Tax side event at the Third International Conference on Financing for Development
Remarks by Angel Gurría,
13 July 2015
Addis Ababa, Ethiopia
(As prepared for delivery)
Excellencies, ladies and gentlemen,
The last 15 years have seen strong progress in helping millions of people move out of extreme poverty. Although aid – or Official Development Assistance (ODA) – reached record levels in 2013, it is dwarfed in magnitude by other financial flows. Private finance, as well as domestic public resources, will be crucial parts of the financing jigsaw if we are to achieve the ambitious Sustainable Development Goals which are currently being finalised.
A strong, reliable tax system is one of the cornerstones of the citizen-state relationship. It helps establish accountability to citizens, and is an important instrument in tackling inequity. Tax revenue pays for roads, ports, hospitals and schools which enable countries to develop, and it levels the playing field of opportunity. Evidence has shown that there can be a significant impact, with important flow-on effects, when development assistance targets tax systems. Yet, in 2012, only 0.22% of ODA was dedicated to strengthening tax systems. This is already a four-fold increase from 2006, but we must do more.
The OECD is proud to have been at the epicenter of groundbreaking changes in the international tax system. For too long, some multinationals have used aggressive tax planning to reduce their tax bills, or avoid paying tax altogether. This simply has to stop. The OECD/G20 Base Erosion and Profit Shifting project – BEPS for short – is leading to a clearer, fairer set of international tax rules.
And in the area of fiscal transparency, the move to Automatic Exchange of Tax Information across countries has the potential to transform efforts to clamp down on tax evasion - already tax authorities in two dozen countries have identified more than 37 billion Euros in revenue from voluntary disclosure programmes and similar initiatives launched in the lead-up to the enactment of automatic exchange requirements - taxpayers are beginning to realise that the era of bank secrecy is over.
Developing countries have played an active role in shaping this work, and they stand to benefit from its results. But developing these standards is only the first step, and tax auditors must be able to take effective action to enforce the tax laws and assure citizens that governments are committed to a fair and robust approach to tax compliance. But enforcing these new standards will require new capacity in developed and developing countries alike.
Capacity building for effective tax policy and administration is a long-term objective. Many of you are already working together with countries to improve tax systems. With the establishment of Tax Inspectors Without Borders (TIWB), a new, niche area of technical support is now available. By creating a framework to address the confidentiality and conflict of interest concerns that previously prevented tax inspectors from assisting each other in this way, TIWB now paves the way for real-time, hands on help to developing countries to fight tax evasion and tax avoidance and improve tax collection.
Under the programme, international experts work alongside local tax auditors on current audits to address some of the complex international tax issues being faced by governments today. This includes advice on, for example, transfer pricing, cross-border information exchange, and the challenges of taxation in the natural resources sector. Learning by doing is essential in tax audit, and Tax Inspectors Without Borders will help tax auditors to translate their theoretical knowledge into concrete results.
And I have good news: we’ve already proven that this approach works. We have already done the proof of concept, and have shown how we can have a big impact on the robustness of tax audits, and enhance domestic resource mobilisation. Thanks to one such pilot, in Colombia, tax revenue has increased ten-fold from 3.3 million USD to 33 million USD over three years. In Kenya, the OECD found that every dollar spent on assisting the tax authorities on cracking down on tax avoidance helped to produce over $1000 in increased revenues.
Following this successful pilot phase, we are today launching a powerful partnership with the United Nations Development Programme on Tax Inspectors Without Borders. And I want to thank Helen Clark for her responsiveness and direct personal engagement to make this initiative a success.
This unique partnership will allow us to scale up the strong results already shown from the pilot cases – drawing on the OECD’s network of development agencies and tax expertise, and UNDP’s global reach and local knowledge. Together, we can ensure that TIWB projects can meet their objectives and have enduring benefits.
With this partnership, and with the support from assistance providers and experts, we now have the opportunity to multiply those successes in Africa and across the globe. Today, here in Addis, we have the opportunity to show how powerful the use of development assistance can be when it comes to domestic resource mobilisation.
As we scale-up the Tax Inspectors Without Borders initiative, I call on your support to deliver expertise, to help put in place individual programmes, and to join us in governing this hugely promising initiative. I look forward to working with you, Helen, and with all of you, as we redouble our efforts. The SDGs will be ambitious, but thanks to very concrete initiatives such as Tax Inspectors Without Borders, they should also be well within reach.