Academic Poverty Experts: New UN Goals Should Do More to Curb Tax Dodging that Has Cost Poor Countries Trillions

ASAP Study Outlines Six Simple Reforms to Tackle Trade-Related Dodges.

The United Nations' proposed global goals for poverty reduction miss much of the story when it comes to trade-related illicit flows -- which drain tens of billions of dollars from the world's poorest countries every year.

A new study from Academics Stand Against Poverty (ASAP) identifies a set of simple reforms that could drastically reduce such outflows and can guide the UN's efforts as it develops its new Sustainable Development Goals.

The UN’s Open Working Group on Sustainable Development Goals is developing a new set of targets to replace the Millennium Development Goals, which expire in 2015. The Group’s late-stage “zero draft” was released for comment June 2. It outlines some ambitious objectives, including bringing to zero the number of people living on less than $1.25 per day.

The draft also includes the objective of reducing illicit financial flows, but it does not identify any policies to be implemented in order to achieve the reduction.

ASAP’s new report outlines reforms that could fill the gap.

The six reforms identified in the report focus on trade-related illicit financial flows. These include tax dodging, trade misinvoicing, and corporate profit shifting. Illicit flows from developing countries alone totaled an astounding $5.9 trillion from 2002-2011, according to the NGO Global Financial Integrity.

"A large proportion of all international trade takes place within this or that multinational enterprise (MNE)," said Chair of CROP Thomas Pogge, who is also ASAP President and Leitner Professor of Philosophy and International Relations at Yale University.

"Much of this trade is designed to shift the MNE's profits into tax havens: jurisdictions that impose low or no taxes on profits. Poor countries with limited administrative capacities find it difficult to curb such profit shifting, which drains them of capital and deprives them of tax revenues. A concerted international solution to this problem could benefit developing countries more than all the development assistance they currently receive. "

The Reforms

ASAP recommends that the Open Working Group on Sustainable Development Goals makes the following six reforms central to their efforts to tackle illicit financial flows.

1) Reform the arms-length transfer pricing system

2) Reform international accounting standards

3) Implement universal automatic exchange of information

4) Require public registers of beneficial ownership

5) Increase the rate of stolen asset repatriation

6) Increase official development assistance for capacity building on matters of tax

ASAP will continue its investigation of the relative merits of these and other reforms, in consultation with over 20 relevant experts, and will deliver additional recommendations in July .