Talking about Tax

A diverse day. An engaging session on the ways that development which engages the private sector discriminates against women, a panel featuring Melinda Gates looking at harnessing technology for inclusive economic growth, the pressing issue of tax justice and a forum of young social entrepreneurs in India, as young as 15 years old!

Tax justice is in area I became interested in way back in 2014 when I volunteered with the Oaktree foundation. We were campaigning for tax justice to be put on the agenda for the upcoming G20 Summit in Australia, and fast-forward four years, it is a prominent theme at the IMF/World Bank Annuals. With huge multinational corporations finding nefarious ways to evade paying tax, this can significantly deprive developing countries of crucial funds which they could be using for essential public services and infrastructure. Back then, we looked at profit shifting. A company should pay tax in the countries in which their business was conducted, however many multinationals have been able to shift their profits to countries with low corporate tax rates, known as “tax havens”. The other piece of tax jargon was transfer pricing. Put simply, subsidiaries of a parent company can set values for transactions that are too high or too low, such that as much of its profit is recorded in low tax-rate countries, and as little of its profit in high tax-rate countries. There are many examples of destructive tax evasion by corporations operating in developing countries, and Oxfam estimated in 2016 that it costs these countries $100 billion a year.

I walked into this forum on tax justice and was surprised to see Wayne Swan, former Australian treasurer, sitting on the panel. He is here as part of the civil society, working with ICRICT, the Independent Commission for the Reform of International Corporate Taxation. As a delegation, we met with Wayne this week and he told us hates the superfluous name. The forum incited robust debate on the ‘radical’ nature of reforming the international tax system. Wayne’s angle was direct and unambiguous. He declared tax evasion “a cancer in our system” and offered a seemingly simple proposal that all subsidiaries of a parent company should be treated as a single entity for all tax reporting purposes. Apparently, this isn’t so simple, and Vitor Gasper, director of the IMF’s Fiscal Affairs department, called Wayne “a radical”!

In Australia, the introduction of transparent public reporting of tax operations led to landmark reforms in our public policy, a process Wayne was heavily involved in. Consensus was found on the need for international standards and reform, and the role regional cooperation, through the likes of the ASEAN bloc, can play in accelerating these reforms. The OECD has launched the Base Erosion and Profit Shifting (BEPS) process, which lists specific actions that governments can take to address tax avoidance, including the emerging issue of taxing digital businesses. Whether these actions are adopted by the world remains to be seen.

Briefly, my day ended at a forum featuring young Indian social entrepreneurs. For example, 15- year old Nikita is behind Project Freshstart, which helps women prisoners in India find work and rehabilitation. Schoolgirl Esha runs an organisation who teach medical health consultants English. Given I am writing my policy paper on social enterprises, these stories were particularly interesting, and reflects a key theme for this week from a personal standpoint. While combatting the bureaucratisation of the IMF and the World Bank may be difficult, young people have the capacity to affect change through many avenues. For me, it just makes sense to find an area you are passionate in, one which aligns with your core values, belief and experiences, and look for ways in which you can have a positive impact.