NEW YORK — As the U.N. approaches its post-2015 development agenda marking the expiration of the Millennium Development Goals and their replacement with the new Sustainable Development Goals, mixed reactions are being heard from those expected to foot the bill. Progress toward each of the MDGs, which range from the eradication of poverty to the reduction of infant mortality and the empowerment of women, will require aid agencies, financial institutions and others to pay the expenses which will be incurred.
While those engaged in development abroad recognize the critical importance of the accomplishment of each of the MDGs, many are calling for the effective taxation of the private sector. Devex recently reported that each year, companies withhold between $250 and $300 billion due to tax evasion. Considering that foreign aid was only 0.7 percent of the U.S. budget for the 2014 fiscal year, the billions currently missing in private sector taxes would be highly valuable in furthering development initiatives.
While governments may agree that imposing fair taxation on all companies is necessary, this may be a difficult task in regions where it is often the case that the government does not hold enough respected authority and may not have the power required to effectively enforce national taxation.
In April, the World Bank held its spring meetings which included a panel on tax evasion, and a critical question was raised: How should fragile states go about collecting tax revenue if they are struggling already to establish enough authority to do so? The answer involves engaging in simple methods of taxation. Denmark’s minister of taxation, Benny Engelbrecht, urged fragile states to avoid replicating complicated systems of taxation present in more developed countries like the U.S. Engelbrecht stated, “Find the things that are easily taxable, that are easy to have full transparency on.” The more simple the taxes, the more successful states will be in enforcing and collecting them.
With at least $1 in $6 being lost to tax evasion, the need to capture these funds for development is crucial. It seems that there is a current push for countries receiving aid to adequately contribute to their own success instead of becoming overly dependent upon the help of more wealthy and developed nations. It is through encouragement of this self-sufficiency that sustainable change can be achieved, creating long-term solutions for poverty abroad.
At the recent World Bank meetings, Director General of the Norwegian Agency for Development Cooperation, Villa Kulild, remarked, “When they meet companies … bragging about their [corporate social responsibility] strategies, [I tell them to] just answer, ‘pay your taxes.’ That is a very important starting point.”
In July, the International Financing for Development Conference will take place in Addis Ababa, Ethiopia. Financial experts and anti-poverty advocates hope to reach some of the influential representatives to express to them the importance of the strict enforcement of fair taxation so that more funds will become available to accomplish development goals.
– Amy Russo