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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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Kishore Mahbubani: “A Russian defeat would not be in the interests of the Global South”

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An apartment building that was heavily damaged during escalating conflict in Ukraine. © UNICEF/Anton Skyba for The Globe and Mail

“Today Western diplomacy is clumsy. The Cambridge’s Bennett Institute for Public Policy survey argues that America’s tendency to divide the world into friends and enemies — the “forces of democracy against autocracy” — has become self-fulfilling. Regimes that see themselves as victims of American hostility, especially because of local human-rights shortcomings, collaborate defensively in mutual support, fueling opposition to Washington,” Max Hastings, a Bloomberg opinion columnist, experienced and hardened political scientist – a former editor in chief of the ‘Daily Telegraph’ and the ‘London Evening Standard’, writes at Bloomberg. He notes:

“Singaporean diplomat Kishore Mahbubani, a former president of the UN Security Council, asserts that most people on the planet want to inhabit a multipolar world, not one dominated by the US or Russia or China. This, he claims, is why many nations are not enforcing sanctions over Ukraine. “A Russian defeat,” says Mahbubani, “would not be in the interests of the Global South. Many countries in the South who still retain memories of the once-dominant West know the West will once again become arrogant and insufferable if it defeats Russia completely.”

All this is frustrating for us Westerners. We know that we are the “good guys”. Our leaders repeatedly declare that it is in the “vital interests of democracy and freedom-loving peoples everywhere” for the Russians to be driven back to where they came from. Yet moral conceit is a besetting vice of our culture.

Western nations might fare better in the conduct of foreign policy if we tried harder to understand why many don’t support our campaign for Ukrainian freedom. In our own times, a YouGov poll shows that while 65% of respondents in the European democracies see Russia as an adversary, 51% of Indians, for instance, view Putin’s nation as an ally (29% see it as a “necessary partner” and only 5% as an adversary).

Memories still rankle among Indians of how US sanctions against Iraq and Iran drove up energy costs in the sub-continent. India’s former ambassador to Russia said in an influential recent interview: “We have not accepted the Western framing of the [Ukraine] conflict”…

Following Lavrov’s recent visit to South Africa, its foreign minister Naledi Pandor recanted an earlier denunciation of Russian aggression. She applauded her country’s “growing economic bilateral relationship” with Moscow. Meanwhile, almost all the North African nations are enthusiastically buying Russian oil.

Some people characterize Russia’s current activism as its Great Return to Africa, of which the most conspicuous manifestation is the deployment of Wagner mercenaries to stem Islamic insurgencies in Francophone West Africa and the Arabic-speaking north. In Africa, the Moscow-controlled TV outlets Sputnik and Russia Today command big audiences.

China is responsible for one-third of all infrastructure projects in sub-Saharan Africa.

In Putin’s recent speech to the Russian Assembly, he denounced past Western foreign interventions in Yugoslavia, Iraq, Libya and Syria, saying: “they will never be able to wash off this blood.” A large foreign audience agrees with him.

Lavrov is obviously right when he says: “The unipolar world is irretrievably receding into the past. A multi-polar world is being born.”

It is not that many people wish to live in Russia or China. But neither do they wish their countries to fall under American hegemony.

Not to be forgotten, the US and Britain were for decades prominent supporters of South Africa’s white apartheid government, because of its perceived value as an anti-communist bastion in the Cold War. And efforts to export democracy by force — notably in Iraq — have backfired by resurrecting memories of colonialism.

In the new world order that Lavrov believes to be evolving, the autocracies and democracies pit themselves against each other as adversaries.

But many nations in between are determined to remain neutral, both from self-interest and skepticism about absolute virtue,” Max Hastings concludes.

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Greece: New report urges better protection for human trafficking victims

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In its second report on Greece, the Council of Europe’s Group of Experts on Action against Trafficking in Human Beings (GRETA) acknowledges positive steps taken by the Greek authorities to combat human trafficking, but also highlights a number of shortcomings.

The report examines progress made by Greece in the implementation of the Council of Europe Convention on Action against Trafficking in Human Beings since the publication of GRETA’s first report in October 2017. The adoption of a national action plan for preventing and combating human trafficking, and the setting up of the National Referral Mechanism for the identification of victims of trafficking, are among the important steps taken by the Greek authorities. The legislative framework has also been revised, as recommended by GRETA in its first report.

The report pays particular attention to combating human trafficking for the purpose of labour exploitation. In the wake of the Chowdury judgment of the European Court of Human Rights, the Greek authorities have taken a number of measures, including the regularisation of undocumented Bangladeshi workers. GRETA calls for further improvements, such as increasing the number of labour inspectors and training them to detect cases of human trafficking and exploitation.

Another focus of the report is preventing child trafficking. GRETA welcomes the setting up of the Special Secretariat for the Protection of Unaccompanied Minors, the establishment of safe zones for unaccompanied children, and the increase in the number of accommodation facilities. However, GRETA urges the Greek authorities to increase their outreach work to identify child victims of trafficking, and to provide them with long-term assistance.

The report stresses that the identification of victims of trafficking should not depend on the presumed victim’s complaint and co-operation in the investigation or criminal proceedings. The expertise of specialised NGOs, psychologists, health-care staff and labour inspectors should be duly considered during the identification procedure. Noting with concern reports of pushbacks and forced removals of migrants and asylum seekers at the land and sea border with Türkiye, GRETA calls on the Greek authorities to ensure that individualised risk assessment is conducted prior to any forced removals and that it assesses the risks of trafficking or re-trafficking on return.

The report also expresses concern over the failure of the authorities to apply protective measures to victims of trafficking, thus exposing them to re-traumatisation and re-victimisation. GRETA urges the Greek authorities to make full use in practice of the available measures to protect victims, including children. Police officers, prosecutors and judges should be provided with the necessary training in order to ensure the application of such measures in practice.

Furthermore, GRETA notes that no applications for state compensation have been submitted by victims of trafficking, and asks the Greek authorities to take steps to ensure that state compensation is effectively accessible to victims of trafficking.

The report also calls on the Greek authorities to ensure that the police units investigating trafficking offences are properly resourced and enabled to carry out proactive and prompt investigations, including financial investigations.

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Pompeo: The Biden administration allowed the Chinese and Russians to come together

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Former Secretary of State Mike Pompeo on Fox News weighs in on the Biden administration’s response to the meeting between Presidents Xi and Putin:

– To hear the White House place this down as if it’s unimportant is a strategic mistake. They often speak in riddles but this is no riddle.

– The Biden administration allowed the Chinese and Russians to come together and presents a risk to every American citizen.

– A couple things we should think of…1,000 nuclear weapons to add to the Chinese arsenal.

– Now two members of the U.N. Security council join against the United States of America. Bad for the United States as well.

– I think we may be in a situation again where this administration has drawn a ‘red line’ and the Chinese communist party has crossed it willy-nilly.

We spent a lot of time thinking our way through how to separate the Chinese communist party and Russia. They have now found a way to come together

– The economic engagement between the two is important and will impact the United States and jobs all around our country. And we should be absolutely on point in pushing back against what it is they’re trying to do.

– We aren’t victims but have to be.

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