Development Ministers in Prague: British reluctance on tax havens

The consequences of the financial crisis for developing countries have been discussed at the Informal Meeting of EU Development Ministers held in Prague end of January, attended by European Commissioner for Development and Humanitarian Aid Louis Michel and representatives of the European Parliament Committee on Development. Although the effects of the financial crisis on developing countries are not yet fully visible, they are likely to be considerable, the Ministers declared. It was also observed that, therefore, it is all the more important that the European Union and other developed countries fulfill their obligations in the area of development aid, from the perspective of quantity as well as quality. During the debates on the reform of the international financial architecture, the ministers also evaluated possibilities of taking into consideration developmental aspects, including more influence for the developing countries themselves in the International Financial Institutions.

According to the CIDSE network, particularly disappointing was the reluctance of the British side and of some other member states to undertake any action in favour of combating tax evasion and better regulate and control tax havens. It was also surprising that a new round of debt cancellation has not been given more consideration, given that it could quickly release extra revenues to many developing countries facing serious fiscal pressures.

A major challenge for development (and environment) ministers will be to make sure that their concerns regarding the impact of the financial crisis on developing countries and climate change finance inform the debates of the EU finance ministers and the G20. A proposal for a “support plan for the developing world” is currently being developed by the European Commission, to be finalized together with Development Ministries in March as an input to the EU position for the G-20 summit.

EU development ministers in Prague

The EU development ministers meet today and tomorrow in Prague for the first time in 2009. On the occasion of the meeting, CIDSE, the solidarity network of catholic aid agencies, urges the ministers to implement financing commitments and ensure that the needs of poor communities in developing countries are addressed in the global discussion on the financial crisis. The network of 16 development organisations from Europe and North America asks that EU member states should make sure that developing countries are given an equal voice in policy making to address the present crises and to prevent future ones.

CIDSE asks the EU development ministers to implement the commitments laid out in the European Council Conclusions of 10-11 November 2008 and the Doha Outcome Document. Moreover, it reckons that they should clearly call for the equal participation of developing countries in discussions on the reform of the international financial architecture, from a development perspective – one of the issues the Czech Presidency has put on the agenda of the Prague meeting. In particular, the network urges EU member states to:

1. Publish binding timetables on aid targets, as committed in the May GAERC council conclusions, by end 2009, to ensure that the EU meets the 0.56% ODA/ GNI commitment by 2010, and 0.7% by 2015;
2. Support the implementation of impartial and transparent debt workout mechanisms in order to deal efficiently and equitably with future debt crises. As expressed in the European Parliament report on FFD, the EU should also address the issue of odious and illegitimate debts;
3. Strengthen “international cooperation to combat tax evasion and tax havens” in order to ensure effective taxation to mobilise resources for development. To this effect, it is crucial to:
* take concrete measures to end all bank secrecy jurisdictions and tax havens;
* agree upon “principles of transparency, exchange of information and fair tax competition” such as country-by-country reporting standard for multi-national corporations;
* take specific measures and commit the necessary resources to “strengthen institutional arrangements, including the United Nations Committee of Experts on International Cooperation in Tax Matters”;
* lead on the “drafting and urgent finalisation of the United Nations Code of Conduct on cooperation in combating international tax evasion.”
4. Ensure financial reforms are participatory of all world governments; inclusive, comprehensive, and transparent. The current financial and economic crisis shines light on the need for far-reaching reforms of the international financial architecture. These reforms must see all world governments participate. The UN conference “at the highest level on the world financial and economic crisis and its impact on development” agreed in Doha provides a unique opportunity to take this process forward. Therefore, CIDSE urges EU governments to provide the political leadership and necessary resources to make this conference a milestone in the process towards a fairer and democratic international financial architecture which works for the world’s poor.