Info Service on WTO and Trade Issues (Jul15/11)
16 July 2015
Third World Network
Third International Conference on Financing for Development: Outcome
document adopted without intergovernmental tax body or new financial
Negotiations conclude in bad faith as developed countries reject
final hour proposals for improvements to the UN tax committee, let
alone a global tax body.
by Bhumika Muchhala and Ranja Sengupta (TWN)
16 July 2015, Addis Ababa
final outcome document for the 3rd international Conference on Financing
for Development was accepted on Wednesday 15 July evening by the Main
Committee of the conference. The outcome document was then adopted
by the Conference on the afternoon of Thursday 16 July.
The South African chair of the G77 group of developing countries,
alongside Ethiopia as host country of the conference, had on Wednesday
morning proposed some key improvements to the language on the UN Committee
on tax experts. However, this proposal was rejected from the
outset by developed countries, namely the United States, the European
Union, Japan and Canada. This proposal included re-designating
the committee as the Intergovernmental Committee of Experts on International
Cooperation in Tax Matters as well as increasing the provision of
The proposal also proposed that members of the committee will be directly
nominated by governments through the respective regional groups and
appointed by ECOSOC, to be drawn from the fields of tax policy and
tax administration, and will continue to act in their expert capacity.
The most important language in this proposal was the invitation to
ECOSOC to finalize, no later than at its 2016 Special Meeting on International
Cooperation in Tax Matters, further proposals for turning the Intergovernmental
Committee of Experts into a universal body with equitable participation
of developing countries.
To the utter disappointment of many developing countries, as well
as global civil society members and many in the UN agencies that supported
the objectives and aspirations of developing countries in seeking
for a democratization of global tax governance, the tax paragraph
that was finally adopted remains the exact same as the 7 July text
that was presented to Member States in the last New York plenary.
There is an addition of only two rather toothless sentences, which
are, "The Committee members shall be nominated by Governments
and acting in their expert capacity, who are to be drawn from the
fields of tax policy and tax administration and who are to be selected
to reflect an adequate equitable geographical distribution, representing
different tax systems. The members shall be appointed by the
Secretary-General, in consultation with member states."
Critique and discontentment
The outcome document clearly reveals that the rich countries have
absolutely no intention to democratize global economic governance
in the most transformative and critical arena of tax. Developing
countries most affected by illicit financial flows, tax evasion and
avoidance and transfer mispricing by large corporations should have
an equal say at an international negotiation table on global tax rules.
The missed opportunity to create a global tax body, as well as to
reaffirm an international debt workout mechanism, on which discussions
are ongoing in the UN, undermines reform in international systemic
issues. The very foundation of Financing for Development is
comprised of the international systemic issues of finance, capital
flows, debt, monetary system, trade. Not only is the UN the
only universal forum that addresses international systemic issues
in global financial architecture, but it is the only context that
connects these issues to the global partnership for development underpinned
on a development cooperation framework that recognizes the North-South
cooperation at the center and the global rules and designs that shape
national policy space for development.
The outcome also undermines the potential of the UN as the world's
most universal and inclusive body, thereby keeping power and control
exclusively in the hands of the G7 and the Bretton Woods Institutions
they control. The role of the UN in setting global rules and
processes on tax and debt is necessary precisely to institutionalize
fair governance for the next 15 years of the Sustainable Development
Goals starting in September this year.
The outcome document of Addis Ababa presents no new financial commitments
aside from a standard (and rather meaningless) reinstatement of existing
aid commitments. This includes the failure to both scale up
ODA and ensure new and additional ODA, particularly for climate finance.
Apart from the establishment of a Technology Facilitation Mechanism,
it is difficult to see how this outcome is supposed to contribute
to the Means of Implementation (MOI) for the achievement of the Sustainable
Development Goals (SDGs) over the next 15 years from this September
2015 when they are adopted to 2030.
The language pertaining to debt, trade and systemic issues is a glaring
retrogression from the language of the Monterrey and Doha agreements
of 2002 and 2008 respectvely. The private finance section also
misses a critical opportunity to highlight safeguards, standards and
accountability measures over public-private partnerships and private
finance schemes such as blended finance.
However, there are two beacons of light. The outcome document
establishes a Technology Facilitation Mechanism in the UN that
supports the achievement of the SDGs, as well as a follow-up forum
for FfD that will at least allow for some issues of systemic importance
to the international financial system and development financing to
be regularly discussed in an intergovernmental and open manner.
Global civil society reaction
Hundreds of civil society organizations have released a powerful,
collective statement that articulates a collective view that the ‘Addis
Ababa Action Agenda’ misses the opportunity to tackle structural injustices
in the current global economic system and ensure that development
finance is people-centered and protects the environment.
does not rise to world’s current multiple challenges, nor does it
contain the necessary leadership, ambition and practical actions.
It undermines agreements in the Monterrey Consensus and the Doha Declaration
and it is almost entirely devoid of actionable deliverables. Civil
society regrets that the negotiations have diminished the FfD mandate
to address international systemic issues in macroeconomic, financial,
trade, tax, and monetary policies, while also failing to scale up
existing resources and commit new financial ones. The outcomes are
also deeply inadequate to support the operational MOI for the Post-2015
Development Agenda, exposing an unbridged gap between the rhetoric
of the aspirations and reality of the actions.
While the Addis Ababa CSO FfD Forum Declaration addresses the full
scope of civil society concerns, the following critical concerns are
Gender Equality as Smart Economics
- Misplaced optimism towards private finance
- I nternational tax policy remains the domain of the powerful
- No concrete commitments to ensure tax justice and equity
- Tendency by traditional donors to elude responsibilities and
- No critical assessment of trade regimes, including investment
- Recent UN normative developments on debt ignored
- Limited progress on technology
- Weakening of UN mandate to address systemic issues
- No strong commitment in terms of transparency and accountability.
In bad faith
The position of developing countries from the very start of the FfD
negotiations has been to call for an upgrade of the UN Tax Committee
into an intergovernmental body. In fact, earlier versions of
the outcome document had contained the following language: “We decide
to upgrade the Committee to an intergovernmental committee, to complement
the work of other ongoing initiatives and further enhance the voice
and participation of developing countries in norm setting for international
In spite of severe pressure from the developed countries to endorse
the text of 7 July as it is, without any further negotiations in Addis
Ababa, the G77 and China group of 134 developing countries that negotiate
as one block in the UN General Assembly stuck to its bottom line,
that of an intergovernmental tax body, until the very last hour on
Wednesday (15 July).
The pressure campaign exerted by many developed countries is reflective
of negotiations that have occurred in bad faith. A problematic
lack of transparency marked the nature of discussions as behind-the-scenes
deliberations persisted throughout the FfD negotiations. Some
observers have commented that the atmosphere in Addis Ababa has been
akin to a ‘Green Room’ style of discussions, where private discussions
take place in small groups without any semblance of openness or transparency.
(The term “Green Room” was first used for meetings of selected members
in trade negotiations at the GATT and later the World Trade Organization.)
For developing countries the creation of an intergovernmental tax
body under the auspices of the UN where all countries have a voice
in setting global tax rules and changes to current policies embodies
both a step forward in systemic issues as well as a concrete mechanism
within the UN that can contribute to ensuring coherence of the international
financial system with the new era of sustainable development that
will unfold over the next 15 years.
The very countries most affected by illicit financial flows, tax evasion
and avoidance and transfer mispricing by large corporations should
have an equal participation in the agenda setting and decision-making
on global tax rules and policy reforms. Such a universal body,
developing countries have stated from the beginning of FfD negotiations,
can only exist within the UN. Civil society has supported this
from the beginning.
Leading up to Addis Ababa
The FfD negotiations over the last seven months or more have witnessed
tough battles between developed and developing countries, with various
complexities in positions and alliances.
Several iterations of the draft outcome document have seen differences
on key issues. While some of these issues were resolved, others
were accepted as diluted compromises by the G77 and China and a few
continued to see a gap until the Addis Conference.
After weeks of closed-door informal negotiations in New York leading
up to Addis Ababa, Member States did not agree to seal the document
before Addis Ababa. Transferring the text of 7 July from New York
to Addis Ababa afforded, at least at first, some negotiation space
on the key issue of upgrading the tax committee to an intergovernmental
a 25 June version of the outcome document had been rejected by the
G77 and China, as it included a proposed paragraph at the very end
of the document that read, “We affirm that the present Accord is not
intended to create rights and obligations under international law.”
This text was apparently introduced by the US.
The 7 July text reflected the deletion of this unfavourable text,
which essentially negated any concrete impact of the outcome at large,
and included a few other critical and positive changes to the language
on South-South cooperation and the relationship of the FfD conference
to the post-2015 development agenda, in that the FfD conference supports
the means of implementation (MOI) for the SDGs but does not comprise
all of the MOI.
Leading into Addis Ababa, developing countries, in a display of solidarity,
expressed their need to keep discussing in Addis Ababa a set of key
issues which are as of yet missing in the 7 July text, without which
an agreement on a final text cannot be reached. For developing
countries, this set of key issues include first and foremost a tax
body, second, an adequate follow-up mechanism for reviewing the implementation
of FfD outcomes starting from the 2002 Monterrey conference, the Rio
principle of common but differentiated responsibilities, as well as
the link between FfD and the post-2015 development agenda through
the role of MOI.
(For an analysis of the New York negotiations leading up to the Addis
Ababa conference please read ‘From New York to Addis Ababa: Financing
for Development on life-support’ by Bhumika Muchhala, 8 July, 2015:
Developing countries at the last hour
Governments in Addis Ababa have acknowledged the powerful media attention
on the intergovernmental tax body that has been generated by civil
society efforts. Indeed, ministers and diplomats had taken note
that global public opinion is on the side of the tax body, and that
at the 11th hour in Addis Ababa could have been a critical moment
to make a concerted decision for a global tax body. Civil society
pressured governments to seize such an opportunity, otherwise more
years will be lost to undemocratic governance in global tax cooperation.
While there were some rumours that Germany had a somewhat different
opinion on the tax body, the negotiations are carried out at the EU
level, and the EU group position is firm on yielding nothing more
on the global tax body.
According to some delegates, the Ethiopian government, keen to ensure
a success of the talks as a host country and as the home of the African
Union, had been persistently appealing to developing countries to
accept the 7 July draft outcome document. This was perhaps also
driven by the implicit challenge thrown by the developed countries
that if any one part of the document is opened up, the whole document
could be opened up to negotiations.
While the G77 and China group was willing to accept this challenge
of negotiating the entire document, it would have presented the prospect
of jeopardizing the hard-won agreed language in several areas of the
7 July text that developing countries are relatively comfortable with.
The danger of any further regression from an already regressed text
was a highly unfavourable prospect.
In a meeting of the G77 ministers on Tuesday 14 July afternoon, it
was agreed that the Ministers of Finance of Ethiopia and South Africa
would speak for the G77 in the Main Committee of the Conference (that
had full participation of all Member States). The plenary for
Wednesday 15 July was scheduled to take place at 1:00 p.m. but was
repeatedly postponed to 8:30 p.m. due to various bilateral and small
group meetings taking place behind-the-scenes between various countries.
Indeed, smaller developing countries are increasingly concerned that
many discussions are being carried out without their participation.
While most African countries were in favour of accepting the 7 July
draft outcome document, they had also indicated that the text is a
work in process and that the important issues absent in the text could
be addressed in the near future.
A few other countries defended the FfD process as a separate process,
independent and unique from the post-2015 development agenda.
They stressed that the Addis Ababa outcome should not be accepted
as the whole of the means of implementation for the post-2015 Sustainable
On common but differentiated responsibilities (CBDR), the G77 and
China eventually accepted a reaffirmation of the Rio Principles as
a whole instead of a specific reference to CBDR, as originally sought
by the whole of G77. The current text contains CBDR in reference to
climate change but not as an explicit underlying principle for the
On the issue of integration of the FfD with the post-2015 agenda with
an associated but separate follow-up and review mechanisms, the developing
countries’ original demand was for a separate (from that of the post
2015 agenda) review process for the FfD, to be under an independent
Commission that reports to ECOSOC.
The eventual result is a Forum under the ECOSOC that will review both
the FfD and the Means of Implementation and Global Partnership of
the post 2015 Development Agenda, and will report to the High Level
Political Forum, which is the review body for the post-2015 agenda.