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How to ensure the poor and vulnerable don’t shoulder the cost of the COVID-19 crisis

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Child farmers help to level fields in Balkh Province, Afghanistan., by World Bank/Ghullam Abbas Farzami

In the wake of the unprecedented COVID-19 crisis, tax systems should be reformed, and tax avoidance and evasion reduced, to ensure an economic recovery in which everyone pays their share, says the International Monetary Fund (IMF).

Taxes pay for many of the things that are fundamental to functioning societies across the world, such as schools, health care, and social services. Money raised through taxation is crucial to ensuring that these services are maintained during the COVID-19 crisis. But, when businesses shut down, and millions lose their jobs, as has happened during the current crisis, tax revenue plummets.

In the short-term, governments have put together stimulus packages, and a wide array of measures to help businesses and citizens get back on their feet. The IMF is tracking these efforts, which range from a $540 billion European Union package, which includes funding to help the hardest-hit states; to a ‘cash for work’ program in Cambodia; and, in Samoa, a six-month reduction in private utility bills.

Damage control

At the same time, the IMF has made emergency COVID-19 funding available, particularly to those countries with developing economies. The IMF has made some $250 billion available, in the form of financial assistance and debt service relief, to some 77 member countries.

For example, In April, the IMF approved Afghanistan’s request for an emergency assistance package of approximately $220 million, to help the country cope with the disruption to trade, which has led to heavy damage to the economy.

Bangladesh, which has been badly hit by plummeting demand for one of its main exports, clothing, received emergency assistance worth some $732 million in May. Also in May, to avoid what the IMF characterized as “immediate and severe economic disruption” resulting from the pandemic, Egypt received a package of more than $2.7 billion, to help alleviate some of the most pressing financing needs, including for spending on health, social protection, and supporting the most impacted sectors and vulnerable groups.

But, in the longer-term, these stop-gap measures will not be enough to fix many of the underlying problems of the global economy, which include growing inequality within countries, and the ability of multinational enterprises to legally minimise corporate taxes.

The progressive approach

Victoria Perry, Deputy Director of the IMF’s Fiscal Affairs Department, and an expert on taxation, told UN News that, in planning the post-pandemic recovery, countries should look at dealing with inequality by implementing more progressive tax systems: “this means that the average tax rate rises, along with income. The extent of the tax burden for richer people is for each country to decide, but it is certainly problematic when effective tax rates for better off people are lower than for poorer ones. It is also often the case that better off people, with access to tax advice and more complex financial affairs, can make better use of exceptions or loopholes in the tax system than those who rely only on wages. Closing such options can make for a more equitable system and — depending on the country — can be more important than structural reforms of tax rates.” 

Before the COVID-19 pandemic, the growing gap between rich and poor was already a cause for concern. Whilst inequality has fallen between countries, with some countries, such as China, making huge strides in raising overall income levels in recent decades, inequality within countries appears to be rising. For Ms. Perry and the IMF, personal income taxes play a leading role, when it comes to determining the progressivity of the tax system. 

Ms. Perry adds that another option for some developing countries, which have trouble raising and enforcing a personal income tax, is to look at taxing property: “whilst income is relatively easy to hide, luxury homes are very visible, and a tax-free threshold means that owners of cheaper homes can be exempt or relieved from paying it”.

Income inequality differs widely across countries, but studies show that creating a fairer society, is not only about redistributing wealth, but, as Ms. Perry explains, putting in place policies that help people to gain sustainable, decent work: “Globalization has affected all open economies, but countries with effective redistributive tax and benefit systems have been able to avoid sharply rising inequality. However, redistribution on its own is not enough. It has to go hand-in-hand with a host of other measures, such as retraining, and job support”. In thinking about equity, then, it is important to look at both sides of the equation—not only taxes, but how the money is spent to improve lives. 

Getting to the source of the issue

Some studies have calculated that, in richer countries, some 10 per cent of corporate tax revenue is lost to tax avoidance by multinationals. Developing countries are estimated to lose even more, in proportion to the national incomes.

“Another problem is that the international tax system may shift the tax base away from the ‘source’ country, says Ms. Perry. “So, if a mining company has its headquarters (residence) in a richer country, but operates mines in a less-developed economy (the source), the source country may not get the lion’s share of the tax revenue. When we talk about ‘fair and equitable distribution’, many observers are talking about ensuring that source countries get a better deal. The current international debate over taxing major digital tech companies, many of which are headquartered in the US, is similar, but the “digital” economy is even harder to address. Even though they’re doing business and making money all over the world, where the presence is virtual rather than physical, countries are not allowed to collect tax revenue on the income, under the current system”. 

“We are going through this huge economic crisis, and countries are having to make major adjustments to their economies. But inequality is also a kind of huge global problem in itself. This is also then an opportunity to change tax systems for the better, to make them fairer and more equitable, and to promote economic activity that is less polluting, less dominated by industry with a large carbon footprint, and more sustainable.”

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ILO and IOM sign agreement to strengthen collaboration on migration governance

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image source: ILO

The International Labour Organization (ILO) and the International Organization for Migration (IOM) have signed an Agreement to create a framework for cooperation and collaboration to enhance the benefits of migration for all.

The framework includes joint support for improved migration governance, capacity building and policy coherence at national, regional and global levels. Other areas of work may also be developed.

The Agreement was signed by Guy Ryder, ILO Director-General, and António Vitorino, the IOM Director-General, on Friday 23 October, at the ILO Headquarters in Geneva.

Speaking after the signing ceremony, Ryder said: “This Agreement seals an important alliance between our two organizations. Together, we will be stronger and more effective in both fulfilling our individual mandates and in collaborating on areas that are crucial for reshaping the world of work so that it is more inclusive, equitable and sustainable.”

“The COVID-19 pandemic is having a brutal impact on economies and societies. Vulnerable groups, particularly migrant workers and their families, are being disproportionately hit. There could be no better time to reinforce our partnership and combine our strengths, so that we can help countries and our constituents build back for a better future.”

Vitorino said: “The agreement that we are signing today will help us further solidify our collaboration at the time when joint solutions are so much needed, with a pandemic that is hitting the most vulnerable the hardest. As we move towards post-pandemic recovery, we fully embrace the call to build a better world together, tapping into the added value of each partner. With ILO, we have much to co-create and we look forward to future cooperation within the broader UN family, with our partner governments, private sector and civil society.”

The new ILO-IOM Agreement builds on the agencies’ comparative advantages, expertise, and respective constituencies. By encouraging joint initiatives, the Agreement aims to strengthen international migration governance and boost cooperation, capacity building and joint advocacy to promote migrants’ rights and decent work opportunities.

By encouraging social dialogue, it will allow workers’ and employers’ organizations – who sit equally with governments in the ILO’s tripartite membership structure – to contribute to policy discussions.

A workplan will be developed in the next six months to push forward the collaboration at global, regional and country levels and, more importantly, facilitate the implementation of the Agreement in the field, where both agencies are working directly with affected populations.

It will seek to enhance the agencies joint contribution to their member states, UN country teams, and societies to achieve the goals of the 2030 Sustainable Development Agenda .

The Agreement will also allow the ILO and IOM to strengthen support for their respective constituencies in implementing the Global Compact for Safe, Orderly, and Regular Migration (GCM), and contribute to other global and regional migration policy fora and debates.

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Rohingya conference pledges to ‘remain steadfast’ in finding solutions to crisis

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A young Rohingya girl holds her brother outside a youth club in Cox's Bazar, Bangladesh. © UNHCR/Vincent Tremeau

A joint UN-hosted donor conference to rally international support behind Myanmar’s displaced Rohingya minority, ended on Thursday with a promise to continue engaging with concerned countries towards finding a long-term solution to their plight.

“We will continue to work together to maintain international attention on the Rohingya crisis and to shift from short-term critical interventions, to a more sustained and stable support”, said the closing statement from co-hosts the UN refugee agency (UNHCR), the European Union (EU), United Kingdom and United States.

“We are grateful to all who have participated…including those who have announced or pledged funding for the international humanitarian response, those who are supporting members of the Rohingya communities in other ways – not least by hosting them – and most importantly, representatives of Rohingya communities themselves”, the statement continued.

The appeal comes more than three years after the orchestrated violence that erupted in Myanmar, across Rakhine state, which saw hundreds of thousands of mainly-Muslim Rohingya flee their homes, in search of safety across the border in Cox’s Bazar, Bangladesh.

There are currently 860,000 Rohingya refugees in and around Cox’s Bazar, and an estimated 600,000 still in Rakhine state, who face ongoing violence and discrimination; and Malaysia, India, Indonesia, and other countries in the region, are together hosting nearly 150,000 Rohingya refugees.

Voluntary, safe, dignified return

“The voluntary, safe, dignified, and sustainable return of Rohingya refugees and others internally displaced to their places of origin or of their own choosing in Myanmar, is the comprehensive solution that we seek along with Rohingya people themselves”, the joint communique stated.

“To that end, we underscore the Secretary General’s call for a global ceasefire and the cessation of fighting to enable safe and unimpeded humanitarian access to all communities in need of assistance.”

The co-chairs urged Myanmar’s Government to resolve the crisis, and “take steps to address the root causes of the violence and displacement”, creating the conditions that would allow for sustainable returns.

“This includes providing a pathway to citizenship and freedom of movement for Rohingya, guided by the Advisory Commission on Rakhine State’s recommendations and encouraged and supported by countries in the region. Myanmar must provide justice for the victims of human rights abuses and ensure that those responsible are held accountable”, the statement continued.

Expressing thanks and support to the Government and people of Bangladesh, the co-chairs stressed that increased support for Rohingya, must go hand-in-hand with increased support for host communities.

“While we continue efforts to secure long-term solutions, a focus on more sustainable response planning and financing in Bangladesh, could more effectively support the government’s management of the response and maximize limited resources to benefit both Bangladeshi and refugee communities.”

$600 million pledged

The co-chairs announced new pledges of around $600 million in humanitarian funding, which significantly expands the nearly $636 million in assistance already committed so far in 2020 under the Bangladesh Joint Response Plan and the Myanmar Humanitarian Response Plan.

The crisis is having a “devastating effect on vulnerable members of Rohingya communities, particularly women and children who require gender and age-sensitive interventions” said the co-chairs, leading to vulnerable refugees “desperately attempting to reach other countries in the region.

UN Children’s Fund (UNICEF) Executive-Director, Henrietta Fore, said that thanks to Bangladesh and generous donors worldwide, UNICEF and other UN agencies such as UNHCR, migration agency IOM, World Food Programme WFP, and many NGOs, continue to serve and support vulnerable Rohingya children.

In addition to providing vital services such as health, nutrition, and sanitation, education is “critical for young Rohingyas to build better futures. And to one day voluntarily return and reintegrate into Myanmar with the safety and dignity they deserve.”

Support for 170,000 Rohingya children

“We’re giving parents and caregivers the training and tools they need to support their children’s education. More than 170,000 Rohingya children are being supported this way”, she said.

“Join our call to ensure a place for Rohingya children in both countries’ education systems and programmes. They need education where they live”, she told the conference.

Ms. Fore called on donors not to forget the daily struggles of Rohingya children who remain inside Myanmar. “They’re still facing discrimination, horrifying violence and intensifying conflict every day. The fighting needs to stop so children can return to school and play, and so refugees can return home safely if they choose.”

Rohingyas themselves ‘backbone of the response’

UN Emergency Relief Coordinator, Mark Lowcock, said it was vital to recognize that the Rohingya refugees themselves have been “the backbone of the response.”

“They volunteer as health workers, they distribute masks and they help protect their communities from the pandemic. And I think we are all need to be very grateful to them and encourage them to take up this kind of responsibility.”

Highlighting again the Rohingya communities that remain in Myanmar, he said 130,000 of them remain displaced in central Rakhine State where they have been since 2012, and another 10,000 have been displaced since 2017 in northern Rakhine.

“Those people continue to have their basic rights denied, they suffer extreme hardships in Rakhine State and elsewhere”, added relief chief Lowcock.

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World Bank-UNICEF: 1 in 6 children lives in extreme poverty

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Children play outside a metal polishing workshop in a slum in Uttar Pradesh, India. © UNICEF/Niklas Halle'n

An estimated 1 in 6 children – or 356 million globally – lived in extreme poverty before the pandemic, and this is set to worsen significantly, according to a new World Bank Group-UNICEF analysis released today.

Global Estimate of Children in Monetary Poverty: An Update notes that Sub-Saharan Africa – with limited social safety nets – accounts for two-thirds of children living in households that struggle to survive on an average of $1.90 a day or less per person – the international measure for extreme poverty. South Asia accounts for nearly a fifth of these children.

The analysis shows that the number of children living in extreme poverty decreased moderately by 29 million between 2013 and 2017. However, UNICEF and the World Bank Group warn that any progress made in recent years is concerningly slow-paced, unequally distributed, and at risk due to the economic impact of the COVID-19 pandemic.

“1 in 6 children living in extreme poverty is 1 in 6 children struggling to survive,” said Sanjay Wijesekera, UNICEF Director of Programmes. “These numbers alone should shock anyone. And the scale and depth of what we know about the financial hardships brought on by the pandemic are only set to make matters far worse. Governments urgently need a children’s recovery plan to prevent countless more children and their families from reaching levels of poverty unseen for many, many years.”

Although children make up around a third of the global population, around half of the extreme poor are children. Children are more than twice as likely to be extremely poor as adults (17.5 percent of children vs. 7.9 percent of adults). The youngest children are the worst off – nearly 20 percent of all children below the age of 5 in the developing world live in extremely poor households.

“The fact that one in six children were living in extreme poverty and that 50% of the global extreme poor were children even prior to the COVID-19 pandemic is of grave concern to us all,” said Carolina Sánchez-Páramo, Global Director of Poverty and Equity for the World Bank. “Extreme poverty deprives hundreds of millions of children of the opportunity to reach their potential, in terms of physical and cognitive development, and threatens their ability to get good jobs in adulthood. In the wake of the massive economic disruption caused by the pandemic, it is more crucial than ever that governments support poor households with children now and rebuild their human capital during the recovery.” 

Extreme poverty among children has not fallen as much as it has for adults; a larger share of the global poor were children in 2017, compared with that in 2013. All regions of the world experienced varying levels of decline in extreme poverty among children, apart from Sub-Saharan Africa, which saw a 64 million increase in the absolute number of children struggling to survive on $1.90 a day, from 170 million in 2013 to 234 million in 2017.

Child poverty is more prevalent in fragile and conflict-affected countries, where more than 40 percent of children live in extremely poor households, compared to nearly 15 percent of children in other countries, the analysis says. The analysis also notes that more than 70 percent of children in extreme poverty live in a household where the head of the house works in agriculture.

The ongoing COVID-19 crisis will continue to disproportionately impact children, women and girls, threatening to reverse hard-won gains towards gender equality. Social protection measures have a crucial role to play to mitigate coping mechanisms by the poor and vulnerable in both the immediate COVID-19 response as well as the longer-term recovery.

World Bank and UNICEF data suggest that most countries have responded to the crisis by expanding social protection programs, particularly cash transfers. Cash transfers provide a platform for longer-term investments in human capital. Particularly when combined with other child development measures and coupled with high-quality social service provision, cash transfers have been shown to address both monetary and multidimensional poverty and improve children’s health, nutrition, cognitive and non-cognitive outcomes.

However, many of the responses are short-term and not adequate to respond to the size and expected long-term nature of the recovery. It is more important than ever for governments to scale up and adjust their social protection systems and programs to prepare for future shocks. This includes innovations for financial sustainability, strengthening legal and institutional frameworks, protecting human capital, expanding child and family benefits for the long term as well as investing in family-friendly policies, such as paid parental leave and quality child care for all.

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