Brussels, 9 December 2009
European Commissioners and President of the Development Committee at the European Parliament launch debate on how to improve tax revenue collection in developing countries
In order to highlight the critical role of tax systems in development and to emphasize the negative impacts of harmful tax practices and non-cooperation on developing countries, Karel De Gucht, European Commissioner for Development and Humanitarian Aid, László Kovács, European Commissioner for Taxation and Customs Union and Eva Joly, President of the Development Committee at the European Parliament organise a joint conference at the European Parliament on Tax and Development to Fight Poverty. The Conference will discuss possible policy measures to increase tax revenues in developing countries, and to develop a fairer and more cooperative international tax environment.
Karel De Gucht, Commissioner for Development and Humanitarian Aid said: "Helping developing countries to strengthen their tax systems and to raise more tax revenues is not just a new theme or the new fashion in the development agenda. It is in fact an essential key to sustainable development and to enhance ownership of poverty reduction policies."
László Kovács, Commissioner for Taxation and Customs Union, said : "With the current financial and economic crisis, national budgets and tax systems are under increased threat and the need for international tax cooperation and common standards has become more important than ever . S ynergies between tax and development policies will allow developing countries to benefit from sound tax cooperation at the international level and fight tax evasion, illicit financial flows and harmful practices more efficiently" .
This one day conference will bring political leaders, academics as well as civil society from the North and the South together and highlight the negative impact that weak tax systems have on development, and the challenges that tax evasion, and illicit financial flows pose for those systems.
Commissioners De Gucht and Kovács and Eva Joly hope to contribute to advancing the debate on the links between tax governance and development, and to raise awareness on the fundamental importance of domestic revenue mobilisation for poverty reduction and sustainable development.
The European Commission is currently preparing an initiative on good governance in tax matters in the context of development cooperation.
Effective tax systems are crucial for development. They contribute to the provision of public goods, to state building and good governance. The financial crisis has increased the need to raise more tax revenue in developing countries, which have been severely hit by shrinking commodity prices and the contraction of international trade. Developing countries suffer high tax losses due to the structure of their economy, weak administrations, and inadequate tax policies. In addition the global system of financial transactions and the abundance of non-cooperative jurisdictions have made feasible tax evasion and avoidance at low risk.
The Doha Declaration 2008 from the UN Conference on Financing for Development lays the cornerstone for action" to increase tax income through modern tax systems, more efficient tax collection, a widening of the tax base and effectively combating tax evasion". Repeatedly the international community has engaged to fight harmful tax practices. Most recently at the G20 meeting in Pittsburgh, the world's leaders reiterated their commitment to fight tax evasion, illicit financial flows and harmful practices.
The EU has been particularly active in capacity building activities over the last twenty years, with a particular focus on assisting developing countries in strengthening their tax administrations. These EU efforts have been undertaken in collaboration with the World Bank and the IMF.
The European Commission has supported tax administration reforms in a number of countries. For instance in Tanzania, support to VAT and domestic revenue departments under the Tax Administration Programme (7 million euro) have been provided. In a number of countries, support to tax reforms has been part of a broader package of support to economic or public sector reforms. In Ethiopia, for example, it is provided under the umbrella of the Public Sector Capacity Building Programme.
The GAERC Council conclusions of the 19 th of May invited the Commission to propose concrete EU action "on dialogue with, and assistance to, developing countries on promoting Good Governance in tax matters and more effective national tax systems in order to achieve development goals". The Commission currently works towards a Communication addressing the issue of good tax governance in developing countries.
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