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Reaction to the launch of the joint IMF- World Bank initiative to support developing countries in strengthening tax systems
Oxfam welcomes the World Bank and IMF’s recognition of the powerful and catalyzing impact of fairer tax systems in reducing poverty, inequality and promoting growth. Financing needs are huge in developing countries so the two institutions’ pledge to work together to support countries to raise more domestic resources through progressive revenue mobilization is a very positive step.
But the two institutions need to provide more clarity on their proposal as it is not yet very clear what distinguishes this initiative from business as usual within both institutions.
In addition to increasing their technical support, the IMF and the WB will also need to reform the way they operate.
- The IMF’s technical advice and loans to countries should put into practice the more progressive positions it takes at headquarters, such as recommending to end discretionary and unproductive tax exemptions provided to corporations.
- The World Bank should abandon the part of its ‘Doing Business’ indicator that incites countries to reduce corporate taxes and should ensure that projects financed by the IFC (the private sector arm of the World Bank) do not support wasteful tax exemptions or irresponsible corporate tax behaviour.
- Both institutions should give political and public backing to those countries that want more progressive tax systems, including by supporting them to ensure corporations pay their fair share of tax.
We welcome the WB and IMF’s desire to help increase developing countries’ voice and interests in the international debate on tax rules and cooperation and to deepen the dialogue to better diagnose their needs. But it is time to move beyond tinkering to concrete solutions.
Their contribution cannot be limited only to ensuring developing countries are better heard in a process in which they will never be decision makers and to helping them implement decisions on which they have had no real input.
- The WB and the IMF should not wait and see what the OECD will propose next, but rather speak NOW in favour of an alternative to the OECD BEPS process and influence what will come next.
- They should support and play a role in the creation of an inclusive intergovernmental process on international tax cooperation where developing countries can have an equal say in designing global tax rules so they no longer hamper their ability to raise sufficient revenue. Without this, the initiative launched by the IMF and the WB will fall short of what is needed.
Sue Rooks, Oxfam Media Officer (in Addis) email@example.com +251 92 930 7629