World Public Finances

2006-09-03T12:55:00.000Z

Concept Paper for World Public Finances (second version)
Introduction

World Public Finances (WPF) has been launched by NIGD and Liberdade Brasil to constitute a process in which we work towards a common conceptual agreement on which measures are needed to safeguard public finances in all levels. Nobody is questioning the need for increased public finances, but most disagree upon its availability and its potential sources. It is the greatest paradox of our time, the wealth creation capability of the world has never been as high, and we seem to lack public finances to fund even the basic needs of citizens both North and South. What we argue through WPF is that there are widely available sources of financing that are not available due to large amounts of money used on debt repayments, lost to tax evasion and tax competition, held up in currency reserves or lost due to corruption in public administration.

We therefore urgently need to turn away from focusing on aid as the main catalyst for prosperity in the developing world. In stead, we should turn towards public finances, domestic resource mobilisation, questioning the legitimacy of odious debt, debt arbitration and ownership of assets in the developing world. Ownership of assets includes burning issues such as land reform. Mineral resources are crucial, for a massive transfer of wealth from North to South, thus introducing high (above 10%) royalties on extractive industries is needed. Even the poorest countries have mining operations, though currently for example, in Mauritania and Niger local populations benefit next to nothing from them. Therefore public finances needs its watch dogs, campaigns by active citizens.

The idea behind launching the WPF platform is to work together between these issues and campaigns in order to come up with a coherent proposal to shift the global financial system to benefit social justice and global solidarity. There are many campaigns looking at the national level, especially in terms of corruption, or working on single aspects where a potential tax base is not being utilised, for instance currency transactions. Politically, we believe that the WPF platform has the capacity to contribute towards work of a complete overhaul of the global financial system, turning the neo-liberal tide, and significantly thus contributing to narrowing global wealth inequalities.

What we propose is that we draw up an ‘open declaration’ at the Nairobi WSF among the participants of the World Public Finances platform. Participants by clarifying the concept, sharing their activism, and spelling out their visions is an open process of making a declaration of common aims and aspirations. Whether or not it becomes an explicit declaration with signatures is an issue left to the movements themselves at the meetings.

Actions in Bamako

(a report is available at http://www.nigd.org/docs/WPFBamakoMattiKohonen )

The World Public Finances platform held one seminar in Bamako. The speakers presented the history of the initiative, and actions and mobilisations happening around the world for the support of public finances. Then the participants around the table were asked to contribute their understanding of world public finances, the proposals and activism can be classified under the following themes:

1) Global taxation initiatives including the currency transaction tax and kerosene tax are needed for global wealth redistribution and regulating global markets. New institutions are proposed for the levy of global taxes;
2) Debt arbitration should constitute a new global institution and odious debt should be completely and unconditionally cancelled, reparations are proposed to be paid by financial supporters of governments that violated human rights;
3) Tax justice can be achieved through
a) Tackling the sovereignty of offshore financial centres with the global community and states that support them, ending banking secrecy;
b) Ending tax competition between states to attract investment;
c) Creating new global conventions in tax matters concerning the automatic exchange of information in tax matters and public accounts of all subsidiaries of all companies and trusts;

4) Transparency is paramount. Public finances in all levels, including overseas and multilateral aid, should have their watch dogs to curb corruption in public administrations. Money laundering rules need to be tighter, looking at the systemic supply-side of corruption in particular in offshore financial centres and other territories where banking secrecy prevails.

The only area that was completely absent were trade issues, the platform has to ask whether we are separate from all trade issues. With this respect, we can first note that taxation and financial transactions are an integral part of any trade and investment decision that companies make. Also free trade agreements may constitute a significant fall in public finances in low-income countries if they agree to lower their trade taxes, which may account up to 30% of all tax revenues in this group. This fall in tax revenues may overweight benefits of increased trade either in absolute terms or relative to income redistribution of net gains of increased trade.

Proposed actions for Nairobi

In the spirit of working towards an ‘open declaration’, we should aim to organise two events at the Nairobi WSF.

In the first instance, we plan to to repeat, what we did in Bamako in terms of the participatory session where ideas, issues and mobilisations for public finances were shared to expand and consolidate the current list of points from a) to n) that is in the notes of the Bamako meeting ( http://www.nigd.org/docs/WPFBamakoMattiKohonen ). This time however we should also attempt to gather the points together and see what type of a coherent platform document we can arrive at and whether we agree on the various points.
The second larger scale plenary session where is for the articulation of key concepts of world public finances and feedback from the public. This will have a significant educative and informative purpose, as many participants would not have yet heard the various analysis of world public finances, or their various proposals for change. Finally, we would also like to encourage different strands of the WPF platform to organise their internal preliminary workshops before the WSF in Nairobi, in addition to some working seminars organised inside the space of the forum.

To concentrate work among the partners, we should also start an edited publication project to collect chapters on world public finances from various contributors and look how different themes are emerging in the understanding of public finances. This would make even further allow the meetings to focus on coming up with a coherent platform, and raise the profile of the platform.

Document préparatoire pour Finances Publiques Mondiaux (Deuxième édition)

Introduction

La plateforme de Finances Publiques Mondiaux (FPM) a été lance par NIGD et Liberdade Brasil pour constituer une processus dans laquelle nous travaillons vers une synthèse de nos propositions pour sauvegarder les finances publiques sur toutes les niveaux. Personne ne questionne la nécessite pour une expansion des finances publiques, mais on n'a aucun consensus sur la disponibilité et les nouvelles sources. C'est la plus grande paradoxe de notre temps, en même temps que la capacité productrice du monde n'as jamais été aussi grande, on apparaît de manquer les finances publiques pour financer même les besoins les plus basiques des citoyens dans les pays du Sud comme le Nord. Ce que nous réclamons à travers la plateforme FPM est qu'il y existe des recoures largement disponibles pour ce financement qui se sont perdus à cause des paiements de la dette publique, perdu dans l'évasion et compétition fiscale, gardées dans les réserves des banques centraux, ou perdus a cause de la corruption des administrations publiques.

Ainsi, la proposition d'aide publique au développent comme la porteur du développent et la prospérité dans les pays en voie de développent n'est pas soutenable. Au lieu de cela, on devrait voir les finances publiques, la mobilisation des ressources domestiques, halte au évasion fiscale, la mise en question de la dette odieuse, l'arbitration de la dette publique et la reforme de la propriété agraire et minière comme les mécanismes pour une expansion des finances publiques. Las ressources minières ont une rôle centrale pour une redistribution massive de la richesse du Nord au Sud, donc introduisant des royautés d'haute niveau (plus de 10% de revenu) sur les industries d'extraction est nécessaire. Même les pays les plus pauvres ont des ressources minières, mais actuellement, par exemple, les populations de Mauritanie et le Nigér ne bénéficient presque pas de ces ressources. En effet, les finances publiques ont besoin d'une citoyenté active, des mouvements pour surveiller les pouvoirs publiques.

L'idée de lancer la plateforme de FPM est de travailler ensemble avec ces thèmes et campagnes pour arriver avec des propositions cohérents pour bouger la système financière mondiale à faciliter la justice sociale et la solidarité mondiale. Il y existe plusieurs campagnes qui regardent le niveau nationale, surtout dans la thématique de la corruption, ou des mouvements qui travaillent sur des propositions de taxation sur des bases fiscales qui ne sont pas exploités, par exemple, la taxe sur les transactions financières. Politiquement, nous croyons que la plateforme FPM a la capacité pour contribuer vers une changement complète du système financière mondiale, pour tourner la vague neo-liberale, et contribuer de manière significatif au decroisement des inégalités de richesse dans le monde.

Ce que nous proposons est que nous allons faire une 'déclaration ouverte' au Forum Social Mondiale de Nairobi entre les participants du plateforme FPM. Les participants, en clarifiant le concept, partagent leur militantisme, et articulant leurs visions est une processus ouverte d'arriver a une déclaration de buts et aspirations communes. S'il devient une déclaration avec des points claires et avec des signatures ou non sera laissée aux mouvements eux-mêmes a décider lors des réunions du plateforme. Partager l'analyse et visions entre les différents mouvements est déjà un processus ouverte.

L'histoire de l'initiative

La plateforme FPM se trouve comme une plateforme thématique des mouvements sociaux. La plateforme s'est émerge de la collaboration dans l'espace ouverte du FSM. Le contenu du plateforme s'est dérivé des réunions qui se sont lieu dans le FSM.

Lors du FSM 2005 de Porto Alegre, la plateforme a coordonné des séminaires sous le titre de 'otro sistema financeiro'. Il n'y avait pas des réunions de travail communs, mais une affiliation entre les réunions avec une liste électroniques. Lors du FSM polycentrique de 2006 le première réunion participatif du plateforme a été tenu à Bamako.

Activités à Bamako

(Un dossier est disponible à http://www.nigd.org/docs/WPFBamakoMattiKohonen )

La plateforme a tenu une séminaire à Bamako. Les orateurs ont d'abord présenté l'histoire de l'initiative, les actions et les mobilisations qui se sont eu lieu autour du monde pour le support des finances publiques. Ensuite, les participants au table ont contribué leurs propres analyses sur le sujet. Les propositions, mobilisations et le militantisme peuvent être classifiées sous les thèmes suivantes:

1) Les initiatives de la taxation globale qui incluent la taxation des transactions financières et le kérosène des avions ont une rôle redistributive mais peuvent aussi selon leurs modalités servir pour une régulation des marchés mondiaux. Des nouveaux institutions sont proposés pour collectionner des fonds.
2) L'arbitration de la dette publique devrait constituer une nouvelle institution internationale, la dette odieuse devrait être complètement et inconditionnellement annulé. Des réparations se sont proposés pour être payés par les supporters financières des gouvernements qui rompent les droits de l'homme.
3) La justice fiscale peut être achevé par:
a) Une mis en examen de la souveraineté actuellement donné aux centres financières offshore par rapport aux autres pays, et le soutien qu'ils se bénéficient des États supporters en matière monétaire, militaire, relations externes ou autre protection. L'annulation de la secret bancaire est liée à la question de la souveraineté;
b) Annulation de la compétition fiscale entre les États, en tout forme d'exemption fiscale ou outres charges exemptés;
c) En créant une nouvelle convention internationale sur les sujets fiscales possiblement au sein de l'ONU pour initier l'échange automatique des informations fiscales et les comptes publiques de toutes les entreprises et trusts.
4) La transparence est déterminant. Les finances publiques dans toutes les niveaux, incluant l'argent pour l'aide publique ou multilatérale au développent, devraient avoir la surveillance des citoyen pour réduire la corruption des administrations publiques. Les règles pour combattre l'argent sale devraient être plus strictes, regardant la corruption du côte d'offre systemic, en particulière les centres offshore de finance et les territoires avec le secret bancaire.

Le seul champ qui était complètement absent étaient celles liées au commerce. La plateforme doit ainsi se poser la question s'il est complètement séparé au thématique de la commerce internationale. Dans ce problématique, on devrait d'abord noter que la taxation et les transactions financières sont une parti intégrale de chaque transaction commerciale. Les accords de libre-échange peuvent constituer des baisses significatifs dans les finances publiques dans les pays les plus pauvres s'ils acceptent de baisser leurs taxes douanières, qui peuvent constituer jusqu'au 30% des recettes fiscales dans ce groupe de pays. Cette baisse de revenue peut très bien être supérieure au bénéfices supposés d'accroissement de la commerce dans le niveau absolu des revenus ou relative au distribution des bénéfices nettes de l'accroissement de la commerce.

Actions proposés pour Nairobi

Dans l'esprit de travailler ensemble vers une 'déclaration ouverte', nous devrions penser à organiser deux événements ensemble à Nairobi.

Primo, nous pensons a répéter ce que nous avons fait à Bamako en termes du session participatif ou les idées, sujets et mobilisations ont été partages dans la thématique des finances publiques mondiaux pour pouvoir élargir et consolider la liste actuelle des points de a) jusqu'au n) qui sont notés dans le dossier du réunion de Bamako (http://www.nigd.org/docs/WPFBamakoMattiKohonen ). Cette fois a Nairobi, nous allons essayer de faire un document qui servira comme un point commun du plateforme qui réunit toutes les contributions.

La deuxième session plénière servira pour une articulation des concepts clés des finances publiques mondiaux avec une public plus grande. Cela aura un but éducatif et informatif significatif, comme beaucoup de participants n'aura pas encore entendu les analyses différents sur les finances publiques, ou bien évalué les propositions pour le changement. Finalement, nous encourageons les différents groupes et mouvements dans notre plateforme d'organiser leurs séminaires internes préliminaires avant le FSM de Nairobi, aussi bien que des séminaires de travail et articulation au sein de l'espace ouverte du Forum.

Pour concentrer le travail parmi les partenaires, nous devrions commencer une projet d'une livre commun avec des chapitres de contribution, et regarder comment les différents thèmes qui s'émergent vont ensemble en regardant des différents cotés du thématique. Cela devrait encore plus réunir les organisations et mouvements qui participent du plateforme, et surtout faire notre plateforme plus connu.

Concept Paper for World Public Finances is here!!

2006-07-15T15:09:00.000Z

Introduction

World Public Finances (WPF) has been launched by NIGD and Liberdade Brasil to constitute a process in which we work towards a common conceptual agreement on which measures are needed to safeguard public finances in all levels. Nobody is questioning the need for increased public finances, but most disagree upon its availability and its potential sources. It is the greatest paradox of our time, the wealth creation capability of the world has never been as high, and we seem to lack public finances to fund even the basic needs of citizens both North and South. What we argue through WPF is that there are widely available sources of financing that are not available due to large amounts of money used on debt repayments, lost to tax evasion, held up in currency reserves or lost due to corruption in public administration. The combined aid inflows of 20 billion dollars to Sub-Saharan Africa, is minimal compared to an estimate of 50 billion dollars lost due to illegal capital flight.

We therefore urgently need to turn away from focusing on aid as the main catalyst for prosperity in the developing world. In stead, we should turn towards public finances, domestic resource mobilisation, questioning the legitimacy of odious debt, debt arbitration and ownership of assets in the developing world. Ownership of assets includes burning issues such as land reform. One could also envisage redrawing water ownership rights especially in Africa to shift the balance towards Sub-Saharan Africa on the Nile river. Mineral resources are crucial, for a massive transfer of wealth from North to South, thus introducing high (above 10%) royalties on extractive industries is needed. Even the poorest countries have mining operations, though currently in Mauritania and Niger local populations benefit next to nothing from them. Such royalties would alone lift places like Ghana, Sudan and Angola out of poverty assuming proper oversight over the governance, and organisations working as watch dogs over public finances are a crucial part of the platform.

The idea behind launching the WPF platform is to work together between these issues and campaigns in order to come up with a coherent proposal to shift the global financial system for the benefit of the poor. There are many campaigns looking at the national level, especially in terms of corruption, or working on single aspects where a potential tax base is not being utilised, for instance currency transactions. Politically, we believe that the WPF platform has the capacity to contribute towards work of a complete overhaul of the global financial system, one which was last accomplished at the wake of the neo-liberal global market between 1979 and 1981 when Thatcher and Reagan were heads of state in countries with the two largest financial centres of the world, UK and USA. It is turning the neo-liberal tide that we are attempting to do.

We do this in the spirit of past visionaries such as Kwame Nkrumah, who started the wave of Pan-Africanism and led to a vast expansion of public finances in Ghana and across the African continent in countries that followed his spirit, freeing themselves from the slavery of colonisation. We can also look up to Alfred Marshall, who in the immediate aftermath of the Second World War convinced European socialists to adopt the welfare state as the ideal type of social control over market disturbances and inequalities. In the era of globalisation, there is once again a lot of scope for national policies over public finances, but the main problems of capital flight, debt, tax evasion, and secrecy spaces needed for corruption lie outside the territories of most nation states. For these tax havens, offshore markets, legal loopholes, flags of convenience, the only type of regulation that works needs to happen on the global level, most notably within the UN and in the WTO. New global institutions are proposed to be founded to carry out global taxation.

We need a global financial system that responds to national welfare needs, away from the system where offshore markets have taken the role of setting the pace for regressive tax policies, tax competition and has created footloose and secretive space for money transfers. In the spirit of Karl Polanyi, who looked at how the market and the social spheres are in constant battle one over the other, we should look at how the market has changed in the post-1979 era, and mobilise the social forces that contest the new neo-liberal market. We may live in a market society, but we as citizens working through social movements have the opportunity to change this.

What we propose is that we draw up an ‘open declaration’ at the Nairobi WSF among the participants of the World Public Finances platform. These times require new conclusions and new methodologies to come up with proposals for change, therefore the initiative of the World Public Finances will be a participatory one, rooted in common mobilisations and principles of participation. The methodology is crucial part of the platform, as there will be no closed committees or ask of signatures without the opportunity to comment the draft. An ‘open declaration’ is like a source code used in the Free/Libre/Open-Source Software (FLOSS) movement. We hope in Nairobi to launch a process of coding or hacking the new financial architecture, but that code will be released after the WSF closes as an initial beta 0.1 version. Whether governments want to run the code will be up to the pressure that we as social movements exert on them, the networks that we build with political movements and parties, and the theoretical and conceptual debates we win in the public, academic and political spheres.

History of the initiative

The WPF platform recognises itself as a thematic platform of social movements that emerged out of the open space provided by the WSF. The substantive content of the platform is derived from these meetings held within the WSF itself.

At the 2005 World Social Forum held in Porto Alegre, movements co-ordinated seminars under the platform of 'otro sistema financeiro'. There were no common meetings, but a loose affiliation to the platform with a mailing list. At the polycentric WSF of 2006 the first participatory meeting of the platform was held in Bamako, where various movements expressed campaigns, concepts, processes and activism that gives us a clear indication of what problems we currently face with public finances across the world. The seminar in Bamako established a methodology to discuss world public finances, in order to create a common concept. The later stage will be one of assembly of the concept once the elements have been laid out. At the end of the later stage, we hope that a declaration would arise agreed upon by the movements.

Actions in Bamako

(a report is available at http://www.nigd.org/docs/WPFBamakoMattiKohonen )

The World Public Finances platform held one seminar in Bamako. The speakers presented the history of the initiative, and actions and mobilisations happening around the world for the support of public finances. Then the participants around the table were asked to contribute their understanding of world public finances, and we came up with the following list:

a)Reparations from multinational corporations, in particular banks that financed the Apartheid regime in South Africa, for human rights violations committed during the Apartheid era;

b)Cancellation of debt for all developing countries;

c)Establishment of an independent debt arbitration panel to avert the possibility of a future debt crisis, and finish the current debt crisis much quicker;

d)Establishing global taxes, particularly on cross-border activities that are currently not taxed, such as kerosene used as airplane fuel, and financial markets of all types;

e)The draft treaty for the currency transaction tax lays out a global tax authority to collect and redistribute; this is proposed as a model for global taxation;

f)Enlarge the definition of money laundering to account for tax evasion as well; the Financial Action Task Force (FATF - GAFI) launched by the OECD, that works closely with the IMF currently has a very limited view of what accounts for money laundering;

g)Implement a new set of international accounting standards that would show where profits are made, where taxes are paid, and how multinational corporations are structured so that they can be taxed more effectively and regulated under the public scrutiny of both the government and civil society;

h)Tax evasion needs to be tackled as an important topic, both individual and corporate tax evasion;

i)Tax competition needs to link the debates over special treatment of multinational corporations in both developing countries, where they ask for tax holidays before deciding to invest, and in the industrialised countries, where there is a need to halt the race to the bottom of corporate tax rates;

j)Information exchange between tax authorities is required to catch cross-border tax evasion, especially within subsidiaries of multinational corporations and private banking schemes;

k)Progressive taxation needs to be discussed because public finances are being eroded by proposals for flat taxes and single rate taxes on income, for example, or, on the other hand, on taxes like the VAT on consumption, which is regressive, due to the statistical fact that the poor use a proportionally larger amount of their income on basic consumption that falls under the VAT;

l)Public information is required on the economy, in terms of national budgets, especially regarding the activities of companies. Libraries were proposed to take on this political role of keeping the information on the economy for public scrutiny;

m)Issues also need to be linked from the ground level up in order to better coordinate our campaigns, and gain information on the achievements, and struggles in other countries, cities and communities;

n)There needs to be public scrutiny over the use of public finances, including schemes that are set up for developing countries, such as the HIPC and other grants or lending schemes, that constitute public
finances in developing countries.

This list is not exhaustive of the topics that could be under world public finances, but they are the ones that have come out of the Bamako meeting by the participants themselves. Some of the most interesting things that can happen are common campaigns. For example, Makoma Lekalakala from Jubilee South Africa identified Barclays bank as the main perpetrator of financial crimes in the Apartheid era, and John Christensen from Tax Justice Network said that they are among the most aggressive banks pushing for the creation of new tax havens (for example in Ghana) and facilitating money laundering. A global boycott of Barclays Bank and its subsidiaries may emerge as a result of this cross fertilisation of different strands of world public finances.

We also saw a convergence in the thinking about global taxes, such as the kerosene and financial transactions taxes, in the sense that it should not principally be a development finance tool, but a tool to regulate global markets and cross-border activities outside the reach of any single nation state. This was mentioned by Jasques Nikonoff of Attac France, as well as Mikael Böök of NIGD and Attac Finland. We hope further debate about the role of global taxes within world public finances.

There could be more participants in the participatory seminars to be held in Nairobi as compared to the one held in Bamako. For instance NGOs working as watch dogs over public expenditure and the use of aid money were only represented by one Nigerian NGO. Trade unions were there in the element of Finnish youth movements and international solidarity campaigns. Trade unions should realise their central role in the debate over public finances even further. Finally, ecological tax initiatives were under represented besides the kerosene tax.

The only area that was completely absent were trade issues, and in this respect the World Public Finances platform has to ask the question whether the platform is separate from all trade issues. I find taxation an integral part of any trade and investment decision, and if the trade issues are not explicitly taken in, then a link should be made to tell the trade campaigners that they need to look at taxation, money laundering as part of the terms of trade. West European economies gain tens of billions of dollars from developing country money laundering that is circulated in Western economies, especially in the housing market. You can, for instance, buy a house or apartment with a suitcase full of cash in London with no questions asked of its origin.

Proposed actions for Nairobi

In the spirit of working towards an ‘open declaration’, we should aim to organise two working seminars at the Nairobi WSF. I find that we should in the first instance repeat what we did in Bamako in terms of the participatory session where ideas, issues and mobilisations for public finances were shared. The session is likely to be a larger one in Nairobi, as more participants are expected to attend the Nairobi WSF. There will therefore be more input to the concept of the WPF from various organisations as long as we actively invite all relevant organisations to bring their input to the seminar. That session should be used to extend and clarify the list that currently from a to n.

In addition to what we did in Bamako, there could be a second session where the points are collected together, and work is done in attempt to collate points made by participants of the first session and propose a declaration of world public finances to be called for. This intent of a two-stage process should be made clear to participants, and that they can opt out of the second stage if they so wish. The declaration can only be made if enough organisations come to the second session to draft a declaration. The declaration would then be put to the public for comments as it need not be final. It would still constitute a historical piece of work that is then set out for further debate. Such a statement would arise from within the open space of the forum, unlike the Bandung appeal for instance that emerged from outside the space of the forum though coinciding with the event.

We understand that this sort of a methodology hasn't been attempted before, but we think that the WSF needs to innovate new working methods. We do not see the assembly of social movements as adequate in articulating systematically on one hand the grievances or on the other hand the potential energy and knowledge for change that the movements gathered to the WSF represent. This sort of a methodology of ‘open declarations’ isn't set to replace the assembly of the social movements, but rather to complement the assembly which at least has its place in calls for non-violent action against the structures of the neo-liberal global economic system, belligerency of states and non-state organisations, and actions of transnational corporations. The assembly of social movements is a good forum to call for actions, like the February the 15th 2003 demonstrations, but it cannot come up with declarations, as it isn’t its role.

These two working seminars do not exclude the organisation of a larger scale plenary session where the key concepts of world public finances are discussed with a wider public who may for the first time hear the topics that are being discussed. Finally, we would also like to encourage different strands of the WPF platform to organise their internal preliminary workshops especially before the WSF in Nairobi, in addition to some working seminars organised inside the space of the forum. If internal work is done before the WSF itself, then the time of the WSF can be more fruitfully used for drawing up open declarations and networking with wider platforms such as the WPF.

To concentrate work among the participants, we should additionally commence an edited publication project to collect chapters on world public finances from various contributors and look how different themes are emerging in the understanding of public finances. This would make even further allow the meetings to focus on coming up with a coherent platform, and raise the profile of the platform.

Rationale

Transnational corporations largely exist due to the secrecy space where they have been allowed to operate by national governments. Take away their current opportunity to use hundreds of thousands of offshore trusts to hide debt, profits and assets, the secrecy of intercompany transactions where through mispricing transactions profits can be shifted to low tax jurisdictions, the powerful armies of lawyers and accountants who negotiate tax holidays and design tax evasion schemes, the outright corruption of officials that requires large sums of money only TNCs can put together and hide, many of the TNCs are will disappear. TNCs are tax efficient vehicles that utilise the gaps in the legal, tax and accounting systems that different jurisdictions offer. Many TNCs are not economically the most efficient units as they portray themselves. Additionally, many TNCs are really controlled by powerful governments or politicians, such military equipment, nuclear power and oil companies. They don’t aim to be creating employment and wealth, but execute the interests of powerful states to control foreign countries, economies and people.

The very existence of TNCs is such a well organised scam that it needs a strong theoretical backing. It is the neo-classical economic theory that gives a smoke screen to the operations of TNC with their theories that legitimise the dominance of all enterprises by their sheer existence. The post-rationalisations that economists do in their models are the wrong way around to understand the economy, one should instead start by studying economic action and economic life from the qualitative and ethnographic standpoint. Economic sociology as a discipline is leading the way in this, and some economists such as Raymond Baker in his recent book ‘Capitalism’s Achilles Heel’ interviewed financial officers of transnational companies in developing countries to estimate the amount of transfer mispricing in these economies. Companies generally do what they are told to do by whoever owns them. As most companies are asked to create shareholder value (often in the short term), they will look at ways it is best gained. It just happens to be so that hiring lots of accountants to cook your books is the best way to sustain profits these days. As a result many of the smaller companies that don’t have access to over paid lawyers and accountants in offshore markets lose out in competition. Schematically this is what is happening, as one cannot explain the rise of the TNCs in my view in any other way than as a well organised tax scam, helped with powerful lobbies to negotiate preferential treatment in every territory they operate in.

Regulation has to start from a real understanding of the economy, i.e. who is benefiting from the current global economic system. The market cannot only be characterised by the logic of firms and individuals, as the logic of the firms and individuals is always met by regulative bodies that define the boundaries, duties and space of manoeuvre of the firm and the shape of the money economy. Incoherent boundaries create incoherent TNCs, that by using such loopholes give us a sense that the economy is more global than it actually is in the sense of movements of goods, services, money and people. The figures on world trade are a hoax as most of it is intercompany transactions that on average are mispriced by 5% in developing countries to avoid paying taxes where the profits are made. Companies don’t actually do that much trade between different parts of the same parent company, these trades only happen in books written by accountants that are read by government statisticians who are told to believe these books. Statisticians need to start estimating the amount of false transactions reported by companies to get more accurate numbers on global trade flows.

The reductions in trade tariffs proposed by the Structural Adjustment Plans of the World Bank and the IMF have in many cases lead to a deterioration of public finances and skewing tax payment to the detriment of the poor. Equally, when a country enters the WTO, they agree to lower tariffs upon entry. Every WTO entering deal and economic adjustment plan should therefore be weighted with its impact on domestic resource mobilisation and equity of tax collection. Low-income developing countries depend from a fifth to half of their fiscal receipts on taxes levied on customs and excise. In Ghana looking at projected 2006 domestic tax receipts, 30% come from value-added tax (VAT), 17% from petroleum taxes, 30% come from direct taxes on companies and individuals, 20% from import and export trade taxes, excise taxes yielded 3%. If Ghana would agree to lower its import tariffs they could potentially lose 18% of their tax revenue. Export taxes on cocoa count for the remaining 2% came, but interestingly enough, there are no export duties on gold, which is the largest single export of the country outweighing cocoa exports by far in value. This demonstrates the power of the gold mining companies in negotiating tax breaks and preferential tax treatment. In middle-income countries like Argentina, there is a tendency in Structural Adjustment Plans to increase indirect taxes such as the VAT to fund gaps in the budget and to maintain a primary surplus to pay off national debt. Therefore the odious debt is mainly a burden on the poor in the respective countries, as they relatively spend higher amounts of their disposable income on consumer goods and transport that carries a VAT. The VAT should be seen as a tax on the poor who cannot represent their lobbying power at the state level, argued by the neo-liberal economists and politicians who believe in flat-taxes and minimal state tax revenue in any case. Shifting the focus from more elaborate income tax and employer contributions towards VAT is detrimental to tax justice. In Ghana the national health insurance levy (NHIL) created to fund the expansion of the health service doesn't come from employers contributions as is the European welfare model, but it comes from an increase by 2.5% in the VAT.

On top of trade issues, the coercive fiscal regime stifles prosperity in many developing countries due to the fragility of their domestic financial system that is overburdened with high public debt, inefficient tax collection, heavy bargaining by international investors for tax holidays, low levels of extractive industries royalties, and large foreign currency reserves. These reserves protect the economy against currency speculators that can ruin years of wealth accumulation in the majority of their populations overnight. Hyperinflation caused by a currency crisis can wipe out domestic bank savings such as happened in 1997 in Indonesia and other Asian economies and in 2001 in Argentina. There have been about thirty currency crisis in the part decade, and no solution is seriously put on the table apart from tightening the Basle rules for central bank and banking sector capital adequacy rules.

Most importantly however the WPF platform will turn the focus on domestic resource mobilisation and away from the debate between trade and aid. Aid will never lift the developing countries away from poverty, aid rather creates new dependencies as a result. Much of trade as I noted before is bogus transactions that happen only on paper in the books of TNCs. Furthermore, trade distortions induced by subsidies in Europe and USA mean that without strong domestic public finances in developing countries they cannot even lobby their own interests at the WTO. Strengthening public finances is therefore are the key to development, coupled together with global financial and trade regulation. This will not only benefit the poor, but solve the public finances crisis in the industrialised economies and reassert the distributive role of public finances. If public finances in the immediate post-war era in Europe were a vehicle for redistribution of wealth, they have largely lost that role now, where as in the developing countries, many movements and trade unions are looking at the vision of progressive taxation in solving pertinent social problems of inequality, poverty and power in modern capitalist economies.

Thanks to Mikael Böök and Francine Mestrum for comments on this paper, they have been integrated to this version of the concept paper.