TAX: A dirty three letter word?

current affairs, ethics, finance, foreign policy, international politics

For many ‘tax’ is a dirty three letter word. It is something to be endured under duress. We all know what it means to get that crested letter from the revenue. The Financing for Development Conference in Addis this week has revolved around tax. The loud call by the G77 for the establishment of a global tax body where all can have an equal say in global tax rules has been the pivotal issue in the negotiations, which are coming to a head as I write. Despite the many new initiatives launched during the FFD summit, this single issue has become critical – and emblematic of the deeper struggle going on within global politics, as I wrote here. Don’t be fooled by the gloss and spin!
The reason for this is quite straight forward. It comes down to a growing realisation that there are only a limited number of available sources to finance development in poor countries – and not all of them are equal.
Let’s take the main financial flows very briefly in turn. First there is overseas aid. Whilst aid remains an important source of finance, especially for the poorest countries, it has some serious down sides. The biggest weakness of aid is that it leaves countries vulnerable to the whim of international actors, who themselves are responding to their own political constituencies. This constituency, in recent years, by and large, in the OECD, has tended to question the value of aid as a legitimate public expenditure. Aid also comes with many strings, not all of which match the desires of national governments around their peoples’ futures. Irish Aid, thankfully, bucks the trend in being untied, grant-based and poverty focused. It sets a ‘gold standard’ I personally am proud of, but still, it is vulnerable to the same downsides.
The second major private flow is foreign direct investment. For sure, this is an important source of finance and it has been the focus of many discussions this week, but again it comes at a cost as a main source of finance. Large external investors are prepared to exert significant on national governments to restructure their economies in their favour as a condition of investment. Importantly, one such condition is pressure to reduce taxes.
The third flow is international trade. Again, it is an important source of foreign currency but history has shown that countries which are heavily dependent on this for development are vulnerable to currency fluctuations, making it a very risky source of core budget finance. A similar argument could be made for remittances from overseas. Again, nice to have – but hardly a sustainable way to finance a country!
Other flows such as raising public debt are becoming increasingly important. The structural adjustment programmes from the 80s onwards, and the recent Greek crisis, however, are testament to how unsustainable debt – whether public or private/public blends– can result in the most serious crises, including state collapse and conflict. That is why the proposals at the FFD conference around ‘blended finance’ and PPPs, which effectively increase public debt levels are so disturbing. In the absence of sovereign debt work out mechanisms or adequate safeguards, there could be many more Greece crises in the future. Bankrupt countries which are bailed out and then run by private finance institutions and technicians, who then literally ‘buy up’ countries are a very possible future.
The overwhelming impact of all of these external sources is to narrow the space that national governments have to implement policies on behalf of their people. With each of the above, countries are beholden to masters beyond their control. Inevitably, the pressure this brings to bear corrupts. It results in a crisis of accountability.
So the attention of many northern governments has turned to forms of domestic resource mobilisation, i.e. resources countries can raise ‘in house’. Unable to provide adequate ODA, they point to Southern government to raise their own resources. Tax is the essential, sine non qua – the unavoidable missing element in the discussion which is now taking centre stage.
Tax has a number of qualities other sources don’t have. It is an obligation, backed by law; it is predictable and long-term; by definition, it is a contribution to the financing of the public good which goes beyond the benefit received in return. As a source of revenue it is raised locally and largely spent locally, it is not bound by the same external conditionalities. Progressive tax has the added benefit of increasing social cohesion through institutionalised solidarity.
What the wealthy countries didn’t foresee on this week was the powerful counter argument to their call for greater domestic resource mobilisation. This was epitomised in a report by former South African PM Thabo Mbeki: African countries have lost the same about in illicit flows as they have received in aid in the last 50 years. Multinationals based in rich countries, who set the tax rules, are by and large responsible for this through tax avoidance schemes such as transfer mis-pricing. Annually, Africa looses $50 billion dollars to illicit flows. In an era of globalisation, if you want to raise domestic resources, you need to stop the bleeding from illicit flows. To do that, all countries need an equal say in setting the rules of global taxation.
Who, how and what is taxed says something deep about the communal values in a given society and how those are aligned to political power. Unfortunately in our world today, there is a profound mis-alignment between our societal values and the forces which determine taxation globally. The large corporations, and their powerful leaders who set the rules, are largely unaccountable. They are able to make the rules to their own advantage in the cracks between inadequate national and international laws. Reversing this through a global tax body which reflects better the shared values of justice and human rights is the key message from Addis, and now a top priority. Tax for me is no longer a dirty word – but a symbol of commitment to a just world.

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"One Company is Not Enough" – Changing the World, One Business at a Time

business, ethics, religion, spirituality

We are living in times not dissimilar to the Reganite and Thatcher years of the 1980s, when the market logic of economic growth was definitely in the ascendance. The resurgence of market dominance brings with it very serious, potentially destabilising down sides. Can markets, as currently structured, ever deliver solutions to the gross inequalities which are increasing exponentially? Can markets solve the global existential threat that is climate change? Can markets deliver on human rights in the fullest sense? As things stand, I have to say no. It just isn’t possible. Businesses lack the foundation of a social contract, which only democracy can deliver. As the recent Trócaire report “Where aid meets trade” shows, there are serious issues of accountability at stake.
Yet last week I attended a global conference which made me realise how much more the business community has to offer – and the powerful role businesses can play if underpinned by a deep philosophy and vision. Back in the 1990s I wrote my PhD on a little known global project called an “Economy of Communion” (EOC). The idea behind it was simple: engage business leaders in a spirit of communion (taken to mean a deep, enduring commitment to sharing with those in need rather eucharist bread and wine) and it will have transformative effects. The businesses involved committed to sharing their profits in three parts – as a direct contribution to addressing inequality, but also as a sign of their commitment to a new kind of economy.
When I did my PhD on the EOC it was early days. The project had just been launched in Brazil by Chiara Lubich in 1991. It had experienced an initial burst of enthusiasm, but was beginning to struggle in its attempt to delineate the respective roles of the faith-based inspiration, business acumen, and the practicalities of operationalizing a form of truly global sharing before Web2.0 existed! Certainly there were many inspiring individuals involved, but the potential for widespread impact was less clear to me. In the first book I wrote on the subject in 2004, I didn’t hold back my critique, pointing to many serious questions that needed to be answered if the project was to fly. In my second book in 2011, launched in UCD,  I was a bit more optimistic, but I still questioned the capacity of the EOC to transcend its Focolare roots.
Fast forward to 2015. I received an unexpected invitation to speak at a conference organised by the EOC and the Catholic University of East Africa in Nairobi. On an impulse, I accepted the invitation. It was the most unexpected, extraordinary experience. I found myself in a hall of 400 business people and young entrepreneurs who subscribe to the EOC philosophy. The people present represented many thousands more who were watching online or running the businesses. Most of them were Africans, many were from Burundi and Congo. One after the other they shared their stories of how they try to “live communion” in their businesses, in their local communities, and in global initiatives. They outlined projects of all sizes designed to bring the spirit of integrity and communion into the most diverse environments. They called on others to support them and they did not hold back. Their stories all demonstrated the same thing: business can play an extremely positive role today. It can be an agent of transformative change – a paradigm shift.
Having stepped back from the EOC for a number of years, and focused on political advocacy, I felt like I was witnessing the blossoming of the most extraordinary movement for good in the world. Here were business people from all over 40 countries coming together at their own expense to freely share their advice, their technologies, their ideas, and their capital with others who badly needed it – not for their own personal gain or out of paternalism, but in a genuine spirit of fraternity. The focus had shifted from singular, isolated EOC business people, who had a commitment to redistributing profits, to building a global network of communities who were connected in a common bond of building a more just, sustainable economy. Someone said it was about ‘loving’ the company of the other as your own, in a shared effort to support others in need and build a new economic culture. As one person put it “one company is not enough.” And the social impact of the idea is already significant.
Whilst I was at the conference I had an intuition, which hopefully is a sign of things to come. We live today in an era defined by resource scarcity: there are not enough resources to go around. The resources we have are ununequally distributed. It’s the basic conundrum at the centre of the climate change debate and post-2015. But what if those resources were shared – in a spirit of communion? What if “yours and mine become ours”? What if this can take place not only on the level of individuals or small communities – but also in businesses which define success in terms of communion? Business like this can become an invaluable instrument for good. Suddenly resources are multiplied, because the bonds of fraternity put in motion a tsunami of generosity which knows no bounds. Scarce resources paradoxically become abundant when they are shared in common. “Ubuntu” (the traditional African word for the feeling of community) is has far greater value than the claim to individual property.

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"Credibility Costs" – Coherence and Ireland's New Foreign Policy

agriculture, climate change, current affairs, foreign policy

Last week in Dublin, leading academics, policy makers and NGOs gathered at Iveagh House at an event hosted by the Royal Irish Academy to examine how Ireland’s new foreign policy ‘Global Island’ can be translated into practice.
There is a lot good about the new policy. On first glance, many NGOs will be very happy. The themes of inequality, poverty and climate change figure prominently. The values expressed in the first half of the policy are ones which any human rights advocate would welcome, particularly against an international context where human rights are increasingly under attack. Ireland remains committed to core values of fairness, justice, security and sustainability. It commits to standing up for human rights, civil society space and promoting greater gender equality. The country’s enduring commitment to multilateralism, particularly to the UN is re-stated, as is its’ intention to stand for the UN Security Council for 2021-22. Reference is made to the Government’s commitment to the UN target of giving 0.7% of GNI in overseas aid, but unfortunately no timeframe for achieving this forty year old target is included.
On closer reading, however, the striking thing about this new policy is the disconnect between the sections on ‘our values’ and ‘our prosperity’. The sections might well have been written by different people. Whilst the re-statement of values is essential – as it states how we want to be seen in the world – there is a chasm with the main thrust of the document, which relates to economic growth, investment, trade and exports. There is an assumption that these areas somehow stand outside the values framework elaborated previously. The entire focus of the second part of the policy is focused on how invigorated economic diplomacy, including through marketing our national day, can generate prosperity for Ireland.
Within this entire section, there is a complete absence of any reference to values and to the need for policy coherence if we are to address that fact that much of our prosperity is still built on the backs of the poor – and the planet. The section, for example, talks about more integrated and skilled economic diplomacy – but has no mention of human rights and the importance of not compromising principles outlined in the ‘our values’ section in the quest for greater trade and investment.
Three flagship policy areas come into sharp relief in that respect: how Ireland’s corporation tax regime squares with our fairness values; how our expansionist agriculturalist policies around beef and dairy square with our sustainability values; how our trade missions square with our long-standing commitment to engage on human rights issues. Given the increasing influence of transnational finance over international governance structures, the chapter on the removal of barriers to trade, and the absence of values to govern this is extremely concerning. The reference to the Transatlantic Trade and Investment Partnership in the policy is very worrying indeed. It is pitched as simply a positive thing, with no reference to serious concerns from civil society, in particular regarding the inclusion of an ISDS mechanism, and implications for human rights and climate change mitigation.
The conclusion one has to draw is that there is perhaps an implicit acceptance of the view expressed by Minister Richard Bruton in his Irish Times article (23rd January 2014) in which he stated that ‘trade missions are not the place to raise human rights’ and that we do human rights in certain multilateral fora such as the UN Human Rights Council. Bilateral trade missions, even with unsavoury regimes, are not the place to argue about human rights. Irish jobs trump every other concern and value.
Values underpinning policy are critical – and the values at the core of this policy are the right ones. However, the litmus test of values, as was said at the President’s ethics initiative, is how they are integrated across policy and applied in the tough choices between policies. Credibility and coherence costs – but there can also be many co-benefits. There need to be clear accountability mechanisms to assess that process of translation. The commitments made on policy coherence for development laid out in the ‘One World, One Future’ development policy in 2013, which would increase transparency and accountability on such issues, have still not been acted on. The OECD highlighted this gap in its review of Irish Aid last year. There are two glimmers of hope in in terms of coherence commitments in the policy. The first is a cross-departmental committee on human rights. This committee has already met once – how the agenda of the committee is shaped and acted on remains to be seen. The second is a consultation around a National Action Plan on Business and Human Rights. Hopefully these initiatives will deliver.

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What's all the fuss about?

climate change, current affairs, international politics

Since I put up my first post a couple of weeks ago a lot of people have been in touch to encourage me to keep up the blog. Thanks and keep spreading the word! One of the questions I’ve been asked is ‘what’s all the fuss about 2015?’ You wouldn’t know how important this year is from the mainstream media. In this post I’ll try and explain why 2015 matters, and why it is important to get involved. Bear with me if you can.
The story starts back in 2000…. A year some of us oldies remember more for ‘tonight we’re gonna party like its 1999’…  hair brain projects like the Dome in London and the ‘Millennium bug’ (not a six legged creature but a fear our world would collapse due to an IT glitch). Anyway, 2000 was also the year that world leaders signed a landmark document called the Millennium Declaration at the UN. It was a time of great promises to end world poverty – the Millennium Development Goals. The deadline for reaching these goals is 2015… THIS YEAR!
Fast forward to today: attention (of some important folk anyway) is now focused on what will come after the MDGs. (There has been remarkably little discussion on how much progress we made on the current goals – but that’s another day’s work.) A global industry has developed around the very imaginatively named ‘post-2015 agenda’ i.e. what comes next. The UN conducted the largest public survey in history to ask people about their priorities. Trócaire too has made its contribution in a five country study about what poor communities would like to see out of the negotiations. All of this will be finalised in September when Heads of State (and Pope Francis!) will head to the UN in New York for a major unveiling…. of the Sustainable Development Goals.
The other very significant process happening this year is the final stage in the UN Climate negotiations (UNFCCC) to agree a new treaty to tackle global warming. All countries need to sign a binding global treaty on curbing emissions by December this year in Paris. The science is quite stark: global emissions need to get to near zero within 35 years if the runaway climate change is to be prevented. The process has been fraught with delays and problems, but it is a golden moment to start to move in a sustainable direction. During the week I had a great chance to share a panel with the French Ambassador for a public debate on this issue, and France’s role in it, in the Alliance Francais. You can read my talk here.
So why does all this matter?
For the first time in history, the set of UN goals to be agreed in September will be universal. In other words, they won’t be applied only to poor countries but to rich countries too. As well as the usual targets on reducing hunger, extreme poverty etc, they will also contain key targets on reducing consumption, making production more sustainable, addressing inequality in our own countries. This is central to achieving the climate goals too. This is great news, potentially ground breaking – but the trouble is nobody knows or seems to care! If there is not greater buy in from people, parliaments, companies etc, these goals will fall from the sky in September and into a great void… and like many goals before them, will remain nice aspirations. Pressure to implement them needs to come from the bottom up.
The climate talks are perhaps even more critical to understand and care about. Given how much we all rely on burning fossil fuels, governments will have to make very tough choices if they are serious about reducing emissions (including here in Ireland with our climate bill). Unless they feel they have the backing of the public, unless this is a real issue, they may be tempted just to kick it down the road or settle for something mediocre. After all, an uninformed, disengaged public won’t give them much stick if they opt for business as usual in the short term over carbon emissions goals. That’s real politics!
Currently in Ireland, far too few people know enough to care. In fact, the Irish citizens who care most don’t even have a vote – school children! I believe if people really knew the facts, they would care. Trócaire has produced great resources to help people understand why this matters and what you can do. All our Lenten 2015 resources focus on climate justice. The Drop in the Ocean documentary my very clever colleagues produced on almost ZERO budget says it all…
At the end of the day, our children will judge us on this, as I said in this interview  for Catholic Ireland during the week. In this important year, we have a golden moment to influence their future, and the future of children all over the world. That’s a big part of the reason I’m out on the road as much as I possibly can, spreading the word on climate justice in 2015.

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And so the 2015 blog begins…

climate change, current affairs, international politics

My blog has been a long time coming. Given the year that is in it (probably the most important year in global politics since I started thinking about such things in the early 1990s), I’ve decided there is no time like the present to get blogging. As a complete novice, I am not sure how it all works. Who on earth is going to read my random thoughts? Is this like Twitter but with more words? Or is it facebook with more meaty content? So this is a total leap in the dark – or rather into the blogosphere.
So what am I going to blog about? I guess I am going to share my thoughts on where the BIG DEBATES are going in relation to global issues – reporting on any big events I attend, and reflecting on what it all means for you and me… and especially our children. I have my two boys (aged 5 and 3) at the forefront of my mind when I write this. It is their generation that will feel the real effects of the leadership – or the lack of it – shown in 2015. It is about their freedom. If we take the bold steps and address climate change and sustainability, then they will have as much freedom to do all the wonderful things I have had the chance to do… if we don’t act, they will lack many of the freedoms we take for granted. And lets not forget – they will still be blessed in the grand scheme of things. Many millions of children will have far less than them in a climate changed world.
If you would like to know a bit of background to me and what is at stake this year, this article in the Village a couple of months back gives a good overview. This article on the climate summit in New York which I wrote last year also gives a flavour of where things are heading in this big year.
Why ‘charityandjustice’? For me, engaging in these issues is essentially about LOVE – our love for our world, our love for our children, love for those with less, and those with more…. and they are about JUSTICE – speaking up for the voiceless in these debates about the world we want to build. I have decided to call my blog – ‘charityandjustice’. From a Church point of view, I think we need a new understanding of charity and justice – but more on that topic in another blog. Let’s see where this goes.
I work for www.trocaire.org, but all things blogged about are my own views.

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