Post 2015: Global Action for an Inclusive and Sustainable Future

which are many in developed countries, including
the Eu (Government commission on capital Flight
from poor countries, 2009; cobham, 2012; oEcD,
2012d; Gravelle, 2010), facilitate and encourage
IFFs. In the light of these findings, proposals
have focused on reforms in developing countries
to discourage IFFs (e.g. strengthening of local tax
administrations and improving the investment
climate) and international reforms.
Since a major portion of illicit funds seems to
be related to tax avoidance and evasion by mncs
(Kar and Freitas, 2011), many proposals seek to
enhance international cooperation to address this
(leading Group, 2008; the task Force on Financial
Integrity & Economic Development, 2012; com,
2010; unDp, 2011). curbing tax avoidance and
evasion that is related to the extractive industries
has received particular support because countries
that are dependent on natural resources seem
to face a higher risk of illicit outflows (Kar
and Freitas, 2011). this risk is partly due to the
difficulty of taxing mncs in the natural-resource
sector (von Haldenwang, 2011). there seems
to be broad support for proposals to increase
transparency, for instance through the reform of
international accounting standards (com, 2011).
more specifically, country-by-country corporate
reporting of accounting information has been
proposed as a means to address transfer price
manipulation (tpm). 85 For instance, the European
commission, the World bank and the oEcD set up
a tripartite Initiative on transfer pricing that seeks
to increase the capacity of a number of countries
to deal with the problem. reform proposals also
focus on introducing more structured processes
into the international exchange of tax information,
particularly with secrecy jurisdictions (reed and
Fontana, 2008; oEcD, 2011a).
Yet despite the rhetoric and some tangible progress
in relation to reform, international cooperation
to curb illicit flows must confront substantial
political challenges. areas of progress include
the geographical expansion of the multilateral
convention on administrative assistance in tax
matters beyond Eu and oEcD countries and the
african agreement on mutual assistance on tax
matters. norway has led government efforts to
focus attention on the IFF issue and commit to
country-by-country corporate reporting of basic
accounting information. moreover, while it still
needs to be agreed with the member States, Eu
legislators have voted a draft law requiring large
extractive companies dealing with oil, gas and
minerals and loggers of primary forests to disclose
full information on their payments to national
governments, on a country-by-country and
project-by-project basis. the Eu has also supported
international initiatives to promote revenue
transparency such as the Extractive Industries
transparency Initiative and international
cooperation on tax evasion and avoidance such as
the International tax compact. 86 moreover, the
international development community (including
multilateral agencies, governments, nGos and
a number of private foundations) has made
substantial efforts to improve governance and
tackle corruption in developing countries, and with
aiming to change the incentives environment for
IFFs in developing countries. It remains difficult
to achieve coordinated international action on
curbing illicit flows and changing the incentives
environment in destination countries, although
there have been some advances. For instance, there
has been only limited movement on country-bycountry
reporting in non-extractive sectors, and
some tax havens are slow to meet treaty obligations
to share reports on suspicious activities. progress
85 tpm refers to the over- and under-invoicing of intra-firm transactions, which mncs use to exploit differences in national regulations and tax
rates as a key mechanism for the illicit transfer of funds.
86 EItI is a voluntary process aimed at strengthening governance in the extractive industries sector, while the International tax compact is an
informal international action and dialogue platform grouping bilateral and multilateral donors to strengthen cooperation with developing and
transition countries to stop tax evasion and avoidance.
poSt-2015: Global actIon For an IncluSIvE anD SuStaInablE FuturE
There is broad
agreement that
IFFs drain
development
resources, notably
by reducing
the scope
to mobilise
domestic
revenue.
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