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.
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.”
UN: Paraguay violated indigenous rights
Paraguay’s failure to prevent the toxic contamination of indigenous people’s traditional lands by commercial farming violates their rights and their sense of “home”, the UN Human Rights Committee said in a landmark ruling on Wednesday.
The Committee, which is made up of 18 independent experts from across the world, monitors countries’ adherence to the International Covenant on Civil and Political Rights.
Lands represent ‘home’
The decision on Paraguay (in Spanish) marked the first time it has affirmed that for indigenous people, “home” should be understood in the context of their special relationship with their territories, including their livestock, crops and way of life.
“For indigenous peoples, their lands represent their home, culture and community. Serious environmental damages have severe impacts on indigenous people’s family life, tradition, identity and even lead to the disappearance of their community. It dramatically harms the existence of the culture of the group as a whole,” said Committee member Hélène Tigroudja.
The decision stems from a complaint filed more than a decade ago on behalf of some 201 Ava Guarani people of the Campo Agua’e indigenous community, located in Curuguaty district in eastern Paraguay.
The area where they live is surrounded by large commercial farms which produce genetically modified soybeans through fumigation, a process which involves the use of banned pesticides.
Traditional life affected
Fumigation occurred continuously for more than 10 years and affected the indigenous community’s whole way of life, including killing livestock, contaminating waterways and harming people’s health.
The damage also had severe intangible repercussions, according to the UN committee. The disappearance of natural resources needed for hunting, fishing and foraging resulted in the loss of traditional knowledge. For example, ceremonial baptisms no longer take place as necessary materials no longer exist.
“By halting such ceremonies, children are denied a rite crucial to strengthening their cultural identity,” the Committee said. “Most alarmingly, the indigenous community structure is being eroded and disintegrated as families are forced to leave their land.”
The indigenous community brought the case to the Human Rights Committee after a lengthy and unsatisfactory administrative and judicial process in Paraguay’s courts.
“More than 12 years after the victims filed their criminal complaint regarding the fumigation with toxic agrochemicals, to which they have continued to be exposed throughout this period, the investigations have not progressed in any meaningful way and the State party has not justified the delay,” the Committee said in its decision.
Members found Paraguay did not adequately monitor the fumigation and failed to prevent contamination, adding “this failure in its duty to provide protection made it possible for the large-scale, illegal fumigation to continue for many years, destroying all components of the indigenous people’s family life and home.”
The Committee recommended that Paraguay complete the criminal and administrative proceedings against all parties responsible and make full reparation to the victims.
The authorities are also urged to take all necessary measures, in close consultation with the indigenous community, to repair the environmental damage, and to work to prevent similar violations from occurring in the future.
Girlpower from Tajikistan to Costa Rica, helps narrow gender gap online
A marked global gender gap in terms of internet use continues to grow, but from Syria to Costa Rica, girls are increasingly pushing back to try and narrow the gap.
The gender gap for online users has widened from 11 per cent in 2013 to 17 per cent in 2019, and in the world’s least developed countries, it reaches 43 per cent.
This year, to mark International Day of the Girl Child, taking place on Monday, the UN is showing how the pandemic has accelerated the use of digital platforms, but also highlighting girls’ different realities when it comes to getting online.
Below, you can read stories from across the UN, featuring how five girls, from five different countries, are using technology to build a better future.
In his message for the day, the UN Secretary-General noted that these girls and all the others “are part of a digital generation.”
“It is our responsibility to join with them in all their diversity, amplify their power and solutions as digital change-makers, and address the obstacles they face in the digital space”, he said.
The path to girls’ digital equality is steep. In more than two thirds of all countries, girls make up only 15 per cent of graduates in science, technology, engineering and maths, known by the acronym, STEM.
In middle and higher-income countries, only 14 per cent of girls who were top performers in science or mathematics expected to work in science and engineering, compared to 26 per cent of top-performing boys.
“Girls have equal ability and immense potential in these fields, and when we empower them, everyone benefits,” Mr. Guterres said.
He recalled seeing this long before he began his political career, when he was a teacher in Lisbon, Portugal, and “witnessed the power of education to uplift individuals and communities.”
“That experience has guided my vision for gender equality in education ever since”, he explained. “Investments in closing the digital gender divide yield huge dividends for all.”
Tied to this, the UN has a new platform, called Generation Equality Action Coalition on Technology and Innovation, where governments, civil society, the private sector and young leaders, are coming together to support girls’ digital access, skills and creativity.
“The United Nations is committed to working with girls so that this generation, whoever they are and whatever their circumstances, can fulfil their potential”, Mr. Guterres assured.
Yemen’s future recovery hangs in balance
Ongoing conflict and violence across Yemen continue to impact heavily on the country’s people who desperately need the fighting to end, so that they can rebuild their lives, the UN’s senior humanitarian official in the country said on Monday.
“I’ve seen the destruction of schools, of factories, of roads and bridges; I’ve seen the destruction of power systems so what made Yemen work seven years ago in many cases no longer exists”, said David Gressly, UN Resident and Humanitarian Coordinator in Yemen.
Speaking in Geneva after a weekend that saw a car bomb at Aden airport reportedly leave 25 people dead and 110 injured, the veteran aid worker warned about arecent escalation of fighting in the oil-rich northern province of Marib.
Fighting cuts access
“This is now adding to additional displacement in that area, a place where we already have over a million people displaced”, he said. “And secondly, we have enclaves where fighting is continuing where we’re not able to provide support”.
Longstanding concerns over potential famine in the country prompted a UN-led appeal for $3.6 billion in funding in March that has raised nearly $2.1 billion to date.
An additional $500-$600 million was also pledged during the recent UN General Assembly, Mr. Gressly added, noting that although the international response has been higher than for other emergencies, “it’s been particularly focused – and we understand why – on the food security and nutrition side, for most immediate lifesaving response”.
This has left the situation inside Yemen “very fragile and if that’s not sustained, if we’re not getting the new pledges on time…in 2022, we will revert back to where we were in March”, Mr. Gressly insisted.
He explained that people needed more than emergency care: “Health, education, water, access and support to IDPs (internally displaced people) and livelihood support; those are almost all funded below 20 per cent, and so while the lifesaving is important, we can’t, we cannot afford to ignore the rest”.
Civil service need support
Critical to Yemen’s recovery is support for the country’s civil servants, many of whom have not been paid in many months, amid conflict between the internationally backed government of Abd Rabbo Mansour Hadi and Houthi opposition forces, who occupy much of the north of the country.
Mr. Gressly stressed the importance of finding ways to support these civil servants as they are key to the country’s recovery – and the UN’s aid programmes. Without them, “the whole humanitarian response” risks becoming more expensive”, he said.
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