Self Organised Activity - Tax Justice and Extractives

 In the Self-Organized Event on Tax Justice and Extractives we covered the following issues:

  1. Overview of the extractives sector in Southern regions and harmful practices of MNC’s in relation to illicit financial flows.

  2. The contributory role of states, laws and policy, including international treaties

     

  3. Emblematic cases from the different regions of MNCs involved in tax abusive practices.

  4. Revenue loss and fiscal implications (such as the imposition of regressive, gender-discriminatory taxes, social service budget cuts)

  5. Impacts on women’s economic empowerment, especially for those in mining-affected communities.

  6. Recommendations for advocacy and campaigning and ways forward (issues, positions, strategies.

 

 Context

Around the world we are seeing a shift in power from people to multinational corporations. These multinationals are extracting huge amounts of resources including financial resources from countries. The harmful impacts of these practices are many fold, not least the destruction of our environment. Moreover, the effects of extractive industries are experienced more dramatically by the countries of the global South.

 

Besides the plundering of our natural resources, multinational corporations are also extracting huge amounts of financial resources through illicit financial flows (IFFs). This is much needed resources that can contribute meaningfully to a just transition toward a more people-centred and ecologically sustainable development path.

 

IFFs do not only reduce the tax base by taking resources out of the reach of tax authorities, it also, in the context of neoliberalism, is one of the underlying causes behind the global corporate tax race to the bottom. Consequently, states have to raise resources in more regressive ways, such as increasing indirect taxes, that ultimates hits the poor hardest. In addition, IFFs perpetuate low-wage regimes, deepening income inequality and reducing consumer demand.

 

The deepening of inequality, growing unemployment (including the precariatisation of work) and poverty in many parts of the global South necessitates urgent, and radical action that is driven by the global South, so as to ensure that appropriate measures are emplaced.

 

 

Rationale

The extractives industry in many countries in the global South is one of the most privileged in terms of tax treatment. Resource-rich developing countries extend generous fiscal and non-fiscal incentives to multinational corporations, in the hope of drawing in the capital investment required to cash in on their natural wealth.

 

Among the most harmful tax practices in terms of revenue-erosion are the provision of generous tax incentives to the sector. They also embolden corruption and rent-seeking behavior, and at the same time promote tax avoidance and evasion schemes that boost corporate returns and individual gain. The sector is particularly prone to transfer mis-pricing and profit-shifting by multinational corporations, given the highly traded nature of fuels and mineral products in international markets and the domination and control by a handful of giant firms.

 

However, it is also commonly observed that many of the developing countries hosting such investments are sites of persistent poverty, fast-growing inequality and other forms of human rights violations. Environmental damage is often irreversible, exacerbating vulnerabilities to climate change. Typically, in mining areas, food, water, livelihood sources are threatened, homes and communities are lost. Meanwhile, billions of dollars in profits are pocketed by mining corporations, as well as colluding government officials who enable such investments. The terms of exchange are steeply unequal and unjust, facilitating and resulting in fiscal, environmental, and intergenerational extractivism and massive loss.

 

In the self organised session we:

 

  1. Highlighted the financial extractivism practices of mining multinational corporations in various global South countries and their impacts on public finance, workers wages and development by examining 1) the preferential treatment accorded by states to mining MNCs; 2) corporate tax abuse; 3) the direct and indirect fiscal impacts, with a specific focus on how women’s economic empowerment is adversely affected.

  2. Laid the platform to further unpack how to build a global South perspectives on how to combat IFFs including providing the space for sharing knowledge, insights and experiences which will ensure contextual relevance in the process of developing a South-South campaign on tax, wage and fiscal justice particularly in the extractives sector.