51³Ô¹Ï

At the upcoming Third International Conference on Financing for Development, world leaders face the formidable task of funding the post-2015 development agenda. Experience with the Millennium Development Goals (MDGs) demonstrated that tax revenue is central to funding development. According to , the MDGs are already being funded two-thirds by tax revenue, one-sixth by aid and one-sixth by private flows. Yet, as we know, several MDGs have not been achieved, largely due to the inability to pay the tab.

The post-2105 development agenda is much more ambitious in scope and will thus require much more resources, especially domestic tax revenue. Past efforts to increase tax revenues largely through capacity building efforts of multilateral institutions and bilateral technical assistance, have been partially successful, increasing tax collections in developing countries. However, these increases have largely plateaued with an additional increase needed to fund the SDGs. It is now time to go beyond capacity building to reform the rules and institutions that govern international tax.

That’s why we have set up the Independent Commission for the Reform of International Corporate Taxation (ICRICT). ICRICT is a group of public intellectuals from around the world who believe that, at this moment in history, there is both an urgent need and an unprecedented opportunity to bring about significant reform of the international corporate taxation system. Our purpose is to widen the debate on international taxation and work for better institutions and rules for an international corporate tax system that works for all people and not just a privileged few.

We have issued our Recommendations for reform of the rules and institutions governing the international corporate tax system. Our proposals include a minimum corporate income tax agreed by developed countries; several mechanisms to avoid the profits of multinationals being shifted to subsidiaries in low tax jurisdictions; public reporting by multinationals on taxes paid in all jurisdictions; and transition to a system in which multinationals are taxed as one unique firm, with taxes allocated to the different countries where they operate according to an agreed formula.

As a Commission, we believe that the central problem of the current system is the separate entity principle for taxation of multinational corporations that encourages the creation of multiple subsidiaries that enable profits to be shifted away from countries where the business operates. The revealing its network of 78 subsidiaries and branches in 15 different tax havens is a case in point of how the current dysfunctional system allows tax abuse. This great wealth transfer has enormous deleterious effects on all governments’ ability to finance quality public services like education, health and infrastructure and it disadvantages domestic firms not able to exploit the loopholes of the international tax system. However, , developing countries are three times more vulnerable to such profit-shifting.

If we are serious about inequality reduction and poverty eradication, a just tax system is essential to achieving these goals. The next phase of international development depends upon it.