Financial Transparency Coalition http://www.financialtransparency.org Fri, 18 Apr 2014 13:54:05 +0000 en-US hourly 1 http://wordpress.org/?v=3.7.3 Africa’s Illicit Flow Problem in Three Charts http://www.financialtransparency.org/2014/04/18/africas-illicit-flow-problem-in-three-charts/ http://www.financialtransparency.org/2014/04/18/africas-illicit-flow-problem-in-three-charts/#comments Fri, 18 Apr 2014 13:51:10 +0000 http://www.financialtransparency.org/?p=24643 Every year, more capital is transferred out of Africa than into the continent. This is despite billions of dollars of foreign aid, natural resource exports, and foreign direct investment:


 

So, what is going on? Well, when you just account for all recorded flows, such as various forms of investment, aid, exports and imports, and other transfers, Africa’s debits and credits to the rest of the world are about even, although trending higher. That’s not good for economic development:


 
But the more grave problem comes in when you add illicit financial flows, which are unrecorded:


 
So, while many in the West like to think that we are generously giving billions of dollars to Africa, we’re in fact taking far more away, creating poverty and stifling much of Africa’s economic development.

]]>
http://www.financialtransparency.org/2014/04/18/africas-illicit-flow-problem-in-three-charts/feed/ 0
As More People Watch the Money Flowing Into Africa, We Need to Keep Eye On What’s Flowing Out http://www.financialtransparency.org/2014/04/16/as-more-people-watch-the-money-flowing-into-africa-we-need-to-keep-eye-on-whats-flowing-out/ http://www.financialtransparency.org/2014/04/16/as-more-people-watch-the-money-flowing-into-africa-we-need-to-keep-eye-on-whats-flowing-out/#comments Wed, 16 Apr 2014 15:12:35 +0000 http://www.financialtransparency.org/?p=24631 watched the shift intently, with a keen interest on the amount of money coming into Nigeria. But keeping an eye on the huge sums of money flowing out is just as important.]]> Earlier this month, Nigeria leapt past South Africa to emerge as Africa’s largest economy. The financial world has watched the shift intently, with a keen interest on the amount of money coming into Nigeria. But keeping an eye on the huge sums of money flowing out is just as important.

The economic growth didn’t happen overnight. Rather, Nigerian officials decided it was time to recalculate the Gross Domestic Product (GDP), based on new statistics they claim more accurately reflect the country’s present economic situation.

In the wake of this revision, Nigeria’s GDP skyrocketed:

As a result of the statistical revision, Nigerian GDP for 2013 was $509bn, 89 per cent larger than previously stated for last year. The change was made by bringing forward the base year for calculations to 2010 from 1990, when the structure of the economy was very different and services such as banking and telecoms had barely taken off.

Many are speculating that this reassessment will fuel a new round of foreign investment, as the oil-rich nation now vaults to the 26th largest economy in the world.

The Financial Times notes that, while many have already invested heavily into Nigeria, this could be a spark for renewed interest:

Companies ranging from Nestlé and Standard Bank to Heineken and MTB have already poured millions of dollars into Nigeria but foreign businessmen and analysts said the revision could serve as a catalyst for further investment.

As new investment opportunities arise in Nigeria, and Africa as a whole, more attention is given to the vast amounts of money flowing into the continent. But we must not forget to keep track of the money flowing out, which often leaves at an equal, or quicker, pace.

In February, Thabo Mbeki, former President of South Africa and Chair of the UN’s High Level Panel on Illicit Financial Flows, estimated that $50 billion leaves Africa through illicit financial flows every year. And, according to statistics from Global Financial Integrity, a member of the Financial Transparency Coalition, Nigeria, alone, lost an estimated $140 billion, between 2002 and 2011.

The money leaving is derived from a wide range of factors, from corporate tax evasion and accounting gimmicks to human trafficking and government embezzlement. The premature, and unchecked, departure of this capital from African countries greatly inhibits the ability to create sustainable and domestic opportunities for financing development.

But as Nigeria unveils new methods for calculating economic output, it is also looking towards new options for controlling the mass exodus of capital.

At last week’s Spring Meeting of the World Bank and International Monetary Fund (IMF), the Nigerian Finance Minister, Ngozi Okonjo-Iweala, along with several other African finance ministers, called on international bodies to help in stemming the problem of illicit financial flows.

Briefing the press, Okonjo-Iweala said African finance ministers had jointly made an appeal to the multilateral institutions to look at the problem of financial outflows from the continent, which had been estimated at $50 billion on annual basis.

Targeting the developing world is crucial. Much of the capital leaving Africa, ultimately, ends up in bank accounts across the developed world, from the U.S. to the U.K. and Europe.

African economies have grown leaps and bounds over the last ten years, but it has to be wondered: what would that growth have looked like if the money that left illicitly had instead been reinvested at home?

]]>
http://www.financialtransparency.org/2014/04/16/as-more-people-watch-the-money-flowing-into-africa-we-need-to-keep-eye-on-whats-flowing-out/feed/ 0
Happy Tax Day (U.S. Taxes by the Numbers) http://www.financialtransparency.org/2014/04/14/happy-tax-day-u-s-taxes-by-the-numbers/ http://www.financialtransparency.org/2014/04/14/happy-tax-day-u-s-taxes-by-the-numbers/#comments Tue, 15 Apr 2014 03:48:17 +0000 http://www.financialtransparency.org/?p=24618 If you’re anything like me, you may have spent an hour waiting in line at the U.S. post office yesterday. I realize I’m a blogger, and a graduate student, and in my twenties — and all of these factors made me rather unlike the typical pen-and-paper-tax-filer — but there’s just something so satisfying about addressing an envelope (and sometimes a check) to the U.S. Department of the Treasury.

Anyone else?

Something that I find less satisfying are the statistics on taxation in the United States, particularly among corporations and very wealthy individuals (i.e., those that have teams of accountants and attorneys to do their filing for them). I can guarantee that none of those folks were in line at the post office with me yesterday.

In honor of  tax day, I’ve put together a little infographic to commemorate these statistics. Enjoy.

 

]]>
http://www.financialtransparency.org/2014/04/14/happy-tax-day-u-s-taxes-by-the-numbers/feed/ 0
Incorporation Standards in Banking: A Race to the Bottom http://www.financialtransparency.org/2014/04/10/incorporation-standards-in-banking-a-race-to-the-bottom/ http://www.financialtransparency.org/2014/04/10/incorporation-standards-in-banking-a-race-to-the-bottom/#comments Fri, 11 Apr 2014 03:05:50 +0000 http://www.financialtransparency.org/?p=24614 market prices; it sent a man to the moon; and it’s responsible for thousands of Olympic medals. In many cases, competitions–or races–are responsible for innovation, efficiency, and better performance. In these cases, an individual actor’s pursuit of victory leads to the betterment of society, a market, or a generation of athletes. However, sometimes competitions—or races—instead lead to worse outcomes for society. Often called a “race to the bottom,” these kinds of competitions include, for example, international degradations of environmental and labor standards. This kind of race also happens in U.S. banking, where individual states' pursuits of bank deposits have led to a degradation of bank security for the entire nation.]]> Sometimes—even usually—competition is a good thing. It lowers market prices; it sent a man to the moon; and it’s responsible for thousands of Olympic medals. In many cases, competitions–or races–are responsible for innovation, efficiency, and better performance. In these cases, an individual actor’s pursuit of victory leads to the betterment of society, a market, or a generation of athletes. However, sometimes competitions—or races—instead lead to worse outcomes for society. Often called a “race to the bottom,” these kinds of competitions include, for example, international degradations of environmental and labor standards.

This kind of race also happens in U.S. banking, where individual states’ pursuits of bank deposits have led to a degradation of bank security for the entire nation.

A hypothetical example might show how this would work in another industry. Imagine that airline security were left up to individual states, rather than the federal government. States might choose to adopt different levels of security. For example, some states might require their passengers to provide identification before boarding and pass their bags through x-ray machines to ensure they aren’t trying to transport illicit materials. Other states, though, might think it’s advantageous to reduce their security requirements. They might believe that by reducing screening, they could trim down wait times and attract more passengers to fly through their airports. They might argue this would create more jobs and incomes within their state.

Do you see the problem with this? Of course by reducing security, those states might attract more business travelers, but they might also attract terrorists, who would take advantage of these weak screening procedures. One state’s security gap would open the entire country to risk.

This is exactly what the United States allows, not in aviation, but in banking. Each U.S. state has a different set of incorporation transparency laws. In some states these laws are inclusive. In other states, you need little more than an expired Starbucks gift card to form a corporation. In Delaware and Wyoming, for example, clients can anonymously set up shell corporations (companies that are used exclusively for business transactions and do not have any real assets or operations). Nevada, one of the worst offenders, does not require banks to even request the names of account or company shareholders, nor do they need to share that information with the federal government.  This means it’s easier to set up a corporation in Nevada than it is to get a library card.

Criminals can then use these anonymous shell corporations to access bank accounts, leave authorities unable to track their assets, which leave huge holes in U.S. banking security. It is a result of these holes that Michel De Jesus Haurte was able to defraud Medicare of more than $4.5 million using a fake AIDS clinic in Miami. It is these holes that allowed forty-four members of an Armenian drug cartel to funnel $100 million through 118 shell companies in 25 states. Others who have banked in the United States include: an al-Qaeda fundraising organization, which used a company called Truman Used Auto Parts as a front; Iran, which owned a Manhattan skyscraper; and Viktor Bout, an arms trader nicknamed the “Merchant of Death” for his role in funneling weapons to terrorists, including the  Taliban and al-Qaeda.

One part of the solution lies in a bill introduced by Senator Carl Levin, which is currently under consideration by the Senate Judiciary Committee. The legislation, called the Incorporation Transparency and Law Enforcement Assistance Act, would require those who form corporations and limited liability companies (LLCs) to disclose the beneficial owners at the time companies are formed. The bill would also require states to keep the identities of corporate executives on file with a form of identification better than a library card.

 

]]>
http://www.financialtransparency.org/2014/04/10/incorporation-standards-in-banking-a-race-to-the-bottom/feed/ 0
When You Want Secrecy, All You Need is a Shell Company http://www.financialtransparency.org/2014/04/04/when-you-want-secrecy-all-you-need-is-a-shell-company/ http://www.financialtransparency.org/2014/04/04/when-you-want-secrecy-all-you-need-is-a-shell-company/#comments Fri, 04 Apr 2014 19:03:33 +0000 http://www.financialtransparency.org/?p=24595 an AP report that came out yesterday, we now know of yet another reason shell companies are used to keep information in the shadows, but this one involves a U.S. government agency and a "Cuban Twitter".]]> Thanks to an AP report that came out yesterday, we now know of yet another reason shell companies are used to keep information in the shadows, but this one involves a U.S. government agency and a “Cuban Twitter”.

From the AP report:

The project, which lasted more than two years and drew tens of thousands of subscribers, sought to evade Cuba’s stranglehold on the Internet with a primitive social media platform. First, the network would build a Cuban audience, mostly young people; then, the plan was to push them toward dissent.

The U.S. Agency for International Development (USAID) created the messaging service, “ZunZuneo,” with the explicit purpose of making it look like a legitimate business, rather than an entity set up by the U.S. government. To do this, the agency, predictably, looked towards a time-honored secrecy tactic of the world of international business: anonymous companies.

According to the AP:

USAID and its contractors went to extensive lengths to conceal Washington’s ties to the project, according to interviews and documents obtained by the AP. They set up front companies in Spain and the Cayman Islands to hide the money trail . . .

“There will be absolutely no mention of United States government involvement,” according to a 2010 memo from Mobile Accord Inc., one of the project’s creators. “This is absolutely crucial for the long-term success of the service and to ensure the success of the Mission.”

The report details the structure further, claiming that a corporation was set up in Spain, and an operating company was based in the Cayman Islands, a British territory well-known for being a tax haven, so the “money trail will not trace back to America.”

While the AP report questions the legality of the agency’s actions, there is a different aspect of the revelation that is perhaps more unnerving. Using shell companies to hide the true owner’s identity is a secrecy method at the disposal of anyone with an Internet connection and a credit card to pay processing fees. It’s not just reserved for secret government programs.

Creating anonymous companies has been at the forefront of the methods used for money laundering, government embezzlement, and corporate tax evasion, which are some of the biggest contributors to illicit financial flows.

But, without publicly accessible registers of beneficial ownership information —information on the person(s) that ultimately own or control a company — traffickers, crooks, and corrupt politicians will continue to hide in the shadows, and keep their names as far away from their bank accounts as possible.

]]>
http://www.financialtransparency.org/2014/04/04/when-you-want-secrecy-all-you-need-is-a-shell-company/feed/ 0
FTC Submits Letter to G20 Finance Ministers and Central Bankers http://www.financialtransparency.org/2014/04/03/ftc-submits-letter-to-g20-finance-ministers-and-central-bankers/ http://www.financialtransparency.org/2014/04/03/ftc-submits-letter-to-g20-finance-ministers-and-central-bankers/#comments Thu, 03 Apr 2014 16:46:25 +0000 http://www.financialtransparency.org/?p=24589 April 10th to the 11th, finance ministers and central bankers from G20 countries will meet in Washington, D.C. to discuss the G20's stance on a number of different monetary and financial policies.]]> While leaders of the Group of 20 (G20) countries won’t convene in Brisbane until November, meetings surrounding the agenda of the G20 are ongoing in the months leading up to the summit. From April 10th to the 11th, finance ministers and central bankers from G20 countries will meet in Washington, D.C. to discuss the G20′s stance on a number of different monetary and financial policies. 

The Financial Transparency Coalition (FTC) used this opportunity to draft a letter outlining our ideas and concerns on a range of financial transparency issues. The letter was sent to all finance ministers and central bankers representing G20 countries in next week’s talks.

In the letter, the FTC outlined three central points:

  • Beneficial Ownership
  • Country by Country Reporting
  • Automatic Exchange of Information

To read the full letter, you can click here.

]]>
http://www.financialtransparency.org/2014/04/03/ftc-submits-letter-to-g20-finance-ministers-and-central-bankers/feed/ 0
Illicit Financial Flows: The Elephant in the Room at the EU-Africa Summit http://www.financialtransparency.org/2014/04/02/illicit-financial-flows-the-elephant-in-the-room-at-the-eu-africa-summit/ http://www.financialtransparency.org/2014/04/02/illicit-financial-flows-the-elephant-in-the-room-at-the-eu-africa-summit/#comments Wed, 02 Apr 2014 16:40:04 +0000 http://www.financialtransparency.org/?p=24571 EUAfricasummit(notext)This piece originally appeared on the websites of EurActiv and The Africa Report$35 million mansion in California, artwork totaling €18 million, and a $38 million dollar private jet. These sound like items purchased by the world’s wealthiest oligarchs, right? Well, they were actually acquired by Teodorin Obiang, son of President Teodoro Obiang of Equatorial Guinea. When his father convenes with other leaders for this week’s EU-Africa summit, a wide range of topics will be covered. But there’s one issue in particular that should be given a loudspeaker during the talks in Brussels: illicit financial flows. ]]> EUAfricasummit(notext)This article originally appeared on the websites of EurActiv and The Africa Report

$35 million mansion in California, artwork totaling €18 million, and a $38 million dollar private jet.

These sound like items purchased by the world’s wealthiest oligarchs, right?

Well, they were actually acquired by Teodorin Obiang, son of President Teodoro Obiang of Equatorial Guinea. When his father convenes with other leaders for this week’s EU-Africa summit, a wide range of topics will be covered. But there’s one issue in particular that should be given a loudspeaker during the talks in Brussels: illicit financial flows.

Africa and Europe have a unique financial relationship. It’s one that is marked by illicit capital flowing out of African countries into bank accounts in financial centers across the EU. While the younger Obiang’s official salary is less than $7,000 per month, he managed to spend more than $315 million between 2004 and 2011 on sports cars, beachfront mansions, lavish apartments, and even some Michael Jackson memorabilia. And this is only one example.

In 2011 alone, it’s estimated that €43.7 billion left Africa by way of illicit financial flows; this money should rather have been invested in infrastructure, education and healthcare, all of which are areas highlighted by the EU-Africa Summit. Just to put that number into perspective, African countries received a combined €34.3 billion in developmental aid the same year, according to statistics from the Organization for Economic Co-Operation and Development (OECD).

While the origin of illicit financial flows ranges from government embezzlement to human trafficking, and from corporate tax evasion to grand corruption, the destination seems less ambiguous. The end game for most is to move funds to a place where they can be used freely, and preferably, anonymously.

At the moment, that task is far too easy.

Loopholes in the current system have fostered a strange breed of companies. They don’t do any real work, don’t have any employees, and, more often than not, don’t even disclose who owns them. These anonymous companies are one of the primary vehicles used to funnel illicit money from Africa into places like the EU.

To set one of these companies up, you often don’t even need to list the name of the beneficial owner, the person who ultimately controls and benefits from the company.

Thanks to the secrecy granted to anonymous companies, they become a predictable means for corruption and money laundering. A study from the World Bank estimates that 70 percent of big corruption cases over the last 30 years involved the use of anonymous corporations to help hide the identity of the perpetrators. The report also found that it is easier to set up an anonymous company in Europe and America than it is in traditional tax havens like the Jersey or the Cayman Islands.

When authorities try to investigate these entities, it’s almost impossible to unravel the web. Money often floats through a labyrinth of different companies, in different jurisdictions, leaving, at best, a confusing and incomplete paper trail.

However, with new legislation moving through the EU, part of the solution appears to be within reach.

The European Parliament recently voted to require EU-based companies and trusts to list their beneficial owners in central registers that would be publicly accessible. This would allow authorities, civil society, journalists and citizens from around the world to verify who owns companies or similar legal entities. José Manuel Barroso, President of the European Commission, has already endorsed the idea of registers for beneficial ownership. Although the European Parliament vote was a monumental step in the right direction, the legislation still needs to be agreed to by European national governments.

This week’s summit is an opportunity for leaders like President Barroso and President Obiang to face the subject of illicit financial flows head on. One of the self-ascribed goals of the meetings is to explore ways to promote sustainable and inclusive growth and socio-economic development. But, as long as financial institutions in the EU remain complicit in the transfer of illicit capital, African countries will continue to bleed billions of dollars every year. These porous financial walls undermine the very goals the summit’s leaders hope to address.

True beneficial ownership transparency, including public registers, is vital to help realize more sustainable economies in Africa and Europe alike.

]]>
http://www.financialtransparency.org/2014/04/02/illicit-financial-flows-the-elephant-in-the-room-at-the-eu-africa-summit/feed/ 0
FTC Newsletter January – March 2014 Newsletter http://www.financialtransparency.org/2014/04/01/ftc-newsletter-january-march-2014-newsletter/ http://www.financialtransparency.org/2014/04/01/ftc-newsletter-january-march-2014-newsletter/#comments Tue, 01 Apr 2014 15:14:19 +0000 http://www.financialtransparency.org/?p=24605 here.]]> After a year-long hiatus, the Financial Transparency Coalition’s newsletter is back! In our newsletter you will find updates on our organization, policy work, press, resources, and upcoming events.

To read the January – March 2014 edition, click here.

]]>
http://www.financialtransparency.org/2014/04/01/ftc-newsletter-january-march-2014-newsletter/feed/ 0
Ending Corporate Tax Loopholes http://www.financialtransparency.org/2014/03/31/ending-corporate-tax-loopholes/ http://www.financialtransparency.org/2014/03/31/ending-corporate-tax-loopholes/#comments Mon, 31 Mar 2014 20:48:25 +0000 http://www.financialtransparency.org/?p=24568 in the last twenty years. In some ways tax expenditures are good; for example, they can be used as incentives to encourage corporate and private behavior that provides a social benefit. On the other hand, these expenditures both lower government revenue and can skew the horizontal and vertical equity of our tax system. For example, corporate loopholes can result in dramatically different effective corporate rates for nearly identical companies. These loopholes have dramatic effects on effective tax rates. While the United States has a statutory tax rate of 35% (the second highest among developed nations) corporations in this country pay an effective tax rate of just 12.6%. Senator Tom Coburn, a Republican from Oklahoma, has responded to these statistics with this: “An individual’s or corporation’s tax rate shouldn’t be dependent on their ability to hire a tax lobbyist. It’s especially wrong to ask families who are struggling to make ends meet to subsidize special breaks for corporations.” ]]> Tax expenditures—government spending through the tax code, also called loopholes—have increased dramatically in the last twenty years. In some ways tax expenditures are good; for example, they can be used as incentives to encourage corporate and private behavior that provides a social benefit. On the other hand, these expenditures both lower government revenue and can skew the horizontal and vertical equity of our tax system. For example, corporate loopholes can result in dramatically different effective corporate rates for nearly identical companies.

These loopholes have dramatic effects on effective tax rates. While the United States has a statutory tax rate of 35% (the second highest among developed nations) corporations in this country pay an effective tax rate of just 12.6%. Senator Tom Coburn, a Republican from Oklahoma, has responded to these statistics with this: “An individual’s or corporation’s tax rate shouldn’t be dependent on their ability to hire a tax lobbyist. It’s especially wrong to ask families who are struggling to make ends meet to subsidize special breaks for corporations.”

One particularly egregious example of these loopholes is the corporate tax deferral on foreign earnings. Though the United States technically taxes all of its corporations’ earnings, the tax code allows corporations to defer tax payments on foreign earnings until they repatriate them to America. In practice, this means corporations can reduce their net tax burden by masquerading domestic income as foreign income. They accomplish this by engaging in abusive transfer pricing to shift profits overseas. As a result, companies like Microsoft and Apple hold $50 and $100 billion, respectively, in foreign cash and investments.

The significance of these expenditures is not only how much money they raise, but also the kind of behavior they incentivize. Deferral allows U.S. corporations to indefinitely defer payment of overseas earnings. This loophole creates two incentives: (1) for corporations to shift profits overseas to tax havens using transfer pricing, and (2) for those corporations to hold large deposits of untaxed cash sitting in bank accounts overseas.

Let’s start with incentives and behavior. As I noted previously, the deferral loophole has one major incentive: for U.S. multinationals to transfer and hold their revenues overseas. From an economic and policy perspective in the United States, this is a bad incentive. Even if these corporations were just holding the cash in the bank (which they’re not), we’d rather multinationals held their money at home than abroad.

Shifting profits abroad is an economic drag. Now, to be clear, ending corporate deferral is not going to encourage multinationals to suddenly bring home the billions in cash they hold overseas. But it does remove the incentive for them to engage in abusive transfer pricing. The other economic effect will result from raising corporate taxes, which may negatively affect corporate and shareholder profits. Some of these effects may trickle down to employees, which would have a negative effect on aggregate demand (that is, economic growth).

To fix this problem, the United States could end the credit that allows corporations to defer taxes on foreign earnings. The FACT Coalition has supported this proposal—in a memo on tax reform the Coalition asked Congress to end corporate tax deferral on foreign earnings and enact a tax system for U.S. corporations that is truly worldwide. This solution is also embodied in the Corporate Tax Fairness Act, which also includes a proposal to end deferral. According to the Congressional Budget Office (CBO),closing this loophole would generate an additional $114 billion in revenue for the U.S. government over the next ten years. The CBO also noted that this change would “boost efficiency.”

Ending this deferral would shape incentives in an important, and positive, way. It’s a goal on which we should remained focused.

]]>
http://www.financialtransparency.org/2014/03/31/ending-corporate-tax-loopholes/feed/ 0
Post-2015 Development Agenda: Moving to Self-Sufficient, Sustainable Development http://www.financialtransparency.org/2014/03/28/post-2015-development-agenda-moving-to-self-sufficient-sustainable-development/ http://www.financialtransparency.org/2014/03/28/post-2015-development-agenda-moving-to-self-sufficient-sustainable-development/#comments Sat, 29 Mar 2014 03:47:11 +0000 http://www.financialtransparency.org/?p=24559 [1] Now that we are rounding into the last year of the Declaration, the UN and other aid organizations are developing the post-2015 Development Agenda and asking the important question: “So now what?”]]> For fifteen years, eight goals have represented the yardstick by which development is measured. These are the Millennium Development Goals (MDGs) adopted in the United Nations Millennium Declaration at the beginning of the century, and represent a commitment to a noble new partnership to drastically reduce poverty worldwide. It is through this Declaration that all 193 member states of the United Nations and 23 organizations have agreed to achieve a set of eight goals by 2015.[1]

Now that we are rounding into the last year of the Declaration, the UN and other aid organizations are developing the post-2015 Development Agenda and asking the important question: “So now what?”

And the answer is self-sufficiency.

In particular, I mean that the world needs to develop a system of global financial transparency that allows developing countries to depend on themselves, rather than the rest of the world, to achieve their development goals.

This will require an evolution away from the status quo. These MDGs, in large part, are donor-centric. By and large, developed countries and international organizations provide the policy advice, technical assistance, and financial support to achieve these goals. In 2005, members of the G8 also provided enough funds to forgive an additional $55 billion debt owed by Highly Indebted Poor Countries.

In many ways, the evolution away from a donor-centric model of development is already happening. In 2011, for the first time in many years, the level of official development assistance to developing countries dropped. Out of the world’s 23 Development Assistance Countries, 16 cut their aid. Many of these countries—the list includes Greece and Spain—are confronting their own grave economic and budgetary problems. Already the world is considering new models for development, such as global taxes, to solve the problem. These efforts, while admirable, don’t achieve the policy and development independence that developing countries need.

No, to alleviate this problem, we must allow developing countries to achieve self-sufficiency through domestic resource mobilization—the most sustainable source of funding in the long-term. To achieve this objective we should pursue several goals, including curtailing illicit financial flows, abusive transfer pricing, and tax evasion. While these solutions are not panacea, in countries with good political institutions and low levels of corruption, they would go a long way toward achieving sustainable, long-term development.

Developing countries cannot achieve self-sufficiency without help from their counterparts in wealthier nations, particularly those with opaque financial systems who facilitate these practices. Those developed countries could also support improving governance and the efficiency of government expenditures on poverty reduction by helping developing countries improve anti-corruption efforts and transparency in payments to governments.

Most people would likely agree that the optimal, most sustainable way to lift developing countries out of poverty and move beyond the MDGs is to help them help themselves. When it comes to the transparency initiatives I outlined above, while developing countries are the ones most hurt by harmful financial practices, they are not the ones with control over their implementation. Participation from developed countries will make or break the effort.

 


[1] They are: Eradicate extreme poverty and hunger; Achieve universal primary education; Promote gender equality and empower women; Reduce child mortality; Improve maternal health; Combat HIV/AIDS, malaria, and other diseases; Ensure environmental sustainability; and Develop a global partnership for development.

]]>
http://www.financialtransparency.org/2014/03/28/post-2015-development-agenda-moving-to-self-sufficient-sustainable-development/feed/ 1