Welcome to the latest episode of the Tax Justice Network’s monthly podcast, the Taxcast. You can subscribe either by emailing naomi [at] taxjustice.net or find us on your podcast app. All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. You may have noticed we’ve rebranded all our podcasts, the new podcast website is here.

On the Taxcast this month: People power for tax justice is on the rise like never before. We kick off 2024 with inspiring stories on campaigns for tax reform from around the world: strategies, successes, limitations, and what we can learn from the first in-depth studies of their kind by International Budget Partnership.

Plus: Malawian poet and Senior Tax Investigations Officer Robert Chiwamba pays tribute to tax collectors everywhere. You can watch him perform We Will Count Them here.

Transcript of the show is here. (Some is automated)

Guests:

• Robert Chiwamba, Malawian poet and Senior Tax Investigations Officer (his youtube site is here, WATCH him here performing his poem We Will Count Them)
• Greg Leroy of Good Jobs First
• Paolo de Renzio, formerly Senior Research Fellow with the International Budget Partnership, now Senior Lecturer at the Brazilian School of Public and Business Administration of Fundação Getúlio Vargas in Rio de Janeiro.
• Produced and presented by Naomi Fowler of the Tax Justice Network.

The last 10, 20 years have seen an important shift. Civil society has started learning this new language, these new skills, and has started engaging in debates around taxation.”

Further reading:

• A Taxing Journey: How Civic Actors Influence Tax Policy (open access – free pdf from International Budget Partnership and a summary paper on that work here
• Beneficial Ownership reporting begins in the US
• Proud to Pay More: 260+ millionaires and billionaires from 17 countries ask governments to tax them more
• The EU Court ruling on Beneficial Ownership registries in 2022
• A Tax Justice Network report on how to fix beneficial ownership frameworks

Here’s a summary of the Taxcast:

Naomi Fowler: Hello, and welcome to the Taxcast, the Tax Justice Network podcast. We’re all about fixing our economies so they work for all of us. I’m Naomi Fowler. Before we get started, a bit of podcast news for you. We’ve just launched a brand new podcast website, and you may have noticed the new Taxcast logo. The new website’s for all our sister podcasts too, so, the Taxcast and our monthly podcasts in Spanish, Arabic, French and Portuguese – all independent productions bringing tax justice to their part of the world. All of them are on our new site on podcasts.tax justice.net For the Taxcast, just as before, you can go straight to it on thetaxcast.com If you’re still seeing the old website, be patient, it’s all settling in still as it goes live. Anyway, on that website, you can get more information and further reading on every podcast we release right there. And as always, you can subscribe to the Taxcast by emailing me, Naomi[at]taxjustice.net

So, on the Taxcast this month, when it comes to tax justice, people power is on the rise like never before. We’re going to kick off 2024 with the first in-depth case studies on campaigning for tax reform from around the world. Strategies, successes, limitations, and what we can learn from it all. And none of these advances in tax justice would be possible without the unsung heroes, our tax collectors. They’re often invisible, often badly paid, often not recognized or respected for their work. Yet, they’re as important to helping our societies and human rights function as nurses, teachers and carers. Sometimes their work puts them in great danger. Some of them have been taken from us way before their time. And on the Taxcast this month, we have Malawian poet Robert Chiwamba here with us to perform his poem, We Will Count Them. Robert himself is a tax man. He works for the Malawi Revenue Authority as a Senior Tax Investigations Officer. Here he is, paying tribute to tax collectors around the world, past and present.

Robert Chiwamba: We will count them. One by one, name them. As they work without appreciation, we will appreciate them. Tax men. Men and women who are least loved. Risk-takers who know no peace. Insults raining on them like rains in the rain forest. But we will appreciate them, one by one count them as they work without appreciation.

We will recognize them. Tax men, men and women who have been branded thieves, development champions who have been convicted in public opinions courts without hearing their side of the story, and ambassadors who have risked it all for the sake of their country’s prosperity.

We will name them. One by one, appreciate them, as they work without being loved, we will recognize them, tax men. Men and women who are at the mercy of politicians, often given instructions contrary to the tax law, threatened, insulted, unrecognized, unappreciated, but we will recognize them, one by one appreciate them, as they work without recognition, we will recognize them.

Tax men, men and women who have carried us through and through, heroes who have supported our ailing economies, champions of fights against illicit trade, drivers of our economies, we will celebrate them, one by one name them, as they work without appreciation, we will recognize them.

Tax man, today’s your day. Pop the champagne, light your candles. We will drink to your prosperity, feast to your good health, dance the night off to your protection. Without tax, there’s no development. Without tax men, there’s no tax. Don’t despair, don’t relent. Be proud, be cheerful. We love you. We will celebrate tax men, one by one name them as they work without recognition, we will appreciate them.

Naomi Fowler: Robert Chiwamba, spoken word poet and Senior Tax Investigations Officer. Thanks. I’ll put a link to a video of him performing that in the show notes.

So, tax justice campaigns are on the rise around the world, and sometimes a surprisingly small group of determined people can do amazing things. Here’s a nice example from Greg Leroy of Good Jobs First in the United States. Good Jobs First is a corporate subsidy watchdog, and in their 25 years of campaigning, they’ve created things like the subsidy tracker, violation tracker, and a tax break tracker, all providing data that has enabled different groups to claw back a lot of public money. Here’s Greg.

Greg Leroy: Good Jobs First is the leading reform group within American economic development. A good example of how our data is empowering activists: nine years ago, some religious, faith-based activists in Louisiana discovered our data about individual deals with chemical plants, oil refineries, worth tens of millions and hundreds of millions of dollars, sometimes creating no new jobs at all. And together with the new governor that took office, they want an executive order and a bunch of reforms that have overhauled the state’s big property tax abatement program so that today, more than 300 million dollars per year that used to go into corporate bottom lines is going back to schools, back to libraries, back to infrastructure. And that number is headed toward 1 billion per year as the reforms play out. That’s progress.

Naomi Fowler: Brilliant! Tax justice campaigning can raise millions, even billions, and that changes lives.

Paolo de Renzio: A few years ago, we decided to start looking at the role that civil society can play in shaping tax policy with a particular focus on making tax systems and taxation more equitable.

Naomi Fowler: This is Paolo De Renzio, formerly Senior Research Fellow with the International Budget Partnership. He’s now Senior Lecturer at the Brazilian School of Public and Business Administration of Fundação Getúlio Vargas in Rio de Janeiro.

Paolo de Renzio: And one of the first things that we did was literally scout around, look around and see, you know, what are some interesting examples of civil society organizations engaging, trying to influence, tax policies in their country, in an effort to make tax systems more equitable. But successful stories of civil society campaigns there, there were not many of them and they had not been looked at in a lot of detail. So we said, as part of our internal learning process, we should definitely go out and collect these stories, collect stories from what these groups did, why they did it, how they did it, when they did it, with whom they did it so that we can start accumulating some knowledge and some lessons And then as we went along, you know the purpose of this exercise became much bigger as we started really uncovering very interesting material about these different campaigns, and the strategies and the narratives and the capacities and so on that these organizations deployed.

Naomi Fowler: So, the International Budget Partnership has produced a book, A Taxing Journey, How Civic Actors Influence Tax Policy. It’s open access, so it’s available online to download for free. I’ll put the link in the show notes.

Paolo de Renzio: I would say telling these stories and seeing what lessons we can learn from them had two main objectives. The first one is to inspire others to basically follow in the footsteps of these pioneering groups, you know, trying to distill the key lessons that others can learn from. And as you know, the movement is clearly expanding. There’s more and more groups in different countries who are engaging in this kind of work, so providing them with lessons, stories that they can get inspired by, examples of how different organization did things, to try and have a menu of options that they can use as they navigate this sort of new and often difficult territory.

The second objective goes beyond other civil society groups And it’s really trying to inject in the policy debates around tax reform in developing countries the idea that civil society can play a role and that civil society deserves to be recognized as a legitimate actor deserves to receive support from different actors within the country from donor agencies outside the country.

So, in the book, we also sort of include some lessons, not just for other civil society groups, but also for governments and for international agencies of different sorts, be it international NGOs that support this kind of work like Tax Justice Network, but others like Oxfam, the big NGOs, etc, and then official donors, both, let’s say bilateral, multilateral, but also philanthropic foundations that increasingly support this kind of work, so what does it mean for donors to, more effectively support the civil society work in this area? So internal learning, inspire other organizations and provide lessons for other actors like governments and donors.

Naomi Fowler: There are seven case studies in the book, and I’m going to run through them quickly: in Guatemala, the campaign to reform the tax administration after a huge corruption scandal, all the way up to the president and the vice president.

There’s France and gilets jaunes or the yellow vests and their social media driven revolt against poorly thought out environmental taxes and less well remembered with that is that part of all of it was Macron’s proposal to replace the wealth tax.

In Kenya, there’s Tax Justice Africa’s historic legal challenge to a double taxation agreement the Kenyan government signed with the tax haven of Mauritius. We covered that on the Taxcast.

In Mexico, a decade long fight to get transparency on tax amnesties, which turned out to benefit only a tiny section of wealthy Mexicans.

There’s a fascinating one in the Philippines with a campaign to increase so called sin taxes, so taxes on things like tobacco and alcohol, which helped to significantly expand health care.

In Uganda, the opposition to a regressive 1 percent tax on the value of mobile money transfers and a tax on the use of social media.

And in the United States, campaigns in three different states to increase income taxes on the wealthy.

Naomi: So, do you have a particular favorite that you really like?

Paolo de Renzio: That’s a tricky question, I mean, all of them are very interesting and fascinating in their own specific way. The ones that I found, let’s say, most inspiring, there’s two of them, Mexico and the campaign that Fundar spearheaded, and then sort of kept going for more than a decade, trying to, at the beginning, improve transparency levels around tax amnesties. So you know, whenever governments basically pardon tax and cancel tax debts, and there was this sort of recurring initiative new governments would undertake with the excuse of increasing revenue collection, but then in the end, it became just favors that they were handing out to a bunch of people.

And so they focused on identifying tax amnesties as the giving of what they call fiscal privileges, which I think is quite an interesting way to sort of frame the issue. And eventually it became much more than just the transparency campaign, it became something around fair taxation and the fact that so many people and organizations, business, get unfair advantages from the tax system, which they don’t really need. And that sort of makes the tax system more regressive and less fair. The interesting thing is that Fundar started off this campaign as basically, as legal, so going through the courts, trying to force government to publish information about tax amnesties and the beneficiaries. But then over time, sort of started adding different tactics, different strategies, engaging with different actors, combining their sort of legal action with technical analysis, with building coalitions, with using social media in very interesting ways, taking advantage of specific opportunities when there were changes in government, etc so that the ways in which the campaign developed over time, and became much more multifaceted and requiring them to basically develop and deploy new and different capacities was, I think, a fascinating example of how civil society can, you know, reach impact by building long term capacities and efforts to target specific tax reform initiatives.

The other one is the one in the Philippines, which possibly was the one with the with the biggest impact you could say, because Action for Economic Reforms is actually quite a small outfit but with a very driven staff that combines different kinds of technical, political communications capacities, and they basically managed to overcome the resistance of the most powerful lobby in Asia, the tobacco and alcohol lobby, by convincing the government to introduce so-called sin taxes on the use of on the consumption of alcohol and tobacco, and through that, generating revenues that funded a huge expansion in health coverage. Again, so the, so very interesting, so very important impact which was reached again with a multi-pronged campaign, they used a vast array of entry points, working directly with the government, working with health sector organizations that were interested in sort of highlighting the negative impact of alcohol and tobacco use, working with Congress in a very strategic way, again, the fact that when a government changed, you know, they were still, they found ways to work with the new government, even if it was ideologically quite distant from their own position.

So really very fascinating ways to think about tax tactics and strategy and deploying different capacities to make sure that the campaign was kept on track and reached maximum impact. So those two, I think would be the ones that were most inspiring for me.

Naomi: Yeah, really clever, really clever. So you make the point in the book that the lack of involvement of kind of regular citizens and civil society historically in tax policy making and decisions – but how that is changing and interest in tax and tax justice and the activism in that area is really growing. I mean, I’ve definitely seen that in the years since I started with these podcasts in 2012, when it was really a minority interest, so I mean, there’s definitely been a lot of quite successful building up of tax as the friend of the people rather than the enemy of the people, so I’m just wondering what kind of changes you’ve seen in your time looking in this field that have demonstrated this change in interest and activism around the area of tax?

Paolo de Renzio: Yes, so I think, you know, historically, if you sort of take a long historical view, it’s very clear that citizens and different types of civic actors have had limited engagement and limited opportunity to really engage with tax reform, But, you know, I definitely think that the last 10, 20 years have seen quite an important shift and I think it comes from a few different directions. There’s been an increasing recognition and debate in international development circles about the role that taxation can play in promoting development, there’s been a lot of action around international taxation reforms, you know, where Tax Justice Network, of course, has been a very important actor, which have also brought in civil society actors in different countries through the regional networks, etc. Civil society has started learning this new language, these new skills, has started engaging in debates around taxation.

What we found was that debates and action on international taxation reform moved faster than country level campaigns and country level debates, partly because of different political context and political realities within many developing countries. But I think that is also now changing and the skills that civil society actors CSOs have gained by engaging with international taxation reform debates are now gradually being transferred to more domestic issues and domestic initiatives. There’s a growing interest by international NGOs and donor agencies in supporting this kind of this kind of work, so there’s basically, I think, a number of different factors that are coming together to generate, to create a more favorable environment for civil society groups to engage in, in this kind of work.

That doesn’t mean that all of the efforts would be successful, there’s still lots of political resistance, still many problems with access to information, with technical skills and capacities within civil society and so on and so forth, which we recognize in the book, but certainly, quite an important shift that basically means that this work will continue to grow in the future. So hopefully we will see more groups getting engaged, more, interesting stories of impact, more lessons that can be learned about how to make this work more effective.

Naomi: Yeah, yeah, I think so. And so in terms of what works best in the most sort of successes that you’ve looked at – obviously, success is an interesting word and tax reform is a battle of ideas, and it’s about how we talk about it in the first place and we make that an accessible subject rather than something that people feel they don’t, they’re not going to be able to understand and it’s not going to make any difference to their lives, when in fact the opposite is true so, which of the case studies would you say that you looked at was the most successful in terms of changing the narrative on tax justice, do you think?

Paolo de Renzio: We could see basically three main types of narratives that civil society groups deployed to sort of make the case for tax reform. One, and probably the most common one, given that we were mostly looking at cases of of campaigns that were aimed at making the tax system more equitable, you know, issues around fairness, justice, equity, different ways to basically make the argument that tax systems were working in favor of wealthier individuals and businesses, and were actually working against poorer, lower income, more marginalized groups is something that we see across a number of the different of the different cases.

So, you know, from the Uganda campaign on the regressive nature of the taxes that were introduced by the government on mobile money transfers and social media use, you know, that we’re clearly working against, especially, for example, in the case of mobile money transfers, rural people who use their mobile phones to move money around much more than people who work in the big cities and have access to the banking system and have bank accounts and so on.

As I said, in the case of Mexico, Fundar, calling tax amnesties fiscal privileges and showing that basically those who were getting away with not paying taxes were definitely not people who needed those tax breaks, basically. So there’s a range of very interesting ways in which civil society groups use this argument of justice, equity, and fairness in different ways to make the argument for, for tax reform.

There’s a second set of narratives that were around the need for governments to raise more revenues to finance basic services and to be able to realize human rights in different ways. So the issue in the Philippines, for example, as I said, around finding financing for universal health coverage, in the United States, a number of campaigns were, you know, very clear in terms of, you know, we’re going to raise more money from rich people and we’re going to invest it in education and infrastructure, which are sectors that are sort of lagging behind and that are not able to sort of cover the costs of these important services. The issue of earmarking in technical terms is sometimes controversial, but it works really well from a narrative standpoint. If you’re able to show people that, you know, taxes are paid to finance public services rather than just to sort of disappear into a black into the black hole of government machinery, so it was interesting to see how different groups used that narrative.

And the third and final one is around transparency and ensuring that corruption does not basically eat away at the money that citizens contribute in taxation. So for example, the Guatemala case is very much about making the revenue administration agency more transparent, more accountable, and this was done right after a big corruption scandal where very senior people in the government, including the president and the vice president, were forced to resign because of schemes that they had concocted basically, to siphon money out of the revenue administration agency, you know, big focus on transparency and anti corruption measures.

Mexico, again, is a case in point where there was this decade-long battle to, force the tax administration to release the names of the beneficiaries of tax amnesties, which they very strongly resisted for a long time.

So these three sets of narratives are the ones that we identified as being used across the different cases, which we think can provide an interesting menu of options for groups that are interested in engaging in this kind of work, you know, depending on the type of tax, the kind of tax or the kind of campaign that people are interested in working on, then there’s a range of possibilities there in terms of a language that works, stories that work ways in which you can turn the technical language of taxation into something that people can relate to that can be used in in the media or can be used in social media for people to more easily connect and understand with the issue and as a consequence of that, support it.

Naomi: Mmmm. Yeah. And it’s – so many very well embedded popular misconceptions about tax, you know, low taxes stimulate the economy and the wealthy people are the wealth creators and they must be kept as wealthy as possible. And they’re really well embedded so it’s a long journey to try to change those stories that society tends to tell itself, but then one of the things that was really interesting in the book was about strategy. You were saying that the most successful campaigns you looked at used multiple strategies.

Paolo de Renzio: That was also another very interesting, very interesting aspect of the analysis that we did. The more successful campaigns were really multi-pronged strategies that brought together technical analysis and technical publications with direct engagement with executive, with building broad coalitions of civil society actors that could, you know, put more pressure on the government, working with the media, trying to work on these narratives and this messaging, working with parliaments and parliamentarians to create better ways to hold the government accountable.

Sometimes we had the sense that using multiple strategies was not necessarily something that was, you know, planned. It was more like a trial and error as these organizations were trying to make their point and achieve impact, trying anything and then seeing what stuck, what worked, but still, the ways in which they kind of went about identifying different entry points, developing different tactics over time, trying to see what worked, what didn’t work, what was worth investing more in and what might have been something that they didn’t have either enough capacity to cover, or didn’t have the right allies to basically carry forward and so on, was definitely a very interesting part of what we found.

So the two cases Mexico and the Philippines and I would also add the case of ECEFI in Guatemala and their campaign to reform the Revenue Administration Agency were the ones that sort of best provide the best picture of these purposeful, multi-pronged strategies that, that, you know, really try to push the issue in many different ways, and depending on where the context allowed more space.

You know, at a specific point in Guatemala, for example, there’s this corruption scandal that happens. They had had been doing work on, revenue administration reform quite some time so they had something ready that they could put in the media, bring to the table sort of, you know, build some momentum around. Then when there’s an election with the change of government, immediately they sort of go and work with new Congress people, new members of Parliament, providing technical input into the parliamentary debates around the new legislation that they were pushing for, so at the same time they were finding, you know, super interesting alliances outside of government. They worked with indigenous groups at local level. They worked with business associations at the national level, always trying to find where the overlap, where the useful overlap existed that they could utilize to basically push for their issue, push for the kind of reform that they thought was the best one for the country.

Yeah. So, the more successful campaigns were the ones that had multi-pronged strategies and worked on different fronts. At the same time you know, also recognizing that not always everything needs to be done. So, for example, social media campaigns in some cases worked really well, in some other cases that didn’t really make much of much of a difference. So there’s also that capacity to recognize when something is not working so that you sort of pull back resources and put them where they can be more impactful.

Naomi: Yeah. Adaptability. And they also had in Guatemala this really interesting political opportunity you could say, because there was such a big scandal over there with La Linea. it’s really interesting how there are occasions in the case studies where perhaps a campaigning group aligned too closely with the political opposition and that in some ways limited the success of their campaign. And the kind of tribalism that can come into play sometimes with campaigning is a really interesting one, and the type of bridges that you can build are very often quite surprising, you know, so you can come at tax campaigns from all sorts of positions, so you have to be really as wide and broad as possible. Even people who work in professions that you would not think, and even politicians who are ideologically coming from such a different perspective, there are meeting places there that can be used to progress particular policies in ways that, you know, if you’re too restrictive in the way you think about change it can limit the success of campaigns.

Paolo de Renzio: Yes, in many ways the issue of strategies is very interlinked with the issue of coalitions cause because yeah, whenever you’re working on, you know, a different part of your campaign or trying to use a different entry point to influence government policy, then there’s a different type of alliance that you need to build, there’s a different type of coalition that you need to sort of bring together to, you know, strengthen your position vis a vis those who resist the reform. And it is very interesting, in fact, across the cases to see how different groups went about building these alliances, these relationships, these coalitions very much across the spectrum, you could say, of actors that might have a role to play in tax reform. And this goes from, you know, working directly with different parts of government where these organizations could show that they could provide interesting technical inputs into even the inner policy workings of the government, you know, in many ways, building the capacity of government to think about policy reforms from the inside.

So we have clear examples – of Action for Economic Reforms in the Philippines, built very close collaboration with the reform unit in the minister of finance. We have FUNDAR in Mexico building the capacity of the institute for access to information, which is sort of the guardian of transparency within the country, helping them think about some of the positions that they developed over time with regard to tax transparency, for example.

So, you know, direct linkages with government, but also building alliances with different oversight actors from supreme audit institutions and parliaments and, you know, civil society is quite a broad field and there’s all kinds of people representing, or claiming to represent different groups with very different ideological standpoints with very, very different views on taxation and other aspects of government policy. So, really going out there and trying to find you know, all of all the different groups and associations, whether they’re from the business sector or from other parts of civil society, or from sector-specific movements, etc, and trying to sit down and think about where your interests overlap and what you can do together to try and push for the type of reform that is of interest to these different parties is something that is quite interesting that we see happening, throughout most of the most of the cases.

Naomi: Yeah, and then in terms of capacity you do make it very clear in the book that it’s technical capacity, political capacity, communications capacity, and a really important capacity to learn and adapt, you need all of them.

Paolo de Renzio: Yeah, and this is something that I think is very specifically relevant in my view for donor agencies and, you know, other outside supporters who often tend to think that what you need is kind of technical capacity to engage in tax debates. And if you build the technical skills within civil society groups and other civic actors, then everything else will follow, almost, you know, naturally. And what we very clearly see from the case studies is that technical capacity is only one of many types of capacities that are needed for successful campaigns, and technical needs to go alongside the political, the political needs to go alongside the communication. So the crafting of the narratives, the capacity to sort of deploy effective messaging strategies and so on, all of these are needed. What is interesting to see is that not necessarily all of these need to exist within an individual organization that is spearheading a campaign. They can bring in others who have who can contribute some of the skills that they don’t have so that then, you know, the coalition becomes the repository of the needed capacities, rather than the individual organization.

And then the final point, which you mentioned, is that this needs to be seen in a dynamic, long term perspective, where basically that capacity to reflect on your own action, learn from it and see where you may have made some mistakes, correct course, or, you know, finding out which capacities are missing and therefore either developing them internally or bringing them in from the outside this is something that, again, that we see as very important and an important lessons for other organizations that want to follow these footsteps.

Naomi Fowler: My thanks to Paolo De Renzio and the International Budget Partnership. Their book, A Taxing Journey, How Civic Actors Influence Tax Policy, is available online to download for free. The link is in the show notes.

And finally, a quick tax justice news summary for you. After 10 years of campaigning, a huge anti money laundering breakthrough in the United States, beneficial ownership reporting has now begun under the Corporate Transparency Act. On the 1st of January 2024, the Treasury Department began accepting filings on the true beneficial owners of many, not all, U.S. companies. Newly formed entities must now file within 90 days of formation.

In Davos, Switzerland this month, as global business elites, government officials, and representatives of global financial institutions met for the World Economic Forum, 260 millionaires and billionaires from 17 countries signed an open letter asking governments to tax them more. They wouldn’t even notice the extra payments! You can read more about that campaign on www. proudtopaymore. org

The same month, Global South countries met in Uganda for the 19th Non Aligned Movement Summit. There they discussed South to South cooperation on combating illicit financial flows, reducing to the barest minimum the processes and costs of the recovery of assets, and debt and climate crisis challenges.

And, in the European Union: the European Parliament and the European Union’s 27 national governments have taken some steps forward to agree regulations to harmonize anti money laundering rules across the bloc. Cryptocurrency platforms will be subject to enhanced due diligence measures. That’s much needed. We need more though!

Not so good on beneficial ownership registers is that a proposal to lower the threshold where firms must identify the beneficial owners of legal entities from the current 25 percent stake to 15 percent didn’t make it because of opposition from EU member states. By the way, at the Tax Justice Network, we’d like to see a no-threshold approach following the examples of Argentina and Ecuador.

But, provision has been agreed now across the block for access to beneficial ownership registries for journalists, academics and other parties with a legitimate interest. The devil’s in the detail there, but it is an advance from the EU court ruling that took us backwards on transparency in 2022 when judges ruled as invalid the legal requirements on corporations, trusts and other legal entities to publicly disclose the identities of their beneficial owners.

Okay, that’s it for now. We’ll be back with you next month. Thanks for listening. Bye for now.

Welcome to our monthly podcast in Portuguese, É da sua conta (‘it’s your business’) produced and hosted by Grazielle David and Daniela Stefano. All our podcasts are unique productions in five different languages – English, Spanish, Arabic, French, Portuguese. They’re all available here. Here’s the latest episode:

A falta de transparência, a falta de abertura para participação social, as tentativas de suborno e corrupção, as brechas na legislação, além de algumas dificuldades bem visíveis, como a falta de equipamentos ou pessoal suficiente….

Como nossos heróis e heroínas invisíveis se preparam para enfrentar os desafios da administração tributária?

Esse é o tema do episódio #56 do É da Sua Conta, especial de fim de ano e em homenagem a auditores e auditoras fiscais das administrações tributárias do Brasil e dos países africanos lusófonos.

• Qual o perfil ideal para trabalhar na administração tributária? Seleção, formação inicial e capacitação durante a carreira de auditoras e auditores com Márcio Verdi (CIAT).
• Cabo Verde, Angola, Guiné Bissau e São Tomé e Princípe: os desafios dos profissionais da tributação nos países lusoafricanos, com Clair Hickman.
• Fim da Escola Nacional de Administração Fazendária (ESAF), greve e falta de condições de trabalho: o que ocorre na Receita Federal? O Isac Falcão (Sindifisco Nacional) responde.
• Justiça fiscal como princípio norteador da formação de nossos heróis e heroínas, com Florencia Lorenzo (Tax Justice Network).

“Defendo que deve sempre haver uma formação inicial. Por melhor formada que a pessoa venha, ela precisa ainda entender, por exemplo, dos aspectos éticos, morais e código de conduta.”
~ Márcio Verdi, secretário executivo do CIAT

“Quando o servidor da administração tributária ingressa através de um processo seletivo  transparente, com provas e título, faz uma melhora sensível no corpo funcional, e depois, inclusive, no oferecimento do serviço público daquela instituição para a sociedade.”
~ Clair Hickman, consultora para administrações tributárias em países lusoafricanos

“Quando o presidente (Lula) falou que é preciso colocar o rico no Imposto de Renda, não é que o rico ia pular pra dentro do Imposto de Renda, precisa de uma administração tributária pra fazer isso.”
~ Isac Falcão, presidente do Sindifisco Nacional

“Um sistema tributário que foca naqueles que têm maior capacidade contributiva, é também um sistema mais eficaz.”
~ Florencia Lorenzo, Tax Justice Network

Participantes:

• Beandrea Montoro, auditora fiscal em Guiné Bissau
• Clair Hickman, auditora fiscal aposentada e facilitadora de treinamentos e consultoria fiscal em países lusoafricanos
• Florencia Lorenzo, Tax Justice Network
• Isac Falcão, auditor da Receita Federal e presidente do Sindifisco Nacional
• Márcio Verdi, Secretário Executivo do Centro Interamericano de Administrações Tributárias, CIAT
• Pascoal Alves Junior, auditor fiscal em Guiné Bissau

Transcrição episódio #56

BÔNUS:
Greve na Receita Federal: por quê?

Postos de fiscalização fechados à noite por falta de iluminação nos pátios, auditoras e auditores da Receita Federal em greve por mais de um mês em  2023, proposta do governo negada pela categoria. O que está acontecendo com a Receita Federal?

Neste episódio bônus, entrevista exclusiva com Isac Falcão, auditor da Receita Federal e presidente do Sindicato Nacional dos Auditores Fiscais da Receita Federal no Brasil, o Sindifisco.

Transcrição Bônus É da Sua Conta

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É da sua conta é o podcast mensal em português da Tax Justice Network. Coordenação: Naomi Fowler. Dublagens: Cecília Figueiredo e Zema Ribeiro. Produção e apresentação: Daniela Stefano e Grazielle David. Download gratuito. Reprodução livre para rádios.

Welcome to the latest episode of the Tax Justice Network’s monthly podcast, the Taxcast. You can subscribe either by emailing naomi [at] taxjustice.net or find us on your podcast app. All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here. We’ll soon be launching our new podcast website, so look out for that!

In an extended Taxcast edition this month, a century of tax rule setting by the former imperial powers has been overturned: we look at the UN vote on global tax reform. Taxcast host Naomi Fowler follows events at the UN, the failed efforts to block it and explores what it all means with Alex Cobham of the Tax Justice Network.

Featuring:

• Alex Cobham of the Tax Justice Network
• UN representatives from Nigeria, South Africa, the Bahamas, the UK, the US, Spain, Russian Federation, Cameroon.
• Hosted by Naomi Fowler of the Tax Justice Network, produced by Naomi Fowler and Jo Barratt.

Transcript available here (some is automated)

“If the time of crisis imposes the time of change, then it’s time for cooperation to take precedence over competition. It’s time for international solidarity to take precedence over particular and selfish interest in the short term. African people are tired of numbers about assistance for development. They do not request more assistance. They request every partner running business, the physical or digital, individuals and companies making profit should pay the right price, the fair and just percentage in terms of tax. Then we could keep our promise to transforming our world, to ensuring the world we want, the future we want is a reality.“

“It’s a century waiting to have a globally inclusive body to set tax rules to throw over the decisions made by the League of Nations in the 1920s and 30s that we’re all stuck with the consequences of today. We don’t actually need tax rules that were set by the imperial powers, honestly, we can do better.”

Further reading:

• The UN adopts plans for historic tax reform, Tax Justice Network
• “No” voters on UN tax reform enable 75% of global tax abuse, Tax Justice Network
• Follow developments on tax reform at the UN on the Tax Justice Network’s live blog: Road to UN vote on global tax reform
• Decolonising the International Tax System from Fadhel Kaboub‘s blog
• A new UN Tax convention – how will it change global tax governance? from Martin Hearson
• You can WATCH the vote at the UN here (the discussion on tax matters starts around 35 minutes)

Here’s a summary of the podcast:

Naomi: Hello and welcome to the Taxcast, the Tax Justice Network podcast. We’re all about fixing our economies so they work for all of us. I’m Naomi Fowler. On the Taxcast this month:

Clip 1: “African people are tired of poverty, they do not request more assistance. They request every companies making profit should pay the right price, the fair and just percentage in terms of tax.”
Clip 2: “The committee is now voting on draft resolution L18 Rev 1 entitled Promotion of Inclusive and Effective International Tax Cooperation at the United Nations.”

Naomi: It may not sound like it, but this is a historic vote at the United Nations on where the power lies for global tax rulemaking.

Clip 3: “The voting has been completed. Please lock the voting machine. The result of the vote is as follows: in favour 125, against 48, abstentions 9. Draft resolution A/C2/78/L18 REV1 is adopted.”

Naomi: Some nations tried their best to block it, but a landslide majority of nations voted to catapult the world into the next steps for fairer rulemaking on global tax. It’s all about who gets to decide, and how, and where.

UN representative from Nigeria: For developing nations this resolution represents a beacon of hope.

Naomi: This is the UN representative from Nigeria introducing the draft resolution before the vote on behalf of the Africa Group.

UN Representative from Nigeria: By standing together today, we commit not only to fairer tax systems, but also to a collective future where economic justice are not mere aspirations but achievable realities. The path is clear and the benefits are manifold.

Naomi: And here’s the South Africa representative.

UN representative from South Africa: For many Africans, fulfilling the UN Sustainable Development Goals is a matter of life and death. Unfortunately, their ability to meet these aims is hobbled by illicit and hidden movements of capital that amounts to vast billions each year. It is high time that the international community addresses this injustice in global taxing rights that is impoverishing millions, which goes back to the days of the League of Nations, when most member states were colonies and which has been perpetuated by the monopoly that rich country clubs have held over international tax rulemaking.

Naomi: We know that if we continue on our current trajectory where the ‘Club of Rich Nations’ at the OECD wields the power on tax rules in their own interests, countries are on course to lose 4.8 trillion US dollars to tax havens over the next decade. This vote aims to avoid those kind of astronomical losses by doing things differently through the United Nations and establishing a UN Tax Convention. Taxcast listeners will remember that in 2022 countries at the UN agreed by consensus to the preparations that have led up to this UN vote. So what have 125 nations just voted for? Alex Cobham of the Tax Justice Network:

Alex: So look, what’s happened, you know, last year there was agreement to move forward with intergovernmental discussions, so the real thing that it required was this report from the Secretary General to look at the options and then a debate in the General Assembly this year.
Naomi: Yes, and I covered that in the Taxcast. It’s the one called the day global power shifted. I’ll put that in the show notes. So the report was done, yeah.

Alex: Right, so that’s happened, and off the back of that a new resolution was brought forward by the Africa Group. And this resolution really does two things. So it sets the commitment to work towards a framework convention on tax. And in the immediate period, really from January to August, it says we will create, basically a committee of all of the UN member states in order to create the terms of reference for those negotiations. So it’s all of the countries of the world agreeing the terms of reference for the negotiation on a framework convention. And the idea is that will then be brought back to the General Assembly in September, and then the negotiations would go forward. So last year was kind of creating the context, saying this is what we’re looking at. And this year is, we’re kind of into the hard and fast steps, this really concrete committee to take it forward, to create the terms of reference. So we’re on the road, you know, we have a resolution now that commits absolutely and without equivocation to negotiating a framework convention, a legally binding outcome.

Naomi: Okay. We’re going to look at the no voters and their motivations in a minute. But why did nations agree by consensus last year, but this time it went to a vote?

Alex: Yeah, so, this is sort of UN technicality, last time they didn’t vote so it’s UN consensus, so nobody objected hard enough to say, let’s take this to the vote. So there were some objections, registered or reservations from some OECD countries but nobody wanted to resist enough to have a vote so it passes by consensus and that’s effectively as close as you get to unanimity. This year they wanted to stop it. And they fought really, really hard all the way through trying to stop it and only the almost complete unanimity of the G77 countries made sure that we had such an overwhelming result in favour.

Naomi: Right, and the G77, that’s a coalition of so-called ‘developing’ countries, so it was a landslide really, those 125 nations voting in favour of the resolution represent 80 percent of the world’s population. It’s a historic vote too, the last attempt to address global power imbalances through the United Nations was spearheaded by Jamaica in the 1970s, along with other newly decolonised nations. Back then, they passed the UN Declaration on the Establishment of a New International Economic Order, and the aim of that was to reinforce the rights of all national governments to control multinational capital and specifically exercise democratic power over multinational corporations. The backlash against it from the most powerful nations dissuaded any similar attempts for nearly 50 years, until now. Here’s the representative from the Bahamas at the UN:

UN Representative from the Bahamas: This resolution is an important step towards an inclusive and equitable global tax system. For over six decades, the international tax policies formulated and dictated by the OECD neglected or failed to address the inherent challenges and the differences in development dynamics faced by the global south. Throughout these decades, developing countries have grappled with the disequilibrium of the international financial architecture, coupled with inconsistent contradictory tax and financial services policies, which have stifled economic growth.
Mr. Chair, this resolution envisions a future where services and trade benefit all countries fostering true inclusivity and cooperation. It will enable countries, particularly in the Global South, to actively participate in shaping international tax norms, while creating equity and development capacity where it did not exist before. It will also ensure the development of protocols to combat illicit tax related illicit financial flows, which cause the loss of hundreds of billions of dollars in tax revenue annually. By addressing this issue we are taking a significant step towards preserving the financial integrity of vulnerable countries while generating more revenue to finance development.
Mr. Chair, the overwhelming support for this resolution is a clarion call, indicating that the majority of the world recognises the inequalities of the current international tax regime and are victims of its arbitrary and inconsistent rules. In this vein, the Bahamas welcomes the passage of this resolution as an aspiration for equity, inclusivity, sustainable development and tax cooperation.

Naomi: The Bahamas co sponsored the draft resolution and we’ll talk a bit about their position later, which is interesting. Before the main vote happened on the draft resolution, Promotion of Inclusive and Effective International Tax Cooperation at the United Nations, the United Kingdom proposed an amendment to that draft resolution. Here’s the UK representative.

UN representative from the UK: During negotiations, the UK and others have sought to engage constructively to bridge the range of views and find a way forward that is in line with the ambition and which commands consensus. That is why we are now proposing an amendment to the resolution, which would change the text to just refer to a framework, rather than a framework convention.

Naomi: OK. So, what was the UK up to there? And why did they want to change the text to refer to a framework rather than a framework convention? What were they doing?

Alex: So, the UK brought forward this amendment. It’s not quite clear why it was the UK who brought it forward, because it was really the European Union’s position but I think just, you know, some OECD members trying to block things together. So the UK brought forward an amendment to strike out the word convention, basically from the resolution, in order to kind of get to a position where you have no legally binding outcome at all.
Naomi: Right, so in a way they were happy to talk shop, but not if it actually meant it was legally binding?!

Alex: I mean, that seems to have been the position, which is remarkable. Because bearing in mind, these are countries that sometimes complain that the UN is a talking shop, and they use that as an argument for why they shouldn’t do things at the UN. And in this case, they were demanding that the UN be a talking shop and have no possibility of being anything else so, yeah, it wasn’t, it wasn’t a very compelling position, I think, and certainly the Africa Group gave it very short shrift, and rightly so.
Naomi: Yeah, here’s the Nigerian representative’s response to that and there’s not much doubt what he thought about the UK’s intervention!
UN representative from Nigeria: Thank you very much, Chairman, and I would like to thank the UK delegation for its engagement and for its, uh, approach of trying to alter the resolution.
The position of the African Group is that the amendments being proposed by the UK delegation aim to, or would certainly preserve a restrictive status quo where developing countries remain marginalised in terms of international discourse. This approach denies us a voice in vital areas of agenda setting, norm creation, and decision making. The African Group, therefore, categorically rejects these amendments and strongly encourages all delegations to vote against them. We instead invite you to support and vote in favour of the draft resolution as it is, affirming our commitment to equity, inclusiveness and a global tax system where every member has an equal say.

Naomi: Well, that attempt by the UK to amend the draft resolution didn’t work. It was heavily defeated. Listen here to the results of the vote on their amendment.

UN representative: Delegations are kindly requested to indicate their votes. Those in favour of the proposed amendment contained in document A/C2/78/CRP 7, please signify. Those against and abstentions. The committee is now voting on the proposed amendment to draft resolution L 18 REV 1, as contained in document A C2 78 CRP 7.
Will all delegations confirm that their votes are correctly reflected on the screen? The voting has been completed. Please lock the voting machine.
The result of the vote is as follows in favour 55 against 107 abstentions 16. The proposed amendment contained in document CRP 7 is not adopted.

Naomi: So, that amendment got nowhere. Next, the United Nations voted on the Africa Group’s now unamended draft resolution. Just before that, the US representative gave a statement on why the US was going to vote against it. Let’s listen to a bit of that.

UN Representative from the US: The United States regrets that it cannot join consensus on this resolution and wishes to explain the reasons for this decision before the vote. The content of the resolution and the process followed over the course of negotiations have resulted in outcomes that are likely to duplicate and undermine existing intergovernmental negotiations on international tax cooperation.

Naomi: Duplicate and duplication are words you hear a lot from the no voting countries.

UN Representative from the US: The resolution has failed to achieve the consensus necessary to strengthen international tax cooperation for the benefit of all countries. Without broad consensus among countries, any process is unlikely to strengthen international tax cooperation or achieve meaningful results.

Naomi: Hmm, well, the United States has often opted out of international agreements on tax rules as they’re decided currently, so, yeah..! Next, the US representative went on to claim that tax rulemaking as it’s done now is all just fine. Nothing to see here!

UN Representative from the US: Negotiations of the Inclusive Framework occur in a setting in which 145 jurisdictions provide input and decisions are made by consensus. This approach affords every member a real voice in negotiations and decision making, which allows for the development of solutions with broad consensus that have a better chance of standing the test of time.

Naomi: So she’s sort of saying 145 jurisdictions agree tax rules together and it’s all great?!

Alex: So, you know, let me not call anyone a liar, you can only conclude from that that the U.S. delegate was exceptionally badly briefed, you know, the Inclusive Framework, and this is on the record by multiple participant countries, simply does not provide an effective voice to most of the Inclusive Framework members. In fact, a number of OECD country members, whatever that is, 38 or something members of the OECD, a number of them have expressed serious frustration at the failure of the process to be inclusive, even of their voices.
But apart from the practicalities, apart from all the people who’ve complained that this isn’t inclusive and highlighted – as ATAF, the African Tax Administrators Forum has done – highlighted that the processes for consensus is quite close to coercion, that sometimes they would be delivered documents at 10 o’clock at night, being told that if they had not raised an objection by first thing in the morning they would be assumed to be joining the consensus, right? Now, even for countries with very high capacity in their tax authorities and finance ministries, that’s a completely unreasonable ask and that doesn’t generate any genuine consensus at all. For countries which in many cases are seriously capacity constrained and operating in different time zones, that’s just outrageous, you know, and it’s clearly not consensus by anyone’s definition.
But look, even setting aside those questions about how the Inclusive Framework fails to work in practice, you only have to look at the governance to understand that what the US delegate said is completely wrong. There is no governance, no rules of procedure for the Inclusive Framework, so there is no basis on which the Secretariat legally is required or even can take the opinions and reflect them of the members of the inclusive framework. So if you look through the OECD’s governance, what you come to is the position stated that legally the secretariat is bound by, which says that they must prioritise the views of OECD members over any other country and that has to be the determinant of all the work that they carry out. And that’s equally true for the Inclusive Framework as for any other thing that the OECD does.
Now, if you wanted, you could think about changing the OECD’s governance, you know, you could create structures and rules of procedure where they could have transparent voting, where there could be decision making by the members of the Inclusive Framework, not by OECD members. But by the time you’ve done all that, you’d effectively have created a United Nations parallel. So there’s kind of a question, you know, why would you do that when we’ve already got the United Nations?! We’ve got the UN. We just need to give it a space to deal with tax.
Naomi: Ok. So, next, nations at the United Nations voted on the Africa Group’s unamended draft resolution. Here it is:

UN Representative and interpreter: The committee is now voting on draft resolution L18 Rev 1 entitled Promotion of Inclusive and Effective International Tax Cooperation at the United Nations.
The voting has been completed. Please lock the voting machine.
The result of the vote is as follows in favour, 125 against, 48 abstentions 9. Draft resolution A C2 78 L18 REV1 is adopted.

Naomi: Right, let’s take a look at the politics and the power relations behind all this. Let’s start with the nations which voted no, voted against the resolution. The first thing to say is that the 48 countries who voted no to the resolution are A) mainly OECD member countries, which represent only 15 percent of the global population and B) those no voting countries are responsible for three quarters of all countries’ losses to tax havens. That puts things in a different light, doesn’t it?! And that’s complicated by the fact that the tax benefits from reform would be good for all nations, not just the world’s poorest ones. And that’s because the wealthiest countries in the world actually lose the most tax revenue each year as a result of the way international tax rules currently work under the OECD. Poorer nations lose the biggest proportion of their potential tax revenues, so they’re hit very hard and they can weather that hit less than wealthier nations. So if wealthier nations also lose out, why did they vote no? Here’s Alex:
Alex: Well, a cynic might say that those countries actually don’t have an interest in fixing the problem. Although they are the biggest losers in terms of absolute revenues, they are also the home countries for the multinationals and professional services firms that are responsible for most of the cross border tax abuse in the world. I think that’s probably not fair.
Somebody even more cynical might say, these countries do kind of want to fix the problem, but not that much. Not enough to actually give up the disproportionate power that they have at the OECD. So they’d rather have this process at the OECD continue to fail to solve the problem, but it being their process and their organisation rather than a globally inclusive one. And again, you know, I think, or at least I hope, that that’s probably unfair to, at least for quite a few of those countries.
So I think maybe the fairer reflection would be to say there’s two things going wrong here. So one is that these countries governments are not under sufficient public pressure from their own citizens demanding that they do more about the problems of tax abuse. And that’s something that we, the tax justice movement should be thinking about and how do we, how do we change that dynamic when these losses are so huge and responsible for so much lost public services, so much excess inequality in these rich countries, as well as everywhere else? So that’s one part.
I think the other part is countries are afraid of what they don’t know. You know, it’s not countries, it’s people, it’s individuals, it’s, it’s government officials and the ministers that they brief, and they’re comfortable at the OECD, you know, they know it doesn’t work, and they know that when the US and France, the biggest member and the host country have a bilateral negotiation, everybody else pretty much has to accept the results because it’s the opposite of a democratic, uh, organisation, but they’re comfortable in it, it’s what they know. And they worry, particularly finance ministries who never engage at the United Nations, they worry that if they go somewhere else it might all be terribly different and scary. And so I think there is a process, you know, in the negotiations generally of people just getting kind of acclimatised, people from finance ministries and tax authorities who aren’t normally in UN spaces actually understanding that this is a place that’s got real possibilities, that the transparency isn’t something to be afraid of, actually it can help them get much better outcomes, and hold each other accountable, and allow their citizens to see that they are taking the positions that they say, outside of the meeting that they’re going to take. And I think, you know, genuinely, I think we’re going to get on a road where a lot of OECD countries really embrace this process. And we can kind of move forward to something much, much more effective, as well as much more inclusive than we’ve had at the OECD.
Naomi: Okay. Let’s look at the Yes voting countries. These efforts to move international tax rules setting to the United Nations have been led by the Africa Group and proposed by Nigeria. Co-sponsors of their draft resolution include Bahamas, Bolivia, Guyana, Russia, Thailand and Tonga. Russia’s interesting. Why Russia? Here’s the Russian Federation representative addressing the assembly before the vote:

UN Representative from the Russian Federation speaking through an interpreter: Mr. Chairman, dear colleagues, Russia is in favour of strengthening international cooperation in the area of tax matters and making it truly inclusive. We hear what the African Group is saying. The existing multilateral cooperation mechanisms within the OECD are neither inclusive nor effective. In this regard we support expanding the tax discussion in the UN and creating an intergovernmental platform with universal membership to discuss specific matters. The obstructive stance taken by most OECD countries, the position of developed countries is bewildering. Meeting the challenge of mobilising internal resources without establishing a fair and inclusive international tax system is not possible. Maintaining the status quo will not enable countries of the Global South to ensure self sufficiency or to decrease their dependency on external financial assistance.

Naomi: Here’s Alex.

Alex: So, I mean, you would like to think that, you know, Russia being aware that it’s very seriously exposed to financial secrecy that drives not just significant tax abuse, but also, you know, the very obvious problem of corruption, that it’s seen the light. I don’t think that’s, certainly not what we’ve really heard, but it’s a calculation that, you know, the G77 countries have really, felt so oppressed, and have been oppressed really, are currently being oppressed by the way the international tax rules operate by their exclusion from any effective voice in that process and the continuing extraction of profits by companies from OECD countries, so Russia sees an opportunity to align itself with the G77 and say, you know, we are much better friends of yours than the United States or the European Union. And that’s, you know, that’s fairly cynical, but it’s not surprising. And, you know, if you’re on the other side of that, if you’re the United States or the EU or the UK, you know, you should really think about whether, let’s imagine that you actually think the OECD is delivering something good, even if you did, which, you know, nobody could, but let’s say you did, you’d still have to think quite hard about where the G77 very clearly doesn’t take seriously the claims of the West to be kind of defending human rights and to be on the good side you know, this is such an obvious opportunity to say, in effect, you know, you’re right. And we can see that we’ve done this wrong and that we’ve acted unfairly for decades now. And it’s time, you’re right. It’s time that you and everyone had a seat at the table and, you know, get on the right side of history, right? You know, this is a process that’s going to happen anyway so it wouldn’t actually have cost very much to say, you know what, we’re going to champion it, instead of being the people who are trying to spoil it at every step. So just even on a kind of, you know, a very narrow political pragmatism basis, you think this was a bad decision by most of the OECD countries who opposed.

Naomi: Hmm. And looking at some of the, the other Yes voters, Colombia and Chile, they resisted a lot of pressure as OECD members wanting them to vote against or abstain and that’s quite an interesting and quite a brave stand they took, I think.

Alex: Yeah, I think the support for this is really kind of quite telling. Thinking of Chile and Colombia, you know, what they’ve done is exceptionally brave and important. I’ve just been in Oslo, and you know, Norway abstained, right, as another OECD member. They were under enormous pressure to vote to vote against, and to stick with the OECD bloc, and so for them even to move to abstention, never mind voting in favour, you know, just to get to abstention was really politically, felt costly for them. And this is a country that’s been, you know, an absolute champion of this kind of inclusive international tax cooperation and work on financial transparency for, you know, at least the last 20 years, so, you know, you can only imagine the pressure that the newer OECD members like Chile and Colombia were under so it’s, you know, it’s all the more admirable that they took this stand.
I think if you then look at some of the other supporters, even the co-sponsors, you see some unusual names when you’re thinking about kind of international tax cooperation. So one of the co-sponsors was the Bahamas, and the Bahamas is a country that’s been you know, frequently on the non-cooperative jurisdiction lists of the European Union or other kind of tax haven blacklists, and they’re always painted as an opponent of progress by those institutions. It is true that, you know, from our perspective, the Bahamas isn’t sort of perfect, you know, it’s got some work to do to become a bit more transparent and make sure it’s not kind of facilitating profit shifting, but it’s far from alone in that, and of course the Bahamas role is much, much smaller than that of some of the big OECD members, whether that’s the Netherlands or Ireland on profit shifting or the United States on financial secrecy. And yet the Bahamas ends up on these lists when no OECD member ever does. So for them to co-sponsor this is a signal that I’m sure they can imagine this process will lead to some further constraints on how they can operate, but clearly they’ve decided it’s much better to be part of a global process in which their voice can be heard, even if the outcomes in some cases may be to require them to meet certain standards than to be outside of a process forever at the OECD or the European Union, wherever, where they’re only ever going to be painted as criminals, you know, and if you look across the Caribbean, actually, the support was really comprehensive, I mean, it was kind of impressive given that that’s a region that’s often felt like international tax co-operation is just another word for coming to attack us, right?
So I think you can see a shift in dynamics here. Countries at different income levels from different regions of the world coming together because genuinely there is a central demand in this which is for everyone’s voice to be heard, not just this this group of OECD members.

Naomi: And the countries that chose to abstain, again, interesting. There’s nine of them, so I’ll run through them quickly. Norway, Alex has talked about, then there’s Armenia, Costa Rica, El Salvador, Iceland, Mexico, Peru, Turkiye, and the United Arab Emirates.
Let’s talk about some of the no voting countries, all of the EU countries voted as one block against the resolution. Here’s Spain’s representative at the UN speaking on behalf of the 27 EU countries after the vote. It’s that duplication word again, but they also seem to think that all that’s needed is to tweak the OECD rich countries club to make it more democratic. Have a listen. what you’re hearing is the UN interpreter interpreting from Spanish to English.
UN Representative from Spain, speaking through a UN interpreter: The EU and its member states recognise the important role played by the UN, including, but not limited to, its efforts to support developing countries in mobilising domestic revenues and to increase their ability to finance their development strategies. The EU and its member states are also committed to the ongoing work of the OECD and G20 inclusive framework, which strives to establish ambitious reforms to the international tax order, and its increasing number of members. We consider it is important to continue developing these global tax standards and avoid duplication of work or inconsistent outcomes, including agreements that have been built over the course of many years and that have global benefits, however imperfect they may seem.
However, we recognise that many UN member states have noted a lack of inclusivity in the existing international agreements, both in terms of their process and also in terms of establishing the agenda. We are resolute in terms of committing to improvements in this regard, both in terms of consultations and with member states and also respective international organisations, the EU and its member states support the efforts of the global framework to improve the inclusiveness of its membership.

Naomi: You’ve talked a bit about the EU already, voting as one bloc against the resolution. And you can see that there is some sympathy for the objections of many nations that they’re not getting a fair say in the making of global tax rules. So, they acknowledge there’s a lack of inclusivity, but still voted against as a bloc. It’s in theory, somebody is able to break out of that bloc and say, no, I’m going to vote for it? Or I’m not quite sure how the EU works in the UN for this kind of vote?

Alex: Yeah, so it doesn’t always, but it very often operates as a bloc, and, you know, at the second committee where this resolution came, that’s typically how it operates. What was different this time though is that the EU finance ministers had met in, I think, September and gave a recommendation that EU members should support option three, this non-binding framework without a convention. That was then interpreted by the lead EU member in the negotiations of this as an absolute outright position that couldn’t be changed. Now that EU member that led the negotiations was France, which of course is the host country of the OECD and always the most aggressive defender of the OECD. So I think the EU got themselves stuck into a position that they didn’t actually necessarily mean to take, but under a combination of pressure from the OECD itself and then from France, ended up tying everyone’s hands. I think there’s quite a bit of anger at France about that. And delegations understand how much geopolitically it’s kind of cost them to be on the wrong side of this and to fail to stop it anyway. So we’re already hearing that EU members will be actively participating in the, in the committee stage that will begin in January and February.
We’ll see if that’s an EU bloc position or if it’s much more open and positive members will be able to engage more positively. My guess is they’ll try and keep a bloc position, but there’s no way it’s going to be dictated by France next time, that’s the message that’s coming.
But one thing to say, you know, for the EU, I think what needs to happen really is a shift in understanding. You know, I heard the head of tax at the European Commission the other day saying he just didn’t know what the UN convention would include and that’s why it was difficult for them to take a position. I think, again, that suggests he simply hasn’t been briefed because there’s a lot of material out there on what could be included.
Actually, you know, the case you can make to the EU is very clear. Going back at least to 2000, the EU has been a leader in a whole set of areas, you know, it was the EU that took forward multilateral automatic exchange of information. The EU has really led on beneficial ownership, at least up to the European court ruling that’s put that in a bit of jeopardy. It’s leading now on public country by country reporting from July this year. That will be a requirement, not perfect, but you know, a big step on the road. And the European Union has led in efforts to try to get a type of unitary taxation with formulary apportionment within the European Union itself and that’s still something they’re still trying.
All of their work across each of those areas has been held up when they’ve tried to make it fully multilateral at the OECD or the related institutions, the Financial Action Task Force and the Global Forum. All of those things have been blocked by the biggest OECD member, the United States, and they’ve only ever moved when the United States moves, so when Obama requires automatic information provision to the US, it allows the EU to get the OECD to deliver a multilateral standard for automatic information exchange. When the US refuses to have public registers of beneficial ownership, then FATF the Financial Action Task Force can’t do it either and everybody else is stuck waiting for the international standard to approve.
If you’re the EU, you ask yourself, am I okay to get blocked every time by the United States, always and only ever able to go at the speed that whichever US administration is in power is willing to go? And you can see it in the current tax reform negotiations too, when, you know, under Trump one thing was possible, under Biden, another thing was possible, and it was almost irrelevant what the rest of the world thought. So everyone has spent all of this time doing what the U.S. has wanted them to do, with the net result that we will have nothing because the U.S. ultimately is going to say we can’t do it, and so no one else is doing it. The EU has to at some point think, is it possible that in a different setting, perhaps a more transparent and democratic one, we might actually be able to support the progressive things that we want to happen, happening multilaterally, that the US opposition could be set aside or overcome in that context in a way that it can’t be at the OECD? Because the OECD is so completely dominated by the US, you know, to the extent that the OECD cannot even say the United States is non-compliant with the Common Reporting Standard for automatic information exchange, even though the United States position is explicitly that they have not signed and will not sign ever, nor provide automatic information exchange, the OECD still can’t actually say that they’re non-compliant because that would be too controversial. Is this the institution for the European Union to set tax rules, to look for multilateral progress? I mean, I think a kind of a cold analytical view of things would suggest that this really is not the future for the EU’s hopes. And the UN convention creates exactly a space in which they could really move forward that agenda. The European Union has a lot to gain from this. It will be a way of opening the doors to the agenda that they’ve had for a very long time, but they need to get comfortable with it and stop feeling quite as afraid of the risks, as they would see it, of allowing countries in the G77 to have a voice as well.

Naomi: When it comes to the United Nations current role in tax governance at the moment I think it’s limited to an expert committee of 25 people who are nominated by member states, but they conduct business in their own capacity, I think. So what do you hope could happen now as a result of this vote to expand and develop its capacity?

Alex: I think it’s worth saying, actually there is quite a lot of tax capacity in the UN system. So the UN Tax Committee that you’ve mentioned, that’s one piece. And yeah, it’s an expert committee, so the experts are nominated by countries, but they are not supposed to be national representatives. Although very often when you see the OECD people blocking things, it feels very much that their role is representative. But you know, that committee, even as it stands, and even with relatively little resources, has actually done some really impressive work, particularly in the last few years.
You know, they’ve come up with treaty articles that really address the problems of digitalisation in a much quicker and more elegant way than anything that the OECD process is going to deliver. They’re working on things like wealth taxes now, so they’re kind of pushing the horizons of where things can go, so we shouldn’t downplay what they’ve already delivered, even with the constraints that have been put on them.
But then you have, you know, UNDP does a lot of work as part of Tax Inspectors Without Borders, collaborates with other institutions, supports national governments in their tax work. UNCTAD does a lot of work on the tax abuse of multinational companies. The UN regional economic commissions, especially the economic commission for Africa have really been, you know, among the biggest champions of tax work. And so they’re all these parts of the UN system where actually there is significant capacity and expertise.
And one, one possibility is just that you could bring together a lot of that into one place and, you know, and really without even any additional resources, you’d have a very powerful group, ready to go.
Look, what the convention offers the possibility of is really going to another level. So you’d have this, this real core of expertise sitting in one place now, rather than spread around the system with all of the data ideally coming in there and, you know, being responsible for generating public analysis of the scale of the problems. You’d have the UN saying, this is how bad the problems are, we’re tracking this, and this is where the real issues are and we need to deal with this and this and this, and doing it in such a way that, you know, instead of the OECD having all the information and publishing little bits of it for people like us to pick up and do what we can with, you could make all of the information at least at the national level, public through that process, so everyone has a common basis of knowledge to work from and to take into negotiations, you know, all of that. Again, it wouldn’t take a huge amount of resources, but having it centralised around this framework body would change the whole dynamic, and in particular for lower income countries outside the OECD who really lack access to information so much of the time, which just layers on top of the capacity constraints they have too, you know, creating a central resource would be extremely progressive because the benefits would be much bigger for the countries that are currently denied, denied information and currently lack capacity most.

Naomi: Right. And in terms of what they should focus on most, should it be a place that enables states with common cause to kind of form blocs together to resist the pressure more effectively than they can at the moment from the most powerful countries and that would help them implement region-wide things or even unilaterally, it gives them more power to implement things domestically that they want to enforce when it comes to multinationals? Or should it be taking an OECD type approach where they try to push tax rules as widely as possible everywhere, according to what they’ve agreed?

Alex: In a sense, this is the set of questions for the governments of the world, you know, and, and for the first time they will be able together to consider them. But we can say, look, here are kind of the relatively quick wins, things that we can, you know, really deliver within a couple of years of negotiations. And here is some more complicated stuff, which effectively will be the agenda for the framework body going forward.
What you can really do in the convention itself in the immediate protocols is more around transparency. You know, so you can take the OECD instrument for automatic information exchange and make it genuinely globally inclusive and address some of its significant shortcomings in terms of how easy it is to design income stream asset classes that are outside the reporting requirement, so you make it much better. And you make sure everyone’s included, and in particular, you allow lower income countries to receive information without immediately having to reciprocate, because you recognise, as the UN process, UN in general always does, that you have common but differentiated responsibilities, and you don’t expect everyone to do everything from moment zero. So it’s kind of, you know, significant wins there that will really generate additional revenues from the following year. We’ve also seen the injustice of, of cutting out most of the countries of the world from it so making that global and making it better will really deliver. So that’s A.
You know, B, you can imagine setting a beneficial ownership standard, which the United States might not like, but more or less everyone else would be happy to aim for of transparency of the ownership of companies, trusts, legal vehicles or other sorts. You know, you could really make significant progress quite quickly on that. Similarly, I think the tipping point is probably about on us getting to public country by country reporting. And if you did that in a multilateral convention, you solve the problem that we currently have that any government like the Australian one this year that tries to move ahead comes under enormous pressure because it’s only one government. You put that in a convention and you really kind of make it politically possible to do without countries getting picked off by the lobbyists. So that’s your ABC of transparency, potentially all there in the convention.
Then the question is on corporate tax, you know, we know what the ambitions are really, and this is true for OECD countries as well as others, we want multinationals profits to be declared and taxed in the places where their real economic activity takes place. So you could actually, even within the immediate convention, you could agree a shift to unitary taxation. There is a broad majority, I would say, in favour of a much more ambitious global minimum tax than this very complex and limited version that is the OECD’s pillar 2 version. So I think, we could move to a much broader and fairly shared global minimum tax at a rate of let’s say 25% rather than 15%. Now again, do you want to try and do that within the convention or you say that’s for the framework body to begin its work in a few years?
And then lastly, there’s a set of kind of governance and structure questions. How would the framework body work? What kind of regular are the meetings? What kind of rules for decision making? What kind of data will it collect? What will it publish? So, you know, this is a moment, a real possibility where things are going to start becoming clear literally within the next few months as the terms of reference for the negotiations are drafted. It’s exciting times, you know.

Naomi: Yeah, it is exciting. And what kind of timescale are we looking at to the day where we’re all celebrating because we’ve got a UN tax convention?

Alex: What the resolution has agreed is the creation of a committee of all UN members that will meet, probably four times for maybe five days a time in New York. It has to deliver a draft terms of reference in August. A key point within that is there’s a bureau to be created, which will be 20 members, 20 member states, and that’ll be divided four from each of the five UN regions. So at the moment, those regional blocks are working out who will be their members of the Bureau. And the Bureau will really steer the process and be, I think, responsible for a lot of the direction and the drafting, so that’s a key thing that will become clear in February, who’s going to be in there.
Then look, you know, that report in August goes to the General Assembly, there will be a debate in September, and then the next resolution will agree to take a final version of the terms of reference as the basis for negotiations to begin in 2025.

Naomi: And would it be, can it ever be legally binding because I’ve seen many UN conventions which are very commendable, and, you know, that are used for all sorts of research and reports to demonstrate where countries are not upholding their obligations, legal obligations under these conventions, but it doesn’t seem to go anywhere in terms of legal consequences, so to what extent are we talking legally binding with this convention?

Alex: You know, countries can always do what they want. Governments, governments can choose to break the law. I mean, you and I have lived through Brexit in the UK, we’ve seen our government repeatedly choose to break international agreements and laws that they are subject to. I suppose in the same way that individuals can break laws, you know, the fact that law is there doesn’t mean that nobody commits murder, but it does mean there is some accountability. And I think that’s the key thing, you know, if you look at the kind of human rights instruments that we’re often working on, you can feel frustrated that governments continually breach their human rights commitments, but there is at least a process when they’ve signed an instrument, there’s a process to hold them accountable for it. And some sense that this does over time strengthen behaviour. It reduces the degrees of violations. I think in the case of tax that the dynamic is probably significantly stronger than that. It’s more like, sort of two elements, you know. So one is things like the UN Convention Against Corruption, you know, another one in this kind of area, gives the basis for countries actually to pass a lot of domestic law and those are then held to, and perhaps held to much more clearly than, sadly, respecting the rights of people with disabilities, say, which, although people sign conventions, it’s very often breached day in day out, whereas on the corruption side you can see very specific legal changes put through by governments and then stuck to, so I think this is the kind of the immediate elements in the tax convention are of that sort. What matters, you know, yes, that it’s agreed and ratified, but actually the government then put it into domestic legislation as they do when there are successful OECD processes, though in this case everyone will have had a say, so this is already better.
And the other piece is, you know, as with the UN Framework Convention on Climate Change, it creates this framework body, and that creates the space for further negotiations and for governments to commit and deliver on further actions in years to come. You can say the climate case, you know, actually a lot of what you see is, if not backsliding, at least trying not to be ambitious, but think about, you know, if you want to see the glass half full, if there wasn’t a UN framework convention on climate change we probably wouldn’t even have that process of regular meetings where governments are at least called out for their opposition for their failure to be sufficiently ambitious. So, you know, having a tax convention doesn’t mean that everyone’s going to do the right thing on tax at all. But it creates the possibility that simply isn’t there at the OECD, that we can move forward on a whole set of things and that a group of the willing can really go further and faster than if they’re on their own and kind of exposed to being picked off by lobbyists and by the pressure of one or two powerful countries who don’t want progress. So it’s the basis for really sustained and significant progress, but it’s not a guarantee. That guarantee will only come from civil society, from people in the street and people like us demanding that once it’s in place, it’s really used by our governments and making sure our governments take ambitious positions and stick to what they end up agreeing.

Naomi: Ok, so 2025 is the year to be really hopeful about that we’re actually less than, well, what, two years away, less than two years away, possibly from a historic UN tax convention?

Alex: I think there’s a question over how quickly you can negotiate it. So, you know, the most ambitious possibility if you start the formal negotiations with a really good terms of reference in January 25, Spain will host the fourth Financing for Development Summit in 2025. Could you race to a convention text in time for the Financing for Development Summit and have global signatures then? I think it’s just about within the bounds of possibility, and more realistic I think it’s a staging point and you’re probably looking at signatures in 2026. So, you know, it’s not a matter of months, it’s definitely years, but it’s such a big shift. You know, it’s a century waiting to have a globally inclusive body to set these rules to throw over the decisions made by the League of Nations in the 1920s and 30s that we’re all stuck with the consequences of today, you know, to say, we don’t actually need tax rules that were set by the imperial powers, honestly, we can do better. So I want to be impatient, I want this today, but you know, if it takes a couple of years to get us past the legacy of the last hundred, we should probably be willing to take our time just a little bit.

Naomi: Yes, indeed. And you can really hear the desire for change from the representative from Cameroon who spoke after the vote to adopt the resolution. Again, what you can hear is the UN interpreter interpreting from French to English.

UN Representative from Cameroon: We are in crisis and the planet is in danger. At the current pace, we will be in an even more dramatic situation than currently. Although we are on the edge of the abyss, there is still time, it’s still possible to save the planet, to eradicate poverty, to ensure prosperity for all in a peaceful world.
If the time of crisis imposes the time of change, then it’s time for cooperation to take precedence over competition. It’s time for international solidarity to take precedence over particular and selfish interest in the short term. We must stand united with a very strong message to make sure there is no longer room for tax evasion, tax avoidance, money laundering, illicit financial flows.
We count on the support of every member state because one country is not in position to combat those cancers depriving developing countries from critical resources for sustainable development.
Mr. Chair, African people are tired of poverty, misery, hunger, tired of suffering from dramatic consequences of conflicts, natural disaster, tired of the narrative of corruption and that of local governance and corruption to explain the problem they are facing. African people are tired of numbers about assistance, assistance for development. They do not request more assistance. They request every partner running business, the physical or digital, individuals and companies making profit should pay the right price, the right price, the fair and just percentage in terms of tax. Then we could keep our promise to transforming our world, to ensuring the world we want, the future we want is a reality. Je vous remercie.

Naomi: That’s it for this month. Thanks for listening. Bye for now.

Welcome to our Spanish language podcast and radio programme Justicia ImPositiva with Marcelo Justo and Marta Nuñez, free to download and broadcast on radio networks across Latin America and Spain. ¡Bienvenidos y bienvenidas a nuestro podcast y programa radiofónico! Escuche por su app de podcast. (All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here.)

En este programa con Marcelo Justo y Marta Nuñez:

• La victoria de Javier Milei en Argentina y su repercusión regional y global
• ¿Habrá alguna vez unidad en América Latina?
• Entrevista con la viceministra técnica de Hacienda en Colombia, figura clave del pacto fiscal para América Latina que firmaron 16 países de la región
• Cerramos nuestra miniserie sobre los mitos fiscales con el mito 10: la corrupción

INVITADOS 

• Juan Valerdi, catedrático de la Universidad de la Plata y ex asesor del Banco Central de la Argentina, publicaciones https://unlp.academia.edu/JuanValerdi
• Oscar Ugarteche director del Observatorio Económico latinoamericano, OBELA, profesor de la Universidad Nacional Autonoma de Mexico, la UNAM y autor de Historia Critica del FMI
• Maria Fernanda Valdez Viceministra técnica del ministerio de hacienda de Colombia y autora de Reducir la desigualdad “El Papel de la política tributaria”
• Andres Asiain, Economista, Director del Centro de Estudios Económicos y Sociales Scalabrini Ortiz

• Enlace de descarga para las emisoras: https://traffic.libsyn.com/j-impositiva/JI_dic_23.mp3
• Subscribase a nuestro RSS feed: http://j_impositiva.libsyn.com/rss
• O envien un correo electronico a Naomi [@] taxjustice.net para ser
  incorporado a nuestra lista de suscriptores.
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Welcome to our monthly podcast in Portuguese, É da sua conta (‘it’s your business’) produced and hosted by Grazielle David and Daniela Stefano. All our podcasts are unique productions in five different languages – English, Spanish, Arabic, French, Portuguese. They’re all available here. Here’s the latest episode:

Desmatamentos, exploração ilegal de minérios e de madeira: parte do dinheiro sujo dos crimes ambientais na Amazônia acabam em paraísos fiscais nos Estados Unidos. Quem são os responsáveis? Como parar com isso? Esse é o tema do episódio #55 do É da sua conta.

• Alessandra Korap fala sobre os impactos do garimpo e da mineração nos territórios dos  mundurukus. Povos indígenas e comunidades tradicionais são as afetadas diretamente pelos crimes ambientais na Amazônia.
• A conexão entre crimes ambientais e crime organizado na região amazônica é explicada pelo professor e pesquisador Aiala Colares Couto (UEPA e Instituto Mãe Crioula).
• Pelo menos 281 bilhões de doláres de rendimentos anuais para criminosos. Relatório da FACT Coalition aponta os Estados Unidos como um dos paraísos fiscais que mais lava dinheiro advindo dos crimes ambientais.  Vivian Calderoni, do Instituto Igarapé, comenta os achados do relatório.
• Fluxos Financeiros Ilícitos: como se definem e como combatê-los? Florência Lorenzo, pesquisadora da Tax Justice Network responde.

Participantes:

• Aiala Colares Couto, professor e pesquisador da Universidade Estadual do Pará. E presidente do instituto Mãe Crioula.
• Alessandra Korap, liderança munduruku
• Florencia Lorenzo, Tax Justice Network
• Vivian Calderoni, Instituto Igarapé

Transcrição do episódio 55

“A gente não sabe quem é pior: se são os garimpeiros ou as mineradoras”. 
 ~ Alessandra Korap, liderança munduruku

“Me perguntaram uma vez sobre lavar dinheiro (das drogas) com ouro. Mas será que é lavagem? Porque se o ouro já é ilegal e contrabandeado, uma atividade ilegal não lava a outra atividade ilegal.”
 ~ Aiala Colares Couto, professor e pesquisador da Universidade Estadual do Pará

“Fraudes, corrupção e lavagem de dinheiro: três crimes essenciais para dar a aparência de legalidade. São fraudados documentos sobre esses bens florestais, ocultando as origens ilícitas e possibilitando que sejam comercializados, por exemplo.
 ~ Vivian Calderoni, Instituto Igarapé

“Precisamos saber quem são as pessoas que estão se beneficiando dessas transações e, portanto,  desses crimes ambientais. Para isso, é central que todos os países garantam transparência de empresas ou outras entidades legais sobre quem são os proprietários, proprietários legais, mas também beneficiários finais”
  ~ Florencia Lorenzo, Tax Justice Network

Saiba Mais:

• A floresta doente: as crianças munduruku que não brincam e podem estar contaminadas por mercúrio, reportagem de Daniel Camargos e Júlia Dolce para a Repórter Brasil.
• Cartografia das violências na região amazônica: relatório final do Fórum Brasileiro de Segurança Pública.
• Relatório (em inglês) da Fact Coalition: Dirty Money and the destruction of the Amazon.
• Facções controlam tráfico e financiam crimes ambientais na Amazônia, diz pesquisador, reportagem de Leandro Machado na BBC Brasil

Episódios Relacionados

• A tributação pode solucionar a crise climática? #4
• EUA: maiores facilitadores da corrupção global #37

É da sua conta é o podcast mensal em português da Tax Justice Network. Coordenação: Naomi Fowler. Dublagens: Cecília Figueiredo e Zema Ribeiro. Produção e apresentação: Daniela Stefano e Grazielle David. Download gratuito. Reprodução livre para rádios.

Welcome to the latest episode of the Tax Justice Network’s monthly podcast, the Taxcast. You can subscribe either by emailing naomi [at] taxjustice.net or find us on your podcast app. All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here.

On the Taxcast this month, the story of what happened when the US tax authorities, the IRS, decided to crack down on Microsoft, one of the world’s biggest tech companies. Worthy of a thriller movie with its twists and turns, there are many lessons for governments worldwide. And it’s not over yet.

Featuring:

• Zorka Milin of the Financial Accountability and Corporate Transparency Coalition
• Paul Kiel of ProPublica
• Samantha Jacoby of the Centre on Budget and Policy Priorities
• Andrew Leigh, Member of Parliament, economist, Australian Treasury
• Alex Cobham of the Tax Justice Network
• Hosted and produced by Naomi Fowler of the Tax Justice Network

Transcript available here (some is automated)

The only ones who benefit here are the big four tax advisors, in this case, tax advisors at KPMG. All of that was very lucrative for them. The downside was suffered by everyone else”

Further reading:

• How a slick accounting maneuver led to a $29 billion tax bill for Microsoft https://fortune.com/2023/10/13/microsoft-back-taxes-irs-29-billion-propublica/ 
• The IRS Decided to Get Tough Against Microsoft. Microsoft Got Tougher https://www.propublica.org/article/the-irs-decided-to-get-tough-against-microsoft-microsoft-got-tougher
• What the Microsoft Tax Case Shows Us About Tax Transparency https://thefactcoalition.org/what-the-microsoft-tax-case-shows-us-about-tax-transparency/#:~:text=They%20had%20negotiated%20a%2015,Puerto%20Rico%20and%20the%20US.
• FT confirms OECD lobbied against Australian tax transparency https://taxjustice.net/press/ft-confirms-oecd-lobbied-against-australian-tax-transparency/#:~:text=The%20law%20requires%20multinationals%20operating,tool%20for%20accountability%20and%20deterrence.
• Microsoft, Cisco Shareholder Votes Demonstrate Increasing Investor Demand for Tax and Offshore Transparency https://thefactcoalition.org/microsoft-cisco-shareholder-votes-demonstrate-increasing-investor-demand-for-tax-and-offshore-transparency/ 
• KPMG’s pitch to Microsoft: ‘Planning Alternatives in Puerto Rico’ https://www.documentcloud.org/documents/6556275-KPMG-2004-Pitch-to-Microsoft.html  and Microsoft 2003 Memo on Puerto Rico Factory https://www.documentcloud.org/documents/6556274-Microsoft-2003-Memo-on-Puerto-Rico-Factory.html
• Bipartisan Senate Action Passes Minimal Test for IRS Funding While Multiple House Republican Bills Fail https://www.cbpp.org/research/federal-budget/bipartisan-senate-action-passes-minimal-test-for-irs-funding-while-multiple 
• Revenue From BBB’s IRS Enforcement Funding Would Support Investments https://www.cbpp.org/blog/revenue-from-bbbs-irs-enforcement-funding-would-support-investments
• UN adopts plans for historic tax reform https://taxjustice.net/press/un-adopts-plans-for-historic-tax-reform/
• “No” voters on UN tax reform enable 75% of global tax abuse https://taxjustice.net/press/no-voters-on-un-tax-reform-enable-75-of-global-tax-abuse/ 

Here’s a summary of the show:

Naomi Fowler: Hello and welcome to the Taxcast, the Tax Justice Network Podcast. We’re all about fixing our economies, so they work for all of us. I’m Naomi Fowler. On the Taxcast this month, the story of when the US tax authorities, the IRS, decided to crack down on Microsoft, one of the world’s biggest tech companies.

Zorka Milin: The only ones who benefit here are the big four tax advisors. In this case, tax advisors at KPMG. All of that was very lucrative for them. The downside was suffered by everyone else.

Naomi Fowler: And before that- titanic power clashes seem to be the order of the day. There’s been another historic vote at the United Nations, a landslide vote on how international tax rules are decided. This vote now pushes the world on to the next stage. Here’s Alex Cobham of the Tax Justice Network.

Alex Cobham: Last week’s vote at the United Nations was absolutely historic. The countries of the Global South came together and demanded that after a hundred years in which the imperial powers or their, their successors at the OECD, the rich countries, have set the rules, that there should actually be a process at the UN to negotiate a convention on tax, international tax cooperation in particular, in which every country in the world will have an equal say, the right to participate fully. So it allows us to look forward to a position where we finally have a global tax body in which every country is represented.

Now this is really important for the countries of the Global South, starting with the Africa group who’ve led this. These are the countries that lose the biggest share of their revenues, each year to international tax abuse. And that international tax abuse is primarily caused by and facilitated by the rich countries, the members of the OECD and their dependent territories.

But there’s also a win here for those OECD countries themselves. They’ve insisted for so long on keeping the power at the OECD. And it’s not just exclusionary there, it’s also become completely ineffective, so the OECD members themselves lose, and all of us who are citizens of OECD countries too of course, lose the greatest amount of revenues in absolute terms to that cross border tax abuse by their own multinationals by individuals hiding assets and income streams offshore. So for all of us, the negotiation of the UN convention that will soon begin is an awesome opportunity to hold our governments to account, instead of going behind the closed doors of the OECD. People said we’d never get anywhere at the United Nations, that we just had to deal with the fact the OECD was exclusionary and kind of structurally unjust and get the best that we could out of that. I think we’ve moved on, So let’s celebrate just a little, and then the hard work begins.

Naomi Fowler: Yeah, the last time the Global South countries tried to bring decision making on tax rules to the United Nations was back in the 1970s. Now, 50 years later, they’re mounting this existential challenge to global power. In next month’s episode, we’re going to bring you our analysis of the vote, the attempts by some nations to block it, and we’re going to look at what happens next.

Back to the largest audit in history. It’s kind of a United States taxpayers versus Microsoft. And the story doesn’t begin where you’d expect.

[Anthem of Humacao]

This is the anthem of Humacao. It’s an absolutely beautiful location in Puerto Rico, about an hour’s drive from the capital city of San Juan. It’s got a 3, 000 acre nature reserve, lots of beaches and a population of around 50,000 at the last count, not including all the tourists. It doesn’t have an obvious connection to one of the world’s biggest multinationals, Microsoft. But, since 1989, Microsoft had a little facility there, employing about 85 people to burn Office and Windows software onto CDs.

Microsoft had enjoyed a 15 year tax deal with Puerto Rico on this little factory, which guaranteed them a tax rate of zero to 2%. Over the years, it saved them nearly $200 million in taxes. It’s not a huge deal for such a big corporation, but it’s nice if you can get it. That nice little 15 year deal was due to end in 2005, but a much more lucrative opportunity came up. This is Business Reporter at ProPublica, Paul Kiel.

Paul Kiel: They were actually about to close the factory because there was no point in having it there anymore when essentially KPMG, you know, one of the big four consulting and auditing firms came to them with a proposal and said, you know, Puerto Rico is actually a great, great place to have a factory if, if you have some sort of IP transaction.

Naomi Fowler: IP is intellectual property.

Paul Kiel: The idea of like a company like Microsoft selling it’s IP, its most valuable product, particularly to a small company in Puerto Rico is ludicrous ! And, you know, these types of transactions are not unique to Microsoft by any means

Naomi Fowler: Indeed they’re not. Multinational companies use all sorts of tax strategies to shift their profits to tax havens, and they do it to the tune of an estimated one trillion dollars a year.

In Puerto Rico, 43 percent of the population lives in poverty. Not much benefit to be had for them with the Microsoft deal. Except for a few jobs maybe. Anyway, this story’s been running for a long time.

Paul Kiel: 20 years, it’s, that’s how old it is. It’s a long time. It’s like, a child born, you know, the same year as the transaction was being audited, you know, is maybe in college now!!

Naomi Fowler: Ha ha. Anyway, KPMG’s brilliant idea was for Microsoft to sell its intellectual property to this 85 person factory it owned in Humacao. This time, KPMG persuaded the Puerto Rican government to give Microsoft a tax rate of close to zero percent. Microsoft shifted at least 39 billion in U. S. profits there. The IRS auditors, the IRS auditors discovered what they believed was some mightily creative accounting, some laughable numbers, in fact. Fast forward to 2023, and Microsoft announced the IRS had notified them that they owe 28. 9 billion dollars in back taxes, plus Penalties and interest. Microsoft disputes that.

Paul Kiel: And they’re going to appeal and that’s going to take another good long time.

Naomi Fowler: A very long time. It’s a fascinating story. It should be made into a thriller movie someday. Honestly, the twists and turns, the arrogance of Microsoft, the determination of the attorneys working for the IRS. I mean, wow.

Anyway, tax authorities don’t often challenge multinationals in this way, even in the United States. So how did this even happen?

Paul Kiel: This is a time when the IRS was actually like relatively well funded around 2010. You know, Obama’s president, they have an IRS commissioner who says is going to make this a priority. And so they stand up this new unit that’s going to audit these sorts of transactions more capably. I think it’s fair to say there had been some audits before that point, but they had not been particularly I guess, aggressive in their, in their posture towards how they’re approaching the issue. And you know, clearly back footed, like reacting as opposed to making any sort of stand. And so they, they hired a guy named Sam Maruca, who actually had been a lawyer in private practice. And he was sort of outspoken about the fact that, you know, some of these transactions were, were clearly a kind of, he didn’t use the word tax shelter, but essentially he’s saying that’s what they are. And that, you know, the IRS had gotten into a little bit of a losing streak in auditing these transactions and he thought the reason for that was that they weren’t essentially going about the audits the right way. And he brought over another attorney from a firm he’d practiced at, named Eli Hoory. He was actually pretty young at that time, not that far out of law school, had done some work in the private sector. And, you know, he also bought into that sort of idea. And so they were canvassing when they got there, 2010, 2011 for cases that they thought would be good, sort of like, let’s stand our ground sort of cases.

Naomi Fowler: And so, I mean, they had this new unit. It was in the height of some serious money and political will directed at corporate tax abuse. So do you put all this kind of action, which was quite unusual in several different ways, down to political will? Was it public pressure? What do you think spurred that kind of, setting up the unit, going quite aggressively after one big multinational?

Paul Kiel: Right, as for why this happened back in 2010, yeah, I think it’s, it was seen as you know, having corporations pay their right amount of tax. I mean, these, these profit shifts, shifting like, you know, to Ireland and all these other tax havens, like, you know, that’s not popular, people don’t like that idea. There’s not a lot of defenders of the principle, like, why that’s good policy. There was a lot of corporations on Capitol Hill saying, you know, we, we follow the law as it’s written, sort of thing. But so yeah, you know, I don’t, I don’t know if public pressure is quite the word for it, but I think it was seen as, you know, politically a positive idea. And that was why the IRS had the capital to do that. But I think it also also comes down to the personalities of people who are put in charge of the unit and decided to do things a certain way. Obviously, there wasn’t like, you know, the public was not clamoring for them to use these, you know, highly obscure tools that the IRS has and nobody knows about that, it’s their choice to decide how to carry out the mandate of, you know, having corporations pay their, pay the appropriate amount of tax.

Naomi Fowler: Yeah, I have found before that just a small, quite surprisingly small group of individuals can make a big difference in cases like this and in how tax authorities, uh, take action.

 But, I mean, hiring a private corporate law firm to represent the agency, that, I don’t think that had happened before either, right?

Paul Kiel: No, it had never, it was kind of a creative idea they had, which comes back to them being from, in private practice. And basically like, I mean, frankly not, they were not very impressed with the litigators that the government had at their disposal. And basically like, we need, we need winners is kind of the idea and yes there was a big freakout on Capitol Hill about that and essentially they got into legislation that prevented it from happening going forward. I mean, obviously it’s not absolutely necessary for the IRS to have access to private litigators. What is necessary is for them to have capable litigators.

Naomi Fowler: Yeah, it’s fair to say as well that if an agency, a tax collection agency can pay well, then they can retain arguably some of the, the best people but I’ve found many times that you see a lot of people going to the other side, because they can earn a lot more money and they’re deploying those skills not for the public good, but for corporate good, I guess.

Paul Kiel: Right. Government salaries are not what you can earn in the private sector, so essentially you’re always, it’s not like they’re paid poverty wages, like you can get paid quite well by normal standards, but not by like, you know, working for a big four accounting firm standards. So the pitch is always like a public service sort of pitch. Or if you want to be less public service oriented, you know, there is value to have worked at the IRS. You want to go back into the private sector and, you know, maybe get paid a little more because of that experience, so they are trying to staff up. It’s going to take time.

Naomi Fowler: So the reaction of the big tech companies to this challenge from the IRS was really, really strong, and they actually managed to lobby enough to get a change in the law, restricting the ability of the IRS to use some of the same tactics in future. This reaction I mean, in lots of ways, it shows you how these very big corporations will act as one when it’s in their collective interest.

Paul Kiel: Right. Yeah. So, I mean the lobbyists argument on Capitol Hill is never, you know, we want to make sure that our big tech companies can send profits to tax havens, that’s not the way they frame their argument. It’s always, you know, taxpayer rights. You don’t want the IRS basically being unfair in how it audits people.

So you know, this, this unit, that was one of their cases and Microsoft was the big one. And so one of, one of the tools they have is called a designated summons. And essentially what it is is when a taxpayer is not being forthcoming with documents, they have not given them over in the typical process where the IRS asks for documents and they can stall or whatever. And then it’s up to the IRS to sort of take a stand. You know, it’s kind of more conventional to issue a normal summons, which would just be, you sue them in court and say, give me the documents, but the problem with that is the statute of limitations is still running. So you’re going to have the clock running out on you. It gives incentive to the taxpayer to, you know, drag their feet a little bit. Designated summons stops the clock. So that takes away the leverage that the taxpayer has in that situation, because instead of being able to run out the clock, they have to just sort of fight it out in court, however long it takes. And that’s essentially what happened in this case.

Naomi Fowler: There’s an internal appeals process where there’s an independent private check on audit findings. Some call the Office of Appeals the gift shop because complex transfer pricing audits looked at there end up reducing the amount of tax originally owed by about 81%. Microsoft was keen to move straight to that process for obvious reasons. The IRS tried to block that avenue and go straight to an open public court. No doubt they were cheered by frustrated IRS auditors everywhere who faced armies of corporate lawyers in other cases.

Paul Kiel: People who I spoke to are auditors often very frustrated with appeals, essentially giving cases away that took years to build on the appeal side they have, they have this idea of they have to weigh the litigation hazard, which is they’re saying, how, how likely is the IRS to lose in court? And they would come to the conclusion, we’re probably not going to win, maybe there’s a 20 percent chance to win, therefore we’ll mark down you know, the, the adjustment to 20 percent of what the IRS is wanting, like that sort of logic. And so they were particularly worried about doing all this work, building this great case, and then appeals is like, well, it’s a transfer pricing case. We don’t win, so we’ll just give it away. So they, they, they sought to skip appeals, and that was one of the big things they fought over.

Naomi Fowler: Microsoft won that particular boxing round and got its internal appeal. And from now on, new legislation will make it harder for the IRS on that front. That’s because this huge lobby of tech and business groups lobbied hard. And to cut a long story short, a bill was passed into law, meaning the IRS will have to follow a new process if they want to block appeals or designate summons. And when they do, they’ll have to report directly to Congress.

Paul Kiel: You know, lobbyists for the corporate world and for wealthy taxpayers are good at making arguments in a way that emphasize the taxpayer rights aspect of things. So you end up with bills that are like called the Taxpayer Rights Act or that sort of thing, when oftentimes they’re picking issues that really only affect like the largest corporate taxpayers, but oftentimes they’ll try to characterize them as hurting small business. So that’s what you’re up against if you’re supportive of, you know, more muscle behind tax administration.

Naomi Fowler: However, in one of the big victories so far for the IRS in this long running case, a judge agreed with the IRS’s view on Microsoft’s use of Puerto Rico. He wrote in his judgment, quote, ‘the court finds itself unable to escape the conclusion that a significant purpose, if not the sole purpose, of Microsoft’s transactions was to avoid or evade federal income tax,’ close quote. And he agreed with the IRS that documents from accountancy firm KPMG had to be turned over because they’d been promoting a tax shelter. And when you see these documents, you can see why Microsoft fought so hard to keep them confidential.

Paul Kiel: so there’s, there’s privilege similar to this attorney client privilege that, you know, an investigative agency can’t get to or, or a litigant. Same thing with tax advice. But in cases where, you know, a court decides it’s, there’s a tax shelter, those privileges get rolled back. And it’s, and it’s more, and essentially that’s what the, that’s what the IRS successfully argued in this case.

Zorka Milin: We know that these kinds of corporate tax schemes are zero sum. Actually, more than that, you know, this case shows they are a negative sum game, in which nobody really wins.

Naomi Fowler: This is Zorka Millin of the Financial Accountability and Corporate Transparency Coalition.

Zorka Milin: So in this case, you know, take the people of Puerto Rico, where Microsoft barely paid any taxes, and they didn’t even create a meaningful number of jobs. And Puerto Rico, you know, that it’s one of the poorest parts of the U. S., and it’s also increasingly hit by you know, climate impacts like the, like the tragic Hurricane Maria a few years ago. So, you know, in Puerto Rico disaster relief and other basic public services are desperately needed.

And let’s not forget the U.S. Treasury. I mean, you know, the U.S. obviously suffered a gigantic, maybe even record breaking revenue loss which they’re now trying to, to recover from Microsoft. And also, think about Microsoft’s investors, they stand to lose, certainly if the IRS is successful, that would be a huge hit to the company’s bottom line, even for a company that’s, you know, as huge as Microsoft.

And so really the only ones who benefit here are the big four tax advisors. In this case, that would be the Microsoft tax advisors at KPMG who came up with this plan and managed to convince Microsoft’s executives to go along with it. And they also negotiated the controversial tax holiday with Puerto Rico. All of that was very lucrative for them. There was no downside. You know, the downside was suffered by everyone else.

Naomi Fowler: Indeed. Like tax authorities in many nations, the IRS was financially undermined for years. Soon after coming into office, President Biden injected huge amounts of money, and with the Inflation Reduction Act, the IRA, more investment was promised.

Samantha Jacoby: The funding is very important for the effort to overall for the effort to rebuild the IRS after over a decade of a budget cuts.

Naomi Fowler: This is Samantha Jacoby of the Centre on Budget and Policy Priorities.

Samantha Jacoby: The IRS budget, it’s sort of annual budget that that it gets every year is, is about 20 percent below what it was in 2010 after you adjust for inflation. So there was a, it’s sort of a deep hole that the IRS was in before the inflation reduction act passed and and kind of the, the whole idea behind it was, was to to get the, the IRS back to where it would have been without those cuts.

Naomi Fowler: the Biden administration was estimating that this new IRS investment should raise 400 billion over the next 10 years. you know if you look at what, what the IRS can do when it’s very, very determined and you’ve got a lot of political will and I’m just thinking about the Microsoft case at the moment and I know that they’re appealing but it just shows that with the right amount of funding that comes from very strong political will and belief in the tax authority as a public good, it can achieve a lot of things for the public, right?

Samantha Jacoby: Yeah, so it is it is it is clear that with with adequate funding that the, the IRS can can take on some of these large high impact cases and bring in a lot of revenue and you mentioned the Treasury estimate on raising 400 billion dollars in revenue but there’s there are some academics out there who think that that would be even higher. That return on investment would be even higher. There’s a study that found that for every dollar, the IRS spends on auditing very high income taxpayers, the, the government, the government gets back 12 dollars in revenue.

So that’s, that’s a huge return on investment. Whereas audits of low middle class households raise far less. And, you know, the, the, without that, that those resources, it’s, it’s clear that the IRS just doesn’t have the capacity to take on those kinds of cases.

The audit rates for millionaires and the largest corporations over the last 10 years fell by roughly 77 percent and 56 percent respectively from 2010 to 2017. The reason that that happens is tax returns of high income and high wealth people and large businesses are just they’re so complex auditing them is is labor and time intensive. And so without resources, without the sophisticated audit staff, the IRS just can’t do it. They’re, they’re, they’re just not equipped to, to sort of even identify those, those high impact cases, let alone pursue them and take on the, the, the, the corporations sophisticated tax advisors in court. But even, you know, even just a year into the inflation reduction act funding taking effect the IRS has already shown what it can do.

The Microsoft case of course, predated the the the IRA, but the, the IRS has has has has been very effective so far in using the new funding, both to improve the services that it provides taxpayers as well as, you know, it’s technology improvements and and even making investments in enforcement. So in terms of customer service, they, they made huge improvements over the last filing season in terms of improving the level of service that they’ve they’ve provided to taxpayers that people have been you know, getting their calls answered more, more quickly, they’ve the IRS has, has opened new taxpayer service centers to help people file their returns, they’ve made big improvements in digitizing the tax the tax return filing process on the enforcement side they’ve, they’ve announced a big new initiative to audit partnerships. Partnerships particularly large partnerships are really, really difficult to audit. And the IRS has historically almost never audited large partnerships. The audit rate was practically zero but they’ve announced that they’re going to start using AI tools to identify partnerships for audit. And, and those, those types of entities include hedge funds, large real estate firms that, that are really, they’re, they’re really sophisticated entities that are able to sort of structure their, their businesses so that it’s, it’s really difficult to unpack where their income is. And so that’s one area we’re seeing improving already just a year in. There there’s been efforts to pursue high income people who have not filed their taxes or failed to pay their their, their tax debts. Those efforts are already starting to pay returns as well.

Naomi Fowler: You’d think that’s something all politicians could get behind, but sadly that’s not the case. The Republicans are proposing to cut the vast majority of what remains of the 80 billion Inflation Reduction Act funding. Paul Kiel again.

Paul Kiel: I mean, it was pretty apparent to me from the beginning that that money would be under threat politically for the entirety of its life. And that’s, you know, what we’re seeing now. I mean, the Republicans have tried, it’s like a routine now, like every single bill they try to take away money from the IRS and you know, if we end up with an election where you have completely Republican controlled government, I think you have to expect them either gutting that pot of money or simply saying like the IRS gets no money in a normal, like it’s there are normal annual appropriations that are going out, they could just say, like, you just use that pot of money to do that, we’re not going to give any more. And that’ll be a threat for the, for the length of this, of this bill. So it’s, it’s unfortunately, the idea was to give the IRS this pot of money that couldn’t be touched and so that they could hire people with confidence. But it’s, it’s, given the political environment, it’s kind of impossible to entirely accomplish that so, it’s something that’s going to unfortunately have to be watched going forward.

Naomi Fowler: Samantha Jacoby.

Samantha Jacoby: It is very disappointing to see efforts to rescind that funding. for context, the IRS budget in 2023 was about 12 billion. So just that, that annual IRS budget would be cut by a significant amount. And then they would also rescind the vast majority of the long term. 80Billion dollars in funding that that Congress passed last year in the inflation reduction act.

So if that if those funding cuts were enacted that that would prevent the IRS from undertaking its planned rebuilding effort just sort of full stop it, it would cement in place the, the current depleted state of the IRS after a decade of cuts and the result would be continued dysfunction, understaffing, declines in the number of audits of the wealthy and corporations on top of what we’ve already seen.

it hasn’t been passed yet. And, and, you know, President Biden would of course have to approve it. So there, we’re still very optimistic that that, that IRS will retain most of its funding.

Naomi Fowler: Oh, I hope so. I mean, can he veto it then as President?

Samantha Jacoby: Yeah so the President can, has a veto, has veto power over it. And the Senate Democrats are in control and they’ve been supportive of IRS funding as well. But, yeah, but it’s unclear where we’ll end up, but there’s good reason to think that that the vast majority of the funding will stay in place.

Naomi Fowler: Let’s hope so. Meanwhile, pressure’s building on multinationals themselves from shareholders and investors who want to see much more transparency on tax. Zorka Milin again.

Zorka Milin: In the last couple of years, we’ve seen increasing demand for tax transparency in particular coming from investors, in a number of major companies, and that includes big oil companies. Exxon, Chevron, ConocoPhillips, in all of those companies, Oxfam America has filed shareholder resolutions, and it also includes big tech companies.

Notably, let me single out Microsoft itself, so at Microsoft, the shareholder resolution for country by country reporting will be put to a vote again at their upcoming AGM, which is taking place next month. When this happened last year at the AGM, this tax proposal was interesting, it actually had the greatest support out of any shareholder proposal that was put up for a vote last year.

And so, you know, it’s clear we’re seeing an upward trend. Here and at this point, I would say, really, it’s just a question of when and not if, and it’s also, you know, a question of whether it will come as a result of shareholder resolutions or maybe, eventually, we expect to see a more broadly applicable regulation that would come from the U. S. financial regulators, so the Securities and Exchange Commission.

Naomi Fowler: And like so many of these messes we report on on the Taxcast, things don’t have to be this way.

Zorka Milin: Okay, just imagine a world in which Microsoft had published all of its country by country tax information for all of the relevant years here. You know, maybe they did it voluntarily as, you know, some other companies have actually already been doing for many years, or maybe they did it because of a shareholder resolution that was successful, or maybe they were just following the law, you know, complying with a regulation that required all companies to provide this tax information. So if, whatever the reason, if that information was made public, then Microsoft’s investors would have spotted right away the incredibly striking mismatch that exists between Microsoft’s, you know, pretty insignificant operations in Puerto Rico versus the many billions of dollars in tax profits that the company had booked in Puerto Rico. And that would be a major red flag. And I think that would most likely deter a company like Microsoft from engaging in such very aggressive tax dodging. So in that sense, what I would say you know, tax transparency is like sunshine, as they say, it’s the best disinfectant.

Naomi Fowler: Currently, the situation is that under OECD rules, companies report the nature of some of the actual business they do country by country, But, that system’s really deficient in its current form, as Zorka Milin explains.

Zorka Milin: The OECD regime for country by country reporting, it is somewhat helpful. At least it’s helpful to those tax officials from those governments who can access it. And it’s important to note here that that doesn’t include most global South countries. So, you know, for them, it’s not really helpful at all.

Naomi Fowler: And many poorer nations need it the most because corporate tax is even more important to their tax base than in wealthy countries. And there’s another fundamental problem.

Zorka Milin: The larger point I would make here is that the OECD, it’s not really a transparency regime, I think that’s a misnomer because it’s not public. So, you know, I, I don’t think we can call something that’s not public, I don’t think that’s, that’s real transparency. And so it also means that this is of no use to investors. But, you know, while we’re waiting for regulatory action in the U. S. and maybe also the U. K., we actually already have some good news coming from Australia, we recently received a confirmation from a senior Australian government official from the Australian Treasury, Andrew Leigh:

Naomi Fowler: And here he is. Listen carefully, he’s talking about public country by country reporting. Very different.

Andrew Leigh: Australia is committed to public country by country reporting to hold large multinationals to account when it comes to their tax affairs. Country by country reporting is intended to shift behaviour in the way large multinationals disclose their tax information. It puts the onus on multinationals to be upfront about where they pay tax.

Australia plans to start our public country by country reporting regime on the 1st of July, 2024, aligning with the start date for the European Union’s regime. Our aim is to be world leading in country by country reporting, and we’ve consulted on it earlier this year. There’s broad stakeholder interest, and we’re considering feedback on compliance costs and alignment with other international standards.

We want Australia’s transparency commitments to be measured and targeted. It’s about encouraging a race to the top in business productivity, not a race to the bottom in tax compliance.

Naomi Fowler: This should be good news. We’re cautious because the Australian government was on the point of passing this legislation in its parliament earlier this year with a comfortable majority, but it faced a tidal wave of opposition and lobbying and they delayed it. The OECD, along with many others, lobbied strongly to stop this legislation that would have delivered the biggest breakthrough ever. Ever on the taxes of multinational corporations. That proposed Australian legislation would have affected at least one in five of them around the world and they’d have had to start publicly disclosing their profits and taxes. Zorka Milin again:.

Zorka Milin: Australia plans to start its public, so true transparency, public country or country reporting next year, 2024, and that day, that’s going to be a sea change in corporate tax transparency, and it will have major global impact that goes far beyond just Australia because the scope of the laws is such that it will cover many major multinationals and we also hope that it will cover all of their global operations. So that will be a major moment next year.

Naomi Fowler: It would make such a difference. So let’s hope Australia is now back on track with its commitment to public country by country reporting. I had one last question for journalist Paul Kiel of ProPublica who stuck with the Microsoft story for so long.

In my job where I’m trying to communicate these kind of long term battles that are going on, trying to explain to people some of the things that go on behind closed doors, some things which seem quite boring in some ways, and are not easy to explain or understand. I was just wondering what your take on it was, because you’ve been following this case and cases like this for a long time, such a long historical curve in a case like this. Just wondering about your thoughts on the capacity of media and journalists to reflect to people this type of very important case.

Paul Kiel: Right, right. I mean, it’s, it’s complex and not complex. It’s not complex in the sense that it’s apparent Microsoft did a somewhat ridiculous transaction just to save a lot of taxes. So people can people can get that. I mean, I made an effort, I mean, I was writing my story. I did this big story back in 2020 and that was for a general audience and well, first of all, I think the secrecy around tax administration is one thing that is sort of a hindrance like, it’s just really hard to write about this in a way that’s engaging at all because there’s so little public detail. And the only thing that made it possible for me to write that story was this fight that they had in court of these, of the summon and not only does that make a lot of stuff public that wouldn’t otherwise be public, but also the IRS and the Department of Justice are making arguments to a district court judge who is not a tax judge. And so they’re writing in a way that is geared towards a, you know, a smart lay person as opposed to a tax judge, like if you read pleadings in tax court, I mean, I’ve covered this stuff for a while now, I’m not a tax lawyer. It takes a while to get through, like, what are they even saying here? Right? Cause they’re just throwing statutes around and things like that. So it was only because this kind of rare case spilled into public view that I was able to write, you know, a story that people could follow.

A lot of times it just happens, you see the result. The only reason you see the result is if it’s a public company and they’ll just say like what had happened, but they’re allowed to keep those details quite secret. And that aspect has never really made a lot of sense to me is the public companies that are divulging all sorts of details to investors, but their taxes, they have a lot of leeway and their taxes are secret essentially, their tax return is like sanctified, you can’t know that, but here’s, here’s hundreds of pages of financials about this company. It’s like sort of ridiculous. So I think that is actually another aspect of it is there’s so few stories to tell because everything is secret. So, I mean, the idea is broadly popular of corporations paying more in tax, the rich paying more in tax, but the details are obscure to the point where it’s hard to sort of engage the public on it, I think is one big aspect of it.

Microsoft, it’s a big, complicated case. It’s going to be an appeal, it’s going to be private, it’s going to be outside of the public eye and then if they, if they don’t get, if Microsoft does not get the answer they want in appeals, then they will go to tax court, which is public. And that itself will take more time.

So so, you know, there’s always more to be done and you just have to fund the agency and have them hire capable people. You know, good things can happen.

Welcome to the latest episode of the Tax Justice Network’s monthly podcast, the Taxcast. You can subscribe either by emailing naomi [at] taxjustice.net or find us on your podcast app. All our podcasts are unique productions in five languages: English, Spanish, Arabic, French, Portuguese. They’re all available here. In this edition of the Taxcast:

The US government has spent an estimated $1 trillion on their ‘war on drugs.’ But, over 50 years later, the cross-border flows of illegal drugs, arms and money have increased. In the second part of a two part series (part 1 available here) we look at the failed ‘war on drugs,’ the movement to decriminalise, regulate and tax, opportunities and challenges for lower income nations, and the role of tax justice.

Featuring:

• Associate Professor of International and Organised Crime at Bristol Law School, Dr Mary Young
• Zara Snapp, co-founder of Instituto RIA
• Sergio Chaparro Hernandez of the Tax Justice Network
• Martin Drewry of Health Poverty Action
• Max Gallien of the International Centre for Tax and Development and the Institute of Development Studies at the University of Sussex
• Eric Gutierrez, of the International Centre of Human Rights and Drug Policy
• Taxcast host Naomi Fowler, co-produced with Jo Barratt of the Tax Justice Network

A transcript of the show available here: (some is automated)

“In terms of a percentage of global GDP, the tax that’s currently being lost by not taxing the drug market is about $232 billion per year. So to put that into context, that’s more than twice the annual spend prosecuting the war on drugs. And it’s way, way above the combined global aid budget.” ~ Martin Drewry 

Resources:

• Invest in Justice, Jamaica Case Study 
• Cannabis taxation – A new revenue source for development? Max Gallien and Giovanni Occhiali
• Diverse models of legalisation, Max Gallien and Giovanni Occhiali
• Tax Justice and the Legal Regulation of Drugs (video)
• A quiet revolution across the globe: drug decriminalisation across the globe
• Inside Mexico’s war on drugs: Conversations with ‘el narco’
• Poverty, gender and violence in the narratives of former narcos: accounting for drug trafficking violence in Mexico Karina Garcia-Reyes https://research-information.bris.ac.uk/ws/portalfiles/portal/193726176/Final_Copy_2018_11_06_Garcia_K_G_PhD_Redacted.pdf 
• Debunking the Narco Myth, Karina Garcia-Reyes
• A world fit for money laundering: The Atlantic alliance’s undermining of organised crime control: Young, Mary Alice; Woodiwiss, Michael 
• Organised crime and security threats in Caribbean Small Island Developing States: A Critical analysis of US assumptions and policies: Young, Mary; Woodiwiss, Michael

Here’s a summary of the show:

Naomi: “On the Taxcast this month, we continue with part two of drug war myths. In Part 1 we challenged the idea of the supposed ‘goodies’ and the ‘baddies’. And in Part 2 we’re going to shine the spotlight on the less visible professional enablers, and we’re going to talk about how to fix the mess of the war on drugs – tax is an important part of it.”

Dr Mary Young: “We need to be looking at white collar criminals.”

Naomi: “This is Associate Professor of International and Organised Crime at Bristol Law School Dr Mary Young.”

Dr Mary Young: “I now use the term ‘money managers,’ you know, the people who manage money. The people who manage money for us, manage money for criminals. And they manage it in exactly the same way, but we need to be focusing on these groups of people. And these groups of people are usually embedded within policymaking and they feed into
the vested interests of the US government and the UK to keep those financial services industries very tight, ticking and wealthy in financial secrecy centers. We only need to look at the scandals which are coming out, where we see different levels of tax abuse and I think that we, we shouldn’t differentiate between legal and illegal, I would blanket it all as a tax
abuse. And we see wealthy government officials, politicians, those of a high social status using these foreign tax havens and financial secrecy jurisdictions to maximize personal wealth, circumvent domestic tax laws, and where possible, hide dirty money.

You know, you have an amazing symmetry between organised crime and the upper world. Organised crime is just an economic enterprise. There are symmetries between legitimate organisations and organised crime bodies and upper world business ventures and they all have profit at their core. So, organised crime groups, legitimate businesses, the government,
massive NGOs even, huge organisations, business operations, they use bankers, they will need lawyers, they will need accountants.

One financial intermediary told me, ‘I’ve done very well out of it, thank you very much. My children have a brilliant life and I’m really wealthy.’ And he was very happy to tell me and boast about the amount of money he makes from being a private banker. And he was also rejecting any type of criticism about the overseas territories. So, financial intermediaries, they either know something is going on, but they will also embrace criminal organisations. Why wouldn’t you? You just do your job, you bring the money through, you keep your eyes on the numbers and you don’t ask any questions. Those financial intermediaries, those excellent mathematicians, numbers guys that criminal organisations use will be happy to
look the other way, it’s simply a job. You’re just part of a corporation, another type of corporation. This one just happens to be a bad business. So on that spectrum of illegality, you have your big corporations, your big multinational trading companies, the ones we see everywhere, you know, delivering our goods, for example, or inventing our phones. And then
you have other types of corporations which just happen to be operating at the illicit end of the spectrum, but they mirror, in so many ways, our huge organisations, and that’s when I feel a little bit like, hang on, maybe we shouldn’t be demonising criminal organisations quite so much as we should be investigating and focusing on the politicians, on the bankers, on
the accountants.

And that means stepping away from the obvious criminals. Step away from the drug traffickers and focus on what’s in front of you now, organised crime walks with us everywhere, it’s everywhere. Once you get used to identifying criminal outfits, even in the town you live in, you realize organised crime is a part of our life and we can’t really deny
that. So think of it as a circle. So you have your tiny circle in the middle, which might be those that we demonise already, the criminals. And then we branch out, and we have this network of white collar workers leading up to the top, leading up to politicians and governments. But conversely, if you talk to them, they don’t like to be called criminals. They don’t like to be associated with the criminality that we see reported about in the paper. Oh
no, they’re not as bad as drug traffickers. They’re not as bad as those who illicitly traffic wildlife goods, floras, faunas, ivory, rhino horn powder. No, they’re not part of that world, they don’t believe themselves to be part of that world, they are part of a different dynamic. They are somehow better. They’ve been to university, they’ve got degrees. So quite often
when you speak to some of these people, you speak to people who’ve investigated them, the white collar criminals reject the term criminality in some cases because they see themselves within a different sphere and let’s remember that offshore financial centres do not say they have secrecy laws.”

Naomi: “Oh of course not!”

Dr Mary Young: “They reject that term. I’ve been heckled for using the term secrecy. They call it ‘strong confidentiality.’ So you have these strong confidentiality laws and then you have another body of laws where there are really decent people who want to recover the proceeds of crime find it incredibly difficult to do so because of the criminal penalties set up
around releasing information. So, throughout the decades since the Organised Crime Control Act of 1971, we’ve had a raft of anti money laundering laws created by Western countries. which show they’re doing something, which tick the right boxes on paper, which say they’re
disrupting major criminal organisations engaged in narcotics and money laundering. But we would see huge amounts of money being recovered, we would see corrupt government officials being removed from office, and it just does not happen.”

Naomi: “It doesn’t. And throughout these decades of prohibition, the money flows from the illegal drug trade are only deepening inequalities and insecurity between the global south – where the ‘producer’ countries often are, and the world’s wealthiest and most powerful countries, which tend to be the main ‘consumer’ countries. Zara Snapp from the Instituto
RIA explains in this recent online event:”

Zara Snapp: “In Colombia they produce, you know, 95 percent of the cocaine in the world which is for export and less than 1  percent of the revenue gains stay in Colombia. And so this is something that’s important of then how are even revenue gains being distributed along the production chain? Whereas 68 percent of those revenues stay in the countries of
consumption, which is primarily the United States for that market, and some in Europe.”

Gustavo Petro speech (voiced by Marcelo Justo): ”Our silence in these 50 years has been complicit with a genocide in our countries because that is what the official war policy against drugs has caused in our Latin America, a genocide. The so-called ‘war on drugs’ policy has failed. It doesn’t work. If we continue, we are going to add another million deaths in Latin
America and we are going to have more failed states and we are going to have perhaps the death of democracy on our continent.”

Naomi: “That was Colombian president Gustavo Petro speaking recently at a Latin American and Caribbean conference on drugs. And there are important shifts happening in many countries. Some nations are turning away from prohibition to decriminalisation and regulation, in some cases legalisation.”

Music clip: Legalise it, Bob Marley live

Naomi: “ In 2015 Jamaica passed its Dangerous Drugs Amendment Act which did various things – it decriminalised personal possession of up to two ounces (or 56 grams) of cannabis, cultivation of up to five cannabis plants per household and also legalised and regulated  commercial cultivation and sale of cannabis for medicinal use.”

TV Presenter: “The passing of the bill comes as good news for the country’s Rastafarian community, which uses the herb for religious purposes. While marijuana would be legal, the bill makes provisions for it to be banned from public places. Plus, a licensing authority would have to be established in order to monitor cultivation, sale and distribution of marijuana for
medical and therapeutic purposes.

The bill was passed even as South American countries grapple with the impact of drug use and struggle to put an end to drug trafficking. In Mexico, Colombia and Argentina, marijuana possession in small amounts was decriminalised. Argentina is drafting a set of proposals to loosen restrictions on possession. Also in Guatemala, President Otto Perez Molina is proposing moves to push for the legalisation of marijuana. Chile and Costa Rica are also debating the introduction of medical marijuana policies. Uruguay last year became the first country in the world to approve the growth, sale and distribution of marijuana.”

Naomi: “ Jamaica’s just one of a number of nations that’s taken steps to decriminalise and regulate in place of punitive policies. Before they passed that bill, 15,000 people were being arrested every year for cannabis possession. A quarter of all Jamaica’s court cases were dealing with cannabis-related offences, their prisons were overcrowded and it was costing an estimated $US64 million a year in arrest and prosecution costs. It was a transformative step, putting public health and wellbeing first. It meant they were able to massively increase their health budget expenditure the following year. It all ran contrary to the perceptions of
outsiders. Dr Mary Young again:”

Dr Mary Young: “I’ve spent a lot of time in Jamaica over the years since 2012 and the people I’ve worked with in Jamaica are absolutely dedicated to undermining organised crime and actually are frustrated by the external elements which do not assist them in a positive manner. Drugs was traditionally seen as an issue for the U. S. as emanating from Jamaica. So,
there was a lot of focus on U. S. assumptions on what Jamaica was and how Jamaica operated. we carried out interviews actually with a number of people on the issue of drug trafficking and crime in Jamaica, and we were repeatedly told that drug trafficking as a main security threat is not relevant to Jamaica. It’s the firearms threat from the U. S. which is
relevant to Jamaica. But it was these historical U. S. assumptions and policies about drugs and organised crime which has kept Jamaica and other countries held down, especially if they’re countries which are indebted to the World Bank and the International Monetary Fund.

So you have Jamaica an hour away from the Cayman Islands. One of them is hugely wealthy, highly developed and supported by Western governments, not just Western countries, many countries all over the world and the people within them will use financial secrecy centres, offshore financial centres, tax havens, whatever you want to call them. And next to it, an
hour away, you have Jamaica, which is indebted to the World Bank, the IMF, which is struggling against the massive tide of firearms which repeatedly come into its jurisdiction every single day. And when you start to look and see how much has been confiscated, it’s overwhelming to view.

But Jamaica is saying, hang on, actually, the biggest issue is firearms trafficking, and the multiple homicides that happen every year. What are you going to do about it? So when I’ve worked with peers and colleagues in Jamaica, we talk about the US needs to be checking its own borders, why are firearms coming out of the US? Why are they leaving Miami? Why is it
so easy for them to leave Miami and end up in Jamaica? And they’re all US manufactured. They can check the codes on the guns. They can check the brands on the firearms. Yet, the US doesn’t do anything at its end. And it comes back to that historical war on drugs.”

Naomi: “That ‘war on drugs’ has served organised crime groups, multinationals and financial secrecy centre self-interest all the more easily because of colonial attitudes and beliefs. Sergio Chaparro Hernandez of the Tax Justice Network:”

Sergio Chaparro Hernandez: “The world is increasingly realising that bad drug policies can cause more harm than drugs themselves. The painful history of bloodshed and corruption in a country like Colombia where I am from has a lot to do with bad drug policy. If we had opted for regulating drugs in a responsible manner rather than prohibition, we would have
prevented institutional destabilisation and violence with the thousands of deaths and all the harms they have caused.

The alternative will be a responsible model to legalise drugs, which recognises that instead of prohibiting drugs, they should be treated as a public health problem which builds upon the lessons learned from regulating industries such as tobacco or alcohol.

The United States has been the big driver of the war on drugs. And if a just international policy is to be advanced, any undue interference that prevents producer countries from choosing their own regulatory models should be eliminated, and countries that have driven the war on drugs should implement policies of reparation for the harms caused by
prohibition.”

Martin Drewry: ”We believe that prohibition is one of the things that creates and sustains extreme disparities of wealth within the countries of the global south that have kept them economically poor. And tax justice is an essential part of correcting that.”

Naomi: “This is Martin Drewry of Health Poverty Action speaking at a recent event:”

Martin Drewry: “So what do we mean by tax justice in the context of a legally regulated drug market? What is the role of tax for that, thinking especially of countries in the global south? First point I want to make is something about just the scale that we’re talking about. So the size of the global drug market, estimates vary from 0. 5 percent of global GDP to about 1 percent of global GDP. Some people think it’s a bit higher, certainly will probably become higher as the cannabis market grows, for example. But if we take that figure of 1 percent, the global average tax rate per, for the world is 29%. But what that would work out as in terms of a percentage of global GDP, the tax that’s currently being lost by not taxing the drug
market is about $232 billion per year, based on those estimates. So to put that into context, that’s more than twice the annual spend prosecuting the war on drugs. And it’s way, way above the global aid budget, the combined global aid budget. So, these aren’t small amounts, but for the poorest countries, it’s much, much more significant than that. So these numbers, in a country like the US or the UK, sure, you know, we did a report on legalising cannabis and it could have offered another billion pounds a year to the National Health Service. So it’s not insignificant, but you know, it’s not going to fund our health systems. But in the U. S., for example, per capita per year, the spend on health per person per year in the U. S. is $9,536. In Ethiopia, it’s 24. In Ghana, it’s 80. In the DRC, it’s 20. Across the lowest
income countries as a whole, it’s 41. So this is why tax is important. There are lots of things we can do with tax. Tax doesn’t just come, this is one of the key points, it doesn’t just come from a product-specific tax. So we have an alcohol tax, for example, and we can have a cannabis tax, and that’s important. But bringing the drugs market into the licit economy also
enables income tax, we want progressive corporation taxes, we want tariffs. One of the things in trade justice is that to address the disparities of wealth between the global south and the global north it requires building up the economies of the global south.

Now, Africa has a supreme comparative advantage for cannabis growing, for example. Most of the profits won’t come from the raw cannabis, they’ll come from the processed stuff, and they’ll come from derivatives, and they’ll come from other kinds of products associated with the use of cannabis. It’s important to build those industries in poorer countries. So one of the ways that you can do that is to prevent, and that’s another role of tax, preventing corporate capture because you disproportionately tax the rich corporations and their exports into the country, you put tariffs on those in order to protect the infant industry. So there’s a lot of things that can be done using tax as an instrument and we need to become experts in these because if we don’t design the proposals, the corporations will!”

Naomi: “And not only corporations, but the nations they’re headquartered in. Sergio Chaparro Hernandez worries that while decriminalised, regulated drug industry policies would indeed knock a lot of organised crime out of the equation, which is great, raise tax revenues and help improve things like healthcare, which is also great, but the benefits
economically could end up being dominated by – you guessed it, global north nations and their multinationals.”

Sergio Chaparro Hernandez: “What is paradoxical and grossly unfair is that producer countries will end up being late to the regulation game after decades of suffering the perverse consequences of prohibition, while the benefits will be reaped by countries that are consolidating a legal industry first, such as the United States and Canada.”

Naomi: “And those countries are moving fast now on decriminalising and regulating cannabis. It’s also kind of ironic that a number of tax havens or financial secrecy jurisdictions are developing regulated cannabis industries partly to move themselves away from overdependence on their finance sectors, just as the financial secrecy market’s getting slowly squeezed by transparency initiatives – pushed by people like us!

At the moment the global legal cannabis market alone is estimated at over US$24 billion and that’s expected to quadruple in the next ten years. So it’s easy to see why developing a decriminalised, regulated and taxed cannabis industry is attractive. But it depends on which country’s doing it: there are richer world producer nations and markets, and poorer producer nations and markets, serving different clientele and facing different realities and
economic power imbalances globally. All this enthusiasm for new revenues from regulated cannabis industries could end up with lower income nations dealing with yet more of the same domination by big players and global trade inequities that they already face. But, first things first:

Should lower income countries be focusing their land use on sustainable food production for domestic use, especially given the climate crisis? I mean, we know there’s this increased chance of crop failure that drives up food prices. Should they be thinking about developing a cannabis industry in that context?”

Max Gallien: “I think that’s an excellent question and I think looking at cannabis in the wider context of agricultural policy is, is really important.”

Naomi: “I’m talking to Max Gallien of the International Centre for Tax and Development and the Institute of Development Studies at the University of Sussex:”

Max Gallien: “Obviously countries’ policy regarding cannabis cultivation will have to be placed within their wider kind of country-specific agricultural and industrial strategy. I think for many countries, dramatically expanding production is certainly risky, both given the young and uncertain global market, but also other priorities they may have in agriculture. The important thing to highlight, though, is that I think for many countries, cannabis production is already a reality. Many countries, including in Africa, are already producing cannabis, already have producers that have been used to producing this for a very long time,
that have been relying on and specialising in these crops for a very long time, that have regions that are particularly specialised in this, for example, if we think about the Reef Mountains in Morocco. So especially for these regions, thinking about the future of that crop and the future of its taxation and marketing is really important, even if we’re not necessarily
advocating for new large scale cannabis development.”

Naomi: “Right, right. it depends on the country and their own context. And because the decriminalized cannabis industry at least globally, is in its infancy, really, do you have hopes that this kind of newness represents an opportunity for lower income nation governments at least to try to do things differently in terms of the way they manage their economies? I know
you’ve written about some really interesting legalisation models, focused on incentivising smaller scale production for example.”

Max Gallien: “I think, yes and no. So, so on the one hand the market is still developing, and this is still a young global market, it’s a market that, you know, is more legalised in some areas than others, is more legalised with respect to certain types of products than to others. So, a lot is still in flux, and this is partly what makes this entire policies area so exciting. There
are very few opportunities where we get to see a new legal market develop, where we get to see policymakers shape the context for this market and what is furthermore really exciting is that we do see new models coming up, and we see really, really interesting ones. We see some countries opt for a less overtly commercialised cannabis market than the U. S. and
Canada has. Malta has been a good example of that, but especially Germany, a very, very large market, not opting for an openly commercialised model, but looking more at kind of smaller cannabis clubs and private production, is really, really interesting and makes this a really, really exciting market to watch.

However, while the market’s still developing and is still young, it’s also not in its complete infancy anymore. And I think that is really important for especially lower income and lower middle income country developers to, to keep in mind that yes, they have an opportunity to shape policy in a new way and to do things differently, but they’re doing that in a context of
a global market that is already developing, where they’re not the first movers.

If they’re focusing on their domestic consumption, there’s wide open spaces still, if they’re focusing on regional consumption. But if they’re looking at global markets, they will have to reckon with the existence of, especially the North American market, which is large and highly capitalised and highly commercialised. So in some ways, there’s wide new areas for
policymakers, but in other areas, there’s already the realities of kind of global competition that are already being developed.

One further point that I think is, is important to remember as well, is that there’s another market that already exists, which is the illegal market. So, obviously, the legal market is, is still in its infancy and is still being developed, but the illegal market has been around for a very long time. And despite some more optimistic projections, it’s not necessarily going to
go away by itself. So policymaking for the legal market will also have to keep in mind the effect of this new legal market on the already existing illegal market.”

Naomi: “Right, and what’s quite interesting is if you contrast the experience in Malta, for example, where I think they were running a non profit legalised market, where in Malta, they don’t necessarily have the same need or desire for a foreign currency to come in, and to trade internationally. Whereas if you look at Malawi, maybe they do, so that kind of nonprofit market, why would that work somewhere like Malawi?”

Max Gallien: “Exactly! So exactly the question for policy makers and countries that are thinking about legalisation is, are we thinking about a domestic market only, or are we thinking about export? And if you’re thinking about export, the policies around that will have to look quite differently than if you’re just thinking about satisfying a domestic market or
domestic interest. And that is particularly important for countries that are already de facto dependent on cannabis export. Morocco is a classic example of this, this is a country that is, although currently largely illegally, already dependent on cannabis export that has large numbers of farmers and entire regions that are quite dependent on this crop. And these
export structures so far have largely been illegal. They’ve been providing most of the European market for quite a long time. But they’re now competing with the new legalised market and are now having to situate themselves in relationship to new legalised market, to new products coming in from other places, being produced in other places. And
consequently, the policy choices look quite different than a country like Malta that can primarily think about its domestic market.

Naomi: “We’ve got to keep in mind here that of course, decriminalising and regulating these industries are about way more than revenue raising and development, they’re also about taking a different approach to prohibition that’s only enriched and empowered organised criminal groups and the professional enabler industry that’s there to serve them. Back to
Max again.

You say there are important lessons to be learned from the tobacco industry in terms of how nations can better design tax systems. I know that over 10 percent of the global tobacco market is still illicit, which is really interesting.”

Max Gallien: “It is. It’s, it’s a really, really important thing about the global tobacco market that we don’t talk about often enough is how much of it is illicit. Cannabis is interesting here, it’s one of those cases where, you know, we often say policies shape markets and markets shape policies. The tobacco industry has been highly concentrated around what we often
refer to as ‘big tobacco’, around these large multinational organisations that have certainly had their influence on how policy on tobacco taxation has developed, especially in lower income countries, especially in Africa. And there’s extensive documentation of the tobacco industry seeking to influence policymaking in this area, and especially lobbying for lower
taxes and pointing to the illegal markets as a reason for why taxes should be lower, arguing that if taxes on tobacco are increased, then smuggling will become more of a risk and this fraction of the market that is already illicit will grow. Now we’ve done a little bit of work at the International Centre for Tax and Development, we’re absolutely not the only ones who’ve done so, that have highlighted that that connection is really not that strong, that just
because you increase taxes does not necessarily mean smuggling goes up, and that that narrative under appreciates the role that the legal tobacco industry has also historically played in in tobacco smuggling, but I think it highlights that lobbying and industry influence on policymaking, especially when there’s a power imbalance between large multinational
companies and lower income countries administrations is is a real threat. And it’s something really concerning, I think it’s something that as the global cannabis market develops we’ll also have to watch out for.”

Naomi: Yeah, definitely because all experience tells us how markets always tend to organise themselves in terms of domination by the biggest, the most heavily capitalised players. And we know that tax justice and tax is a great tool to incentivise and disincentivise certain behaviours if governments want to do that. So do you have faith that governments, nations,
lower income nations in particular, can design a tax system that can do what no other nation has really done in the ways we’d like to see, not just in this economic sector, but, but in others?”

Max Gallien: “That’s a lot of faith you’re asking for! I think it’s, it is unlikely that what we’ll see in cannabis will be completely different from any other export crops from any other similar industries that we’ve seen. And I think seeing it develop completely different or seeing kind of these radically different models that we see in Malta or, or have been discussed in Mexico or other places becoming the global standard, I think that is unlikely.
However, where on that spectrum between a completely different approach and repeating some of the mistakes of of the past we lie, I think is really important and I think tax policy has a, has a big role to play in that. As you say, it can incentivise policies. It can play a central role in making sure you extract profits at the point where they’re accumulated and not
necessarily at the point where kind of smallholder farmers are engaging in traditional practices. It is also a way to shape markets. It’s a way to influence who gets to be involved in them. One of the things that we’ve seen in some countries that have really recently legalised is if the licensing fees for producing cannabis are really, really high, that often means that the
only producers that can pay these fees are already quite large organisations and that might crowd out other, other actors.

So I think all of this will be extremely difficult, but it will be helped if developing country policy makers can be part of a conversation quite early on where they can help identify what their goals In the legalisation process are, what their goals on a newly developing global legal market are. Is it around export? Is it around focusing on the domestic market? Is it
about focusing on smallholder farmers in, in a local context that already exist, or is it around expansion of production? what are their assumptions about an emerging international market? If they’re thinking about export, are they thinking about a regional export? Are they thinking about a more global scale? Are they thinking particularly about the kind of crop
itself or about processing and upgrading? So I think being very explicit about the goals, about the consequences of the goals, and then the policies that need to follow from that. It’s still an uphill struggle, but it gives you a bit of an advantage in a, in a very, very fast moving market.

I think that the writing is on the wall in terms of the creation of a global legalised market. I think it’s hard to imagine a future over the next few decades where that’s not increasingly becoming the norm and where these markets are not increasingly connected globally. So I think it’s also a question of positioning within that market, anticipating where it’s going to
go and thinking of what that means, especially for producers that have traditionally produced illegally. So, I think one of the motivations for me is really to think about from the perspective of places like Mexico, places like Malawi, places like Morocco, that are going to feel the changes of these changing global markets whether they change national policy or not, and
thinking how they can react to that and how they can anticipate that, I think, is, is really important.”

Karina Garcia-Reyes: “As a society, we have to accept that there’s no perfect solution.”

Naomi: “This is Criminology lecturer and writer Karina Garcia-Reyes of the University of the West of England. We heard from her in part one of drug war myths in the previous Taxcast.”

Karina Garcia-Reyes: “There’s no silver bullet here okay, and interestingly, we prefer a very violent strategy that is really damaging us instead of something more nuanced that actually minimises consequences, So, this is a very complex solution, I acknowledge this, but to me, legalising drugs is the first step, but we have to manage our expectations. Violence,
unfortunately, will always exist because even if we legalise drugs we have so many other markets in organised crime but at least from my perspective, in countries like Mexico, where most of this violence at the moment is linked to drug trafficking, to this market in particular, violence will be minimised considerably. And in a country with so many homicides and so
many disappearances, this is really something to consider because whereas the United Nations and the US and the UK dictate the global policy, we, countries like Mexico, Colombia, we are contributing with the deaths and disappearances. And that’s very, very painful.”

Naomi: “Eric Gutierrez of the International Centre of Human Rights and Drug Policy.”

Eric Gutierrez: “I would say that legal regulation of drugs is a key option to consider. Law enforcement has not won the war on drugs, there has been, you know, wars on drugs for decades now, and, you know, if there will be some kind of clampdown on tax avoidance mechanisms, that may be a way to win that war without firing a shot and at the same time move the illegal, illicit drug trade to legal regulation where taxes can be raised and be used
to pay for the public good. If there will be reforms to prevent tax avoidance, then taxing through the legal regulation of drugs will also work.”

Naomi: “This is a complicated subject. But it is clear that prohibition and punitive drug policies and the so-called war on drugs have a) failed and b) are making inequalities between north and south even worse. New approaches that are health and human rights-based are urgently needed across the board, it’s a matter of life and death. We know tax justice can play a key role in a decriminalised environment. And of course, the starting point for nations like the UK and the US is to put their own houses in order and end financial secrecy. And instead of investing in militarisation, they should be investing in harm reduction programmes, not only domestically but also overseas in the producer countries – it’s part of the reparations they owe, their moral debt.”

Welcome to our monthly podcast in Portuguese, É da sua conta (‘it’s your business’) produced and hosted by Grazielle David and Daniela Stefano. All our podcasts are unique productions in five different languages – English, Spanish, Arabic, French, Portuguese. They’re all available here. Here’s the latest episode:

Poluição por combustíveis fósseis; contaminação do solo, rios, animais e vida humana por agrotóxicos. Tabaco, bebidas alcoólicas e ultraprocessados que prejudicam a saúde. A tributação pode colaborar para desincentivar estas e outras práticas nocivas.

O episódio #53 do É da Sua Conta explica como funciona a reprecificação com o imposto seletivo, ferramenta que, se bem desenhada, pode diminuir o efeito da crise climática, melhorar a saúde das pessoas e combater desigualdades. Grandes corporações, que contaminam mais, devem contribuir mais!

• Reprecificação: Florencia Lorenzo, da Tax Justice Network, explica como a reprecificação, um dos  5 “Rs” da justiça fiscal pode contribuir no combate à crise climática, na promoção de uma alimentação mais saudável e no desincentivo de outras práticas que fazem mal à saúde e ao meio ambiente.
• Bob Michel da Tax Justice Network traz evidências científicas de que imposto seletivo desincentiva práticas nocivas, como o tabagismo, na Europa.
• Reforma tributária no Brasil deve ser sustentável e prever transição para economia menos poluente através de impostos seletivos para combustíveis fósseis e agrotóxicos, comenta Mateus Fernandes, do Instituto Democracia e Sustentabilidade.
• Imposto seletivo para bebidas alcoólicas e ultraprocessados devem constar da reforma tributária brasileira. A proposta é da ACT Promoção da Saúde e Marcello Baird acredita que o projeto de lei que tramita no congresso nacional pode estar entre  os pioneiros no mundo se for aprovado com estas medidas.

“Trata-se de tentar mudar o comportamento de grandes empresas, de grandes fundos de investimentos, para reorientar a economia para que quando façam suas decisões econômicas, levem em conta também o custo social dessa decisão de investimento.”  
~ Florencia Lorenzo, Tax Justice Network

“Nos países europeus, a introdução do imposto seletivo sobre o consumo de cigarro onde esse tipo de imposto era uma novidade reduziu  nitidamente o número de fumantes.”  
~ Bob Michel, Tax Justice Network

“Qual é a nova revolução verde que a gente precisa fazer? Vai continuar sendo baseada em agrotóxicos, que recebem algo em torno de R$ 350 bilhões de incentivos por ano?”
   ~ Mateus Fernandes, Instituto Democracia e Sustentabilidade

“Imposto seletivo é uma medida super importante para desestimular o consumo de ultraprocessados. Há inúmeros dados que mostram como esses produtos são prejudiciais à saúde das pessoas, causando mortes e adoecimentos” 
~ Marcello Baird, ACT Promoção da Saúde

Participantes:

• Antonia, agricultora ribeirinha brejeira no Sul do Piauí
• Bob Michel, pesquisador da Tax Justice Network
• Florencia Lorenzo, pesquisadora da Tax Justice Network
• Marcello Baird, ACT Promoção da Saúde Mateus Fernandes, assessor de advocacia e situação ambiental no Instituto Democracia e Sustentabilidade

Trancrição #53

Saiba Mais:

• Manifesto Reforma Tributária 3S: Saudável, Solidária, Sustentável
• Ultraprocessados, uma relação Tóxica, podcast Prato Cheio

Episódios Relacionados

• Justiça fiscal e aumento da probreza no mundo #1
• Qual reforma tributária o Brasil precisa? #5 As armadilhas das criptmoedas #50

É da sua conta é o podcast mensal em português da Tax Justice Network. Coordenação: Naomi Fowler. Dublagens: Zema Ribeiro. Produção e apresentação: Daniela Stefano e Grazielle David. Download gratuito. Reprodução livre para rádios.