Beyond these new mechanisms, other paths must be explored for raising additional resources: first, through mechanisms intended to prevent capital flight (illegal financial flows, tax avoidance), second with a moderate tax on currency exchange in particular, and international financial transactions more generally.
Raymond Baker, Director of Global Financial Integrity, first presented the central issue of the impact of illegal financial flows on development. It has been estimated that US$1 trillion in illegal funds leave developing countries to be diverted abroad. This makes the global financial system more opaque and hitting poorest people in developing countries the hardest, undermining poverty reduction and hindering healthy growth. Only a policy which takes the transparency of the global financial system into account, based on the reduction of illegal financial flows, the sharing of tax information, harmonization of legislation concerning this crime, could help improve the situation which continually penalizes developing countries.
Pascal Saint-Amans, Head of the International Cooperation and Tax Competition Division at the OECD, then explained the negative impact of tax avoidance on development. Fraud, laundering, and corruption thrive in an opaque financial system and contribute to the diversion of significant resources of developing countries.
David Hillman, Stamp Out Poverty Coordinator, welcomed progress made by innovative financing and stressed the potential a moderate tax on financial transactions would have. Financial transactions have been a stable base up until now. They have been little affected by the crisis, and could provide substantial additional resources for development. Several participants signalled their interest in this window of opportunity by first calling for joint discussion on the overall technical feasibility of this model.
Tore Godal, special adviser to the Prime Minister of Norway, and chair of the session, concluded by stressing the importance of the sweeping changes in the aid architecture which innovative financing has brought about and whose support will be essential to achieving the Millennium Development Goals (MDGs). He also stressed the growing role of new technologies in the emergence of a more solidarity-based globalization.
16 June 2009Printable version