In less than two weeks New Yorkers will head to the polls to replace Mayor Michael Bloomberg, who has hit his term limit. In the race, Bill de Blasio, the Democratic candidate, is the clear frontrunner over Republican Joe Lhota by 64 percent to 23 percent.
To voters, the campaign has centered on the economy and jobs, public education, and affordable housing—issues which all relate to major concerns over New York’s rising income inequality. In New York City income inequality is a huge concern. In fact, according to the Census Bureau, the income gap in the City is higher than in any other metropolitan region in the United States. On this issue, many New Yorkers have expressed a preference for de Blasio, and noted that during 12 years of Republican-turned-Independent Mayor Bloomberg, the city “paid too much attention to the rich and not enough to the poor.”
Mayor Bloomberg, who is a billionaire himself, has not responded to this issue with much sympathy. ”Wouldn’t it be great if we could get all the Russian billionaires to move here?” he said recently in his weekly radio interview, “You picture this income inequality measure, but if we could get every billionaire around the world to move here, it would be a godsend.”
The UK government must use the Open Government Partnership summit in London next week to end the secrecy surrounding who really owns millions of UK companies, campaigners said today. Discussions are underway right now at the highest levels of government and campaigners are expecting a decision to be made by the end of this week.
At the G8 summit earlier this year, David Cameron promised “to push for more transparency on who owns companies”. Failure to do so would be a massive missed opportunity to stop tax evasion, money laundering and other forms of crime and corruption, and would seriously undermine UK government claims to lead the world on government openness and accountability, according to a coalition of non-governmental organisations including the Tax Justice Network and the Financial Transparency Coalition.
In the October 2013 Taxcast: Swiss villagers send some of profit shifting mining giant GlencoreXstrata’s money to humanitarian projects, tax havens do some window dressing and how many sets of accounts does a multinational corporation REALLY need to file their tax returns? The David and Goliath story of tax collection – even for the United States.
Tom Cardamone, Managing Director of Global Financial Integrity, recently published a piece in Reuters on the connections between human rights and tax evasion. He references a recent report Tax Abuses, Poverty, and Human Rights, published by the International Bar Association’s Human Rights Institute (IBAHRI) Task Force on Illicit Financial Flows, Poverty, and Human Rights. The report finds that the evasion of taxes “has considerable negative impacts on the enjoyment of human rights.”
The IBAHRI report goes beyond this connection, however. Developed nations, they write, have an “obligation to assess and address the domestic and international impacts of corporate, fiscal and tax policies on human rights.” These ideas are worth fleshing out.
Much of the IBAHRI report reflects the philosophies of Thomas Pogge, a member of IBAHRI and a chair of Tax Force on Illicit Financial Flows, Poverty, and Human Rights. Pogge’s philosophies are grounded in the philosophical principal on the two types of moral imperatives: negative duty and positive duty. Negative duty is the moral obligation not to cause harm (that is, non-interference), whereas positive duty is the moral responsibility to prevent harm (that is, assistance). For example, you have a negative duty not to push another person in front of a speeding train. You might also have a positive duty to pull an injured man out from in front of a speeding train.
Transparency International released the report, Transparency in Corporate Reporting: Assessing Emerging Market Multinationals, on October 17th. You can download the report here.
The world is changing. The United Nations Development Programme projects that by 2020, “the combined economic output of three leading developing countries alone – Brazil, China and India – will surpass the aggregate production of Canada, France, Germany, Italy, the United Kingdom and the United States.”
The growing importance of emerging markets means their impact is felt broadly around the world. Thus it is important companies from emerging markets do all they can to stop corruption from being a part of their business. As markets become global, the ethical and transparency standards of companies must become higher and more universally applied.
The Transparency International study Transparency in Corporate Reporting: Assessing Emerging Market Multinationals assesses the corporate reporting practices of 100 large multinational companies from emerging markets. These rapidly expanding companies, identified as rising stars of the world economy, come from 16 different countries.
While at an event sponsored by the Council on Foreign Relations, FTC Manager Porter McConnell asked French Finance Minister Pierre Moscovici if France would support public registries of companies in the European Union. His response: not only does France support them, but they also support several other key pieces of FTC’s agenda. Video here at 41:39:
The Democratic Republic of the Congo is widely considered one of the world’s nations with the highest levels of natural resource wealth. In particular, the nation is richly endowed with many types of mining industries—including copper, cobalt, gold, diamonds, and tin—and timber. In fact, DRC accounts for 51% of the world’s extraction of cobalt and is the world’s fourth largest producer of diamonds.
Despite this wealth, and in part because of it, the country also has experienced conflict, economic instability, and systematic corruption since its independence in 1960. These dynamics have contributed to its status as the world’s poorest nation in terms of per capita GDP. In particular, DRC suffers from an uncertain legal framework and a paucity of transparency in government. As I explained in a recent series of blog posts, nations that have vast natural resource wealth, but do not take the necessary steps to keep the extractive industries accountable, transparent, and honest, are likely to suffer from corruption and, ultimately, the resource curse. DRC’s policies and dynamics fall squarely in these criteria.
Given these existing dynamics, it is difficult to see that expanding oil production—as the government now hopes to do—will stimulate economic growth. In 2012, oil revenues contributed $325 million to DRC’s GDP, but according to Nathaniel Dyer, a campaigner for Global Witness, these revenues are expected to “rise sharply,” particularly given the DRC’s recent deal with Angola to exploit offshore fields.
African civil society organisations and a coalition of leading international development organisations have called for global policymakers to adopt measures to counter the hundreds of billions of dollars siphoned out of the continent through money laundering and industrial scale corporate tax avoidance.
The Financial Transparency Coalition’s (FTC) two-day high-level conference with Policy Forum held in Dar es Salaam last week was attended by 150 senior politicians, prominent international lawyers, academics, anti-corruption specialists and campaigners.
We’ve just completed our pre-conference seminar here at the 2013 FTC Conference in Dar es Salaam. Fifty reporters, civil society members, and experts from across the world gathered to prepare for the conference. Tomorrow, we’re expecting that number to quadrupedal for the conference’s main event on October 1st and second.
For the first time, we’re scaling up opportunities to participate in the conference. I’ll be live-tweeting the event as our panoply of experts discuss financial transparency and illicit financial flows. On each side of the main stage, we will be displaying all Tweets using the hashtag #FTCDar2013. You can help contribute to the discussion in the room by using the hashtag, or by Tweeting @FinTrCo.
The conference agenda is here. We’ll do our best to post the PowerPoint presentations online, so you can follow along with the play-by-play on Twitter.
Dar es Salaam, Tanzania, September 30, 2013 - The Financial Transparency Coalition (FTC) and Tanzania’s Policy Forum, will host the highly anticipated conference Towards Transparency: Making the Global Financial System Work for Development at the White Sands Hotel on October 1 and 2, 2013. Topics to be discussed include the detrimental effects of illicit financial flows on the extractive industries (oil, gas, timber and mining), conflict and instability, illicit wildlife and arms trade. An expected two hundred guests from over 30 countries will look at how to make the global economy work for rich and poor by increasing financial transparency.
In remarks on the eve of the conference, Policy Forum coordinator Semkae Kilonzo said “of the roughly US$1 trillion that leaves developing countries in illicit financial flows each year a staggering US$50 billion – comes out of Africa. These proceeds of crime, corruption, and tax evasion represent an unacceptable drain on developing economies that is equivalent to eight times the size of global foreign aid.”
Greetings from Dar es Salaam! We’re still half a day away from the beginning the 2013 FTC Conference main program, and we’ve already seen a number of exciting developments. One big development: Semkae Kilonzo, Coordinator for Policy Forum, our partners for the conference in Dar, had a great blog post published at The Guardian this morning. Check it out here.
Towards Transparency: Making the Global Financial System Work for Development, the Financial Transparency Coalition 2013 Conference, will take place in Dar es Salaam on October 1-2. To join in the discussion, or ask questions of the panel, Tweet us using the #FTCDar2013 hashtag, or follow FTC on Twitter at @FinTrCo.
Illicit financial flows are one of the leading, and most under-appreciated, causes of poverty in the developing world. They erode taxes bases, facilitate crime and corruption, and represent a massive transfer of wealth from poor to rich. Financial Transparency Coalition member Global Financial Integrity finds that developing countries lost US$859 billion to illicit flows—defined as cross-border movements of funds that are illegally earned, transferred, or utilized—in 2010 alone. And the estimates are conservative, since they fail to include important sources of illegal money, including cash movements, mispriced services, hawala networks and most transfer mispricing.
This creates a tremendous drain on the developing world’s resources, outpacing aid coming in by 8 to 1. When this is taken into account, the conventional wisdom by many in the West of global development changes. A study GFI conducted with the African Development Bank found that when you take into account the illicit financial flows, as well as flows of foreign direct investment, aid, remittances, debt relief, imports and exports, and all other private sector flows into and out of Africa, the country is a net creditor to the rest of the world. US$1.4 trillion left the continent on net from 1980-2009. Developed countries may think they are being generous to Africa, but in reality they are taking far more than they are giving.
Even absent the other harms caused by illicit financial flows, like the erosion of tax bases and public trust, this capital loss is one of the primary explanations for why much of Africa is struggling to develop. It is also one of the biggest drivers of global inequality.
Where does the money go? It is roughly split between offshore financial centers, like the Cayman Islands and Switzerland, and developed countries, like the United States and United Kingdom. It’s moved to these locations using the global shadow financial system—a worldwide network of secrecy jurisdictions, anonymous shell corporations, partnerships, and trusts, and banks and other institutions with permissive money laundering standards.
Deep down, this is a moral issue. Developed countries cannot continue to claim they are committed to aiding Africa while simultaneously taking vast sums of ill-gotten gains away from the continent. It is wrong and has gone on long enough.
That’s why we’re excited to join forces with civil society and government partners from around the globe this week to work towards a solution. If you haven’t been able to join us here in Dar es Salaam, fear not. You can join the discussion this week by following the FTC on Twitter at @FinTrCo and using the #FTCDar2013 hashtag.
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