rapidly growing evidence, including from many European countries that show PPPs are an expensive and risky method of financing. If they fail, Public-Private Partnerships can also end up 'privatizing benefits while socializing losses', when the public sector has to rescue or bail-out a failing private service provider. What is more, there are inadequate checks or balances in place to ensure PPPs work in the public interest, safeguard people's rights, or best serve local communities.

Governments, the investor and business community, and civil society organizations and public representatives need to work together to ensure the necessary foundations are in place to align private finance to guarantee sustainable and equitable development and poverty reduction.

Similarly, there has been a rapid expansion of aid being used in partnership with private sector investment without the accountability or transparency mechanisms to ensure that the projects are contributing to sustainable development. By the close of 2015, the amount of aid flowing to the private sector is expected to exceed US$100bn, which is equivalent to almost two-thirds of global aid.

Addis failed in many ways - but while the battle is lost the war is far from over. Never before have so many developing countries stood firm for so long for their rights and the rights of their people.

If political leaders across the developing world, backed by people around the globe, continue to demand a fairer way to run the global economy, Addis may still be the turning point we had all hoped for.

Photo: The @GlobalTaxBody in Addis at the Financing for Development Conference.