How the tax fight is being won

Guest post from Alice Macdonald, Save the Children’s head of action/2015 campaign, @alicemac83.

As part of Save the Children’s History of Change series (see more here and here), Alasdair Roxburgh (previously Head of Campaigns at Christian Aid) talked us through the history of the tax movement.

It was an inspiring talk (you can listen to the whole thing here) about how campaigners around the world managed to turn tax – which let’s be honest isn’t the most exciting of subjects –  into a big political issue and achieved changes which will help to ensure that millions of people around the world benefit from the tax revenues which belong to them.

Though tax may not be sexy – it matters. It matters for the obvious reasons – it provides the services we all need whether we live in the UK or in Tanzania – hospitals, schools, roads. It can encourage good behaviour like saving money through ISAs and discourage bad habits through increasing the price of things like cigarettes. If we use it well tax can help reshape the world. And it also matters for less obvious reasons – by paying tax we sign up to be active citizens contributing to improving the world around us.

But to date the tax system has been skewed towards the interests of the richest in society. It’s notoriously hard to put an exact number of how much money is lost through tax dodging but estimates put it at hundreds of billions lost from some of the world’s poorest countries. There is no doubt that tax dodging costs lives. The money lost could be spent on vital services like healthcare. That’s why the tax justice movement was born.

It got off to a pretty technical start with the conversation pretty much confined to the policy wonks. It was only when the financial crisis hit in 2008 and stories about corporate giants hit the headlines that it really moved up the political and public agenda. That was a turning point for the movement and it began to strengthen and now counts hundreds of organisations around the world from big NGOs like Oxfam and ActionAid to grassroots organisations, faith networks, student movements and trade unions.

It hasn’t been an easy ride, especially in the early days of the campaign. Governments and companies repeatedly slammed the door in campaigners’ faces and organisations like Christian Aid were even labelled the “Tax Taliban” by opponents. But despite the hurdles, the tax movement has already achieved some major wins – getting tax on the agenda at the G7, a law on EU transparency and the Dodd Frank Act which both mean that extractive companies are obliged to publish how much tax they pay on a county by country basis. The campaign also transformed the narrative around tax, taking it from the technicalities to an issue of justice helping to rally people around the world to challenge a financial system in which let the richest get away with robbing the poorest.

What can we learn from the movement for future campaigns? There are 5 key lessons:

  1. Persistence pays off: it took 5-6 years to secure the first big campaign win. Campaigners need to be ready for the hard slog and not expect instant results.
  2. Change your tactics and targets: the campaign mixed it up from private lobbying, targeted actions, hard-hitting reports and stunts and identifying targets and supporters from MPs to corporate champions.
  3. Nothing is too complicated to campaign on: at the beginning the campaign didn’t talk about values and got too tied up in the technicalities. When the campaign turned tax into an issue of social justice it really took off. So don’t always focus on facts and stats but focus on values and the impact on people.
  4. Small targeted campaigning works: You don’t always need to make a big noise to achieve success. For example securing the European directive on country by country reporting for extractive industries was secured by a very specific targeted e-action.

Of course the fight isn’t over yet. In September, the world agreed an ambitious agenda to end poverty, inequality and fight climate change – the new global goals for Sustainable Development something which as Head of action/2015 I’ve been closely involved in campaigning for along with millions around the world.

That ambition won’t be delivered without money and tax will be a crucial part of finding that finance. Ultimately the whole global financial system needs to change so that the world’s richest governments and richest companies are no longer able to dictate the terms of engagement and countries are able to operate on a level playing field. We need to strengthen legislation, ensure it is complied with and make sure that citizens are able to hold their leaders to account.  The fight isn’t over yet but the strength of the movement gives us plenty of room for optimism.

Alice Macdonald is the Head of the action/2015 campaign at Save the Children. Action/2015 is a global coalition aimed at securing ambitious action on poverty, inequality and climate change which has mobilised millions of people this year.  She has worked in international development for the last decade holding a variety of roles across campaigns, policy and advocacy.

OECD DAC Chair Erik Solheim replies on ODA to least developed countries

A couple of days ago, I argued in a post here that while it was welcome that aid flows had reached a new all-time high in 2013, it was bad news that aid was continuing to fall to Least Developed Countries (LDCs). These are, after all, the economies that need aid most, given that – unlike middle income countries –  they remain highly dependent on aid (9.7% of their GDP compared to 0.3% of middle income countries’), and much less able to finance their development from other sources like foreign direct investment, remittances, or domestic resources like savings or tax revenue.

With the debate about post-2015 development objectives increasingly focused less on the goals themselves than on the resources that will enable their delivery – “means of implementation”, in UN-speak – I wrapped up the post by repeating a call I’d made in a report last year on a post-2015 Global Partnership for Development, echoing a recommendation made by the UN High-level Panel on the Post-2015 Agenda (itself based on a long-standing UN target):

With the post-2015 agenda now about to move into the home straight, this is the year when donors need to set out a clear timetable for making good on their long-standing promise to give at least 0.15% of their gross national income (GNI) to least developed countries – and ideally go beyond it to 0.20%. And the OECD DAC’s High Level Meeting this December is the right moment to do it.

On which note, I also sent a tweet to the Chair of the OECD DAC, Norway’s Erik Solheim, to put the idea to him: here’s what he came back with.

This is a fair point. If we unpack Solheim’s example of the United States, they only give 0.19% of GNI to aid in total, and 0.07% of GNI to LDCs (here’s the data). So for them to spend 0.15% of GNI on LDCs, as I’m proposing, would be a drastic shift, involving spending more than three quarters of their total aid budget on LDCs.

But Solheim also had another idea:

This is a pretty interesting idea. To stick with our example of the US, this approach would clearly be much less scary in that it would involve much less upheaval in aid allocations. But at the same time, given that the OECD as a whole spent 0.30% of its GNI on aid in 2013, the net result of what Solheim’s proposing would be that LDCs would receive… 0.15% of OECD GNI, the same proportion that I was calling for to start with.

And here’s the really key point: given that the OECD’s analysis of 2013 aid spending suggested that “aid levels could increase again in 2014 and stabilise thereafter”, the implication is that if donors were to commit to spending half their aid on LDCs, then the percentage of GNI could quickly rise to more than 0.15%.

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Surprise! Aid flows are at a new all time high

So here’s a big surprise. Until last year, global aid flows were declining in the wake of the financial crisis – a trend that was widely expected to continue. But here’s what emerged when the OECD’s 2013 aid statistics came out last month:

Development aid rose by 6.1% in real terms in 2013 to reach the highest level ever recorded, despite continued pressure on budgets in OECD countries since the global economic crisis. Donors provided a total of USD 134.8 billion in net official development assistance (ODA), marking a rebound after two years of falling volumes, as a number of governments stepped up their spending on foreign aid.

An annual survey of donor spending plans by the OECD Development Assistance Committee (DAC) indicated that aid levels could increase again in 2014 and stabilise thereafter.

Admittedly, there are two important qualifiers here. One is that while aid may be at an all-time high in absolute terms, that’s not true for the arguably more important measure of aid as a proportion of donor countries’ gross national income: in 2013 they gave 0.30% of GNI, as compared to 0.32% in 2010 (and way lower, of course, than the 0.7% target).

The other point, flagged up by OECD Secretary-General Angel Gurria in his comments on this year’s statistics, is that the trend of falling aid to the neediest countries, especially in Sub-Saharan Africa (which saw a 4% real terms decrease against 2012), is still happening and appears likely to continue in the future. The new aid stats also show that donor countries only gave 0.09% of their GNI to least developed countries in 2012 – as compared to 0.10% the year before.

Donor countries have got to sort this out. While middle income countries now have access to a huge range of sources of finance for development – foreign direct investment, remittances, commercial debt, portfolio equity, and a vast increase in domestic resources from tax revenue and savings – that doesn’t hold true for low income countries, who are still highly reliant on aid. With the post-2015 agenda now about to move into the home straight, this is the year when donors need to set out a clear timetable for making good on their long-standing promise to give at least 0.15% of their GNI to least developed countries – and ideally go beyond it to 0.20%. And the OECD DAC’s High Level Meeting this December is the right moment to do it.

How to defuse the twin climate finance / post-2015 finance for development timebombs (updated)

Whether it’s at the climate summit currently underway in Warsaw (from where I’m writing this post) or at two key meetings happening in NYC next month on the post-2015 agenda, financing is one of the issues furrowing most brows.

Right now, progress in both places is stalled. Promises of $100 billion a year by 2020 under the Green Climate Fund are starting to look like a bad joke – especially to the least developed countries (LDCs) who most urgently need help to adapt to climate impacts.

Aid flows, meanwhile, have actually been declining for the last two yeas, rather than rising towards the 0.7% target. And they’re falling fastest for LDCs: while bilateral aid as a whole fell by 4% last year, it fell by 12.8% for them.

Nor does it look likely that rich countries are about to put big new pledges of cash on the table any time soon, what with weak growth, high unemployment, and fiscal pressures – despite the crucial 2015 deadlines on both climate and development. Yet if they fail to do so, it could toxify the dynamics on both issues – and contribute to an outcome where the climate and development ‘tribes’ perceive themselves to be fighting over the same pot of cash rather than working together on a shared agenda.

Is there any way to defuse this ticking timebomb? Well, there might be. Continue reading