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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Integral ecology and the 'interior' world

climate change, pope francis, religion, spirituality, sustainable development goals

This week I had the honour of giving a reflection at the Trócaire Lecture given by Cardinal Peter Turkson, the President of the Pontifical Council for Justice and Peace. The lecture was on “integral ecology” – the topic which Pope Francis’ much anticipated Encyclical will cover later this year. I have to confess that before this week I knew very little about integral ecology. After immersing myself in the subject in preparation for the lecture, I am fascinated by the idea and look forward to learning more. Three aspects of it appealed to me:

  • integral ecology demands that we put care for creation and a planetary perspective at the heart of all our decision-making. Environmental issues have to come out of their ‘special interest group’ box and become an integral part of all decisions. In the words of Pope Francis, Christians are not being asked to ‘go green’ but to ‘be Christian’.
  • integral ecology requires us to shift to a systems way of thinking. It is about integration and synthesis rather than individual, isolated perpsectives. I was really taken by this idea.
  • integral ecology means placing far greater value on ‘interiority’ – the awareness that is present within all living beings. This aspect of the concept really appeals to me – and is of huge value in a world which tends to devalue or disregard interiority.

The absence of integration and synthesis today is everywhere, especially in the political world. It results in incoherence in policies at every level, like that I mentioned in my previous blog. I see this especially when I go to the UN. It is remarkable to witness the sheer numbers and industriousness of NGOs, policy makers, officials… all fighting for very worthy goals. “I’m for disability” “I’m for indigenous peoples” “I’m for small island states” “I’m for people living in extreme poverty”… and so on. Yet everyone is so caught up in fighting their own corner. The end result is 17 new Sustainable Development Goals with 169 targets!!! This sounds fine until you realise that virtually no-one is thinking about the sum of the parts, the systemic questions which make the achievement of these goals possible. It is just too complicated, the power interests are too great. The result is ineffective action, not seeing the wood for the trees.

If we begin to focus on the ‘whole’, the ‘systems’, as an integral ecology proposes, it becomes evident that we need to rethink of our hierarchy of public values which currently puts economic growth above ecology – consumption above conservation, private gain above the universal destination of goods. As a placard at the Climate march last September put it “tell the next generation: it was the economy, stupid!” Despite so much research on human and planetary well-being, governments still define progress in terms of national and global economic growth, even when that growth is predicated on the destruction of the planet we call home. There is something seriously wrong in our accounting system! Rethinking global economic governance in a way that reduces excessive, wasteful consumption but still allows those living in poverty to achieve a decent standard of living is the major challenge today. Redistributive justice is also an ecological issue.
Developing an integral ecology is a collective exercise. This means focusing energy on breaking down the intellectual and political silos and finding ways to achieve new insights through shared knowledge. This demands a very different skill set to what is valued today. Yes, it still requires technical expertise. But above all, it requires an ability to dialogue, to share perspectives, to listen, to try to engage and understand the others perspective and appreciate what is good about it. It requires a certain humility – an ability to see that none of us has the whole truth, but many of us have partial truths.
What is most exciting about the ide of an integral ecology to me is the value it places on ‘interiority’: the spiritual and cultural renewal required to make the shift to a just and sustainable future. This transition, which prioritises care for creation and the poor, can only be achieved through a change of heart, a valuing of interiority. As Cardinal Turkson said at the lecture, ‘we will care for what we cherish and revere’. It means cultivating a sense of ‘wonder and awe’.
Western culture traditionally has placed little value on interiority, almost assuming that a rational, technical, materialist culture is adapted to address the problems of the 21st century. Religion is widely regarded as a private affair. Yet the attitudes, behaviours and values needed are far different. Rather than focusing on quick technical fixes, the key questions for society has to be ‘What is the interior world, the thought systems, the values that sustain or undermine an integral ecology?’ It strikes me that a communitarian spirituality, which is deeply attune to dialogue and mutual understanding, in this regard, becomes a critical public good. As Pope Francis points to, the horizon of hope needs to open up and be underpinned by a new interiority – a change of heart, a ‘revolution of tenderness’. In fact, the flourishing of a counter-culture which actually recognises the beauty and value of less is a profound paradox. It is a hard sell for those who are bought into the dominant culture, but perhaps not for those who have made the Gospel of love and justice the motivating force for their life!

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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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