Roger Thayer Stone Center For Latin American Studies

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Tax To Finance The SDGs, But Not To Undermine Them

This blog post was jointly authored by Nora Lustig, Brahima Coulibaly, Ian Gary, Sanjeev Gupta, Warren Krafchik & Wilson Prichard

This week over 170 policymakers, government officials, and members of academia, civil society and international organizations will gather in Berlin to discuss the future of the Addis Tax Initiative (ATI). The overarching goal of the ATI is to improve domestic revenue mobilization (DRM) in order to finance the Sustainable Development Goals (SDGs). More than 55 countries, regional and international organisations have joined the ATI, which commits donors to collectively double their assistance to DRM, developing countries to step up their tax collection efforts, and all members to ensure “policy coherence for development.” However, noticeably absent from the ATI’s progress monitoring is the issue of equity. Indeed, analysis by Oxfam finds that only 7% of DRM support reported by ATI donors in 2017 contained clear goals related to equity or fairness in revenue systems.

The importance of equity
If the primary goal of DRM projects and reforms is simply to collect more revenue, this can have negative consequences for development efforts. For example, revenue targets (like collecting 15% of GDP in tax) can create perverse incentives to collect wherever it is most feasible- which can harm those without political power such as the poor or women the most. Tax and transfer systems in low and middle-income countries are, in general, far less effective than those in OECD countries at reducing poverty and inequality. In fact, research by the CEQ Institute shows that in 16 out of the 29 countries analyzed, taxes and direct transfers to the poor actually increased income poverty. Of course, part of that pattern reflects the inadequacy of social spending, but it equally reflects the need for a greater focus on the equity implications of tax reforms.

Priority areas for increasing equity in DRM
Given that in low and middle-income countries, taxes on consumption currently make up over 60% of revenues, there is a great deal of room for making tax systems more equitable at the national level. We suggest four priority areas for reform:

1. Strengthening taxation of income and wealth: OECD countries collect about 10% of GDP in personal income taxes, while non-OECD countries collect only slightly more than 2% of GDP on average. There is much developing countries can do to better tax professional incomes, increase the progressivity of income tax schedules, and tax inheritance and capital gains. When it comes to wealth, it remains largely undertaxed, despite a surge in ultra-high net worth individuals (especially in developing countries). An increasing amount of that wealth is being concentrated in real estate, yet property tax collection is similarly low. Non-OECD countries on average collect merely 0.5% of GDP from property taxes (compared to 2-3% in OECD countries). If low and middle-income countries as a group could reach 1.5%, this would be equivalent to an additional $28.9 billion in government coffers annually: more than total combined aid disbursed by Canada, France, Netherlands, Norway and Sweden in 2017.

2. Rationalizing the use of tax incentives: Tax incentives to attract investment can play a legitimate role in economic policy. Unfortunately, studies suggest that tax incentives in developing countries frequently continue to be characterized by excessive discretion, poor monitoring and little transparency. The result is reduced revenue and little new investment – in effect, a handout to corporations and wealthy interests. More transparent and accountable governance of tax incentives is needed.

3. Reducing the burden of consumption taxes and informal and nuisance taxes on the poor: While many assume that the poor do not pay much tax in low-income countries, they actually bear a heavy fiscal burden due to a wide array of consumption and informal taxes, small subnational taxes and levies, and formal and informal user fees to access essential services. In low and middle-income countries, consumption taxes make a significant proportion of the poor poorer than they were before taxes and transfers. Unless the poor can be sufficiently compensated with transfers, exemptions for basic foodstuffs and other essential goods may thus be necessary. Studies from Sierra Leone and the DRC suggest that total formal and informal burdens of direct taxes, levies and user fees make up as much as 10-20% of the incomes of poor households. Limiting these burdens should be given significantly greater priority.

4. Enhancing the participation of accountability stakeholders: Civil society organizations, academic institutions, women’s rights groups, and journalists have a critical role to play in monitoring and pressing for increased fairness in tax systems, voicing the concerns of the vulnerable, and advocating for the translation of tax revenues into public benefits. Nevertheless, in 2017, only 7% of DRM aid (reported to ATI) supported these actors.

Parallel action is also needed at the global level to make the ATI’s third commitment to “policy coherence” a reality:

1. Reforming the international tax system: While the BEPS Action Plan was a useful first step in trying to combat aggressive tax avoidance, it is not enough. Low-income countries continue to be disadvantaged by restrictive tax treaties and often still have little voice in global decisions that impact their taxing rights. All countries should be given the opportunity to raise their voice in the BEPS 2.0 negotiations, even if they are not members of the OECD Inclusive Framework – a situation that pertains to half of ATI partner countries. Meanwhile, existing international rules continue to be difficult to implement in lower-income countries, which are substantially more dependent on corporate tax revenues than OECD countries. A continued push for developing country taxing rights and priorities, including simplified approaches to enforcement, is needed.

2. Increasing cooperation on tackling offshore tax avoidance and evasion by wealthy individuals: It is estimated that Africans hold $500 billion in financial wealth alone offshore, which results in governments losing around $15 billion per year in unpaid taxes. Progress must be made to include developing countries effectively in automatic exchange of information processes and ensure effective collaboration in cases of tax evasion, while strengthening rules on beneficial ownership.

3. Continuing external support: In low-income countries, even the most substantial improvements in DRM will not generate enough revenue to finance adequate social protection and human development floors. External support such as aid will therefore remain critically important in pursuing equity at the global level.

Prioritizing equity in the ATI agenda
The theme of this week’s conference is “Towards a Roadmap for the ATI post-2020.” In drawing that roadmap, we are calling on ATI members to focus more explicitly on equity and inclusion. Along with the priorities outlined above, we propose that members of the ATI:

1. Adopt specific indicators on revenue composition in monitoring progress on Commitment 2, in order to prioritize not only collecting more revenue, but from more progressive sources, like direct taxes on income and property, rather than indirect taxes on consumption.

2. Regularly assess, under Commitment 3, tax spillovers and the distributional impact of tax policy reforms. ATI donor countries should conduct tax spillover analyses to ensure that their own corporate tax rules and practices, and tax treaties, are not undermining their DRM support. ATI partner countries should conduct distributional impact assessments in order to ensure the drive for more revenue does not come at the expense of achieving the SDGs, particularly on inequality and poverty.

3. Make a collective commitment to increase tax transparency. All government ATI members should commit to transparency on data about tax collection, tax policy decisions, administrative practices, and the amount of revenue raised from each type of source. In addition, all ATI members should commit to encouraging and facilitating the engagement of accountability stakeholders, and to support the effective representation of developing countries in international policy-making forums.

Rhiannon McCluskey (ICTD), Paolo de Renzio (IBP), Nathan Coplin (Oxfam) and Ludovico Feoli (CEQ) also contributed to this piece.

For more on this topic, read our brief: What Might an Agenda for Equitable Taxation Look Like?

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Lecture/Screening: Emma Christopher, "The Amistad Mutineers' Countrymen: a Rebellious Caribbean Diaspora"

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Emma Christopher is Associate Professor of History at the The University of New South Wales in Sydney, Australia. She is a documentary filmmaker and is the director, producer and researcher of They Are We, (New York: Icarus Film, 2014) which won five Best Documentary Awards, featured widely in the media, and was chosen as the United Nations’ Remembrance of Slavery film 2015. It has screened in more than 70 countries around the world. Secretary General Ban Ki-moon described the film and Emma’s work as, “an inspiration; a victory over slavery”. They Are We is the story of a remarkable reunion, 170 or so years after a family was driven apart by the ravages of the transatlantic slave trade. Her current project continues that research.

Professor Christopher’s latest book is called Freedom in White and Black and is the story of the only two men shipped to Australia as convicts for the crime of slave trading, and the enslaved men, women and children rescued from them. She previously published Slave Ship Sailors and their Captive Cargoes (Cambridge University Press, 2006) and A Merciless Place (New York (Oxford University Press, 2011), which won both the Kay Daniels and Ernest Scott prizes. She is the co-editor, with Marcus Rediker and Cassandra Pybus, of Many Middle Passages: Forced Migration and the Making of the Modern World (University of California Press, 2007). She is an anti-slavery campaigner and previously worked at Anti-Slavery Australia. Co-sponsored by the Amistad Research Center and the Tulane Department of History.

Sponsored by: African and African Diaspora Studies, Amistad Research Center, Cuban and Caribbean Studies Institute, History Department

Roots of Immigration: Educator Workshop

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ROOTS OF IMMIGRATION
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Explore the roots of immigration in this important and timely professional development workshop for teachers of grades 6-12. This workshop will provide participants with the resources and important tools to teach about immigration in the United States and discover strategies to increase inclusivity and enhance your teaching on the topic. This workshop will incorporate the first-hand experiences of immigration lawyers working with families, historians and education faculty. Participants will learn about the free resources available through Tulane University’s Stone Center for Latin American Studies and through S.S.NOLA, a resource of Tulane’s Teacher Preparation and Certification Program.

Cost is $5 if registered by August 26.

Workshop includes a light dinner, resources and a certificate of completion.

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Latin American Library Open House

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The annual Open House at the Latin American Library is an opportunity for the Tulane and greater New Orleans community to come together and celebrate the collections and services at the Latin American Library. For this event, LAL has prepared an exhibit of some recent acquisitions.

Along the side gallery wall to the right of the main entrance, photos by Colombian photo journalist Viki Ospina are featured. During her 44-year career working for news outlets and on documentary films, Ospina has captured candid shots of collective experiences, throughout Colombia. The images on display here offer a window into the 400 images recently acquired by the Latin American Library.

2019 CLASP Américas Award Ceremony & Workshop

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Friday, September 27, 2019
11am-12pm
Author reading with Francie Latour
Location: Hispanic Reading Room

1-1:45pm
Workshop with Duncan Tonatiuh ‘€” Maya Codices
Location: Library of Congress, LJ-119
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5-7:30pm
Américas Award Ceremony
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Latin American Writers Series: Luis Negron

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Ecuadorian writer and Tulane Visiting Scholar Gabriela Aleman interviews Puerto Rican writer Luis Negron about his life, interests, and influences. Their discussion will be followed by an open Q&A and an informal reception. Note: This event will be held in Spanish.

About the Latin American Writers Series

This series brings together Latin America’s most representative creative voices and the editorial entrepreneurs that publish them. By way of interviews conducted by renowned Ecuadorian writer Gabriela Alemán and presentations of various editorial missions, the guests will shed light on a literary world shaped by the contemporary issues of the continent. Moving forward, their conversations will comprise the centerpiece of a digital archive that introduces their ideas to a global audience.

Este serie reúne a los autores más representativos de la escritura continental y los editores que los publican. A través de entrevistas con la reconocida escritora ecuatoriana Gabriela Alemán y presentaciones de proyectos editoriales, los invitados explorarán los vínculos entre el mundo literario y la realidad continental. Sus conversaciones se convertirán después en el eje de un archivo digital que busca llevar estas ideas a un público global.

About the author

Luis Negron was born in Puerto Rico and is a writer, film critic, and bookseller. The English translation of his short-story collection Mundo Cruel, a work originally published in Spanish in 2010, won the 2014 Lambda Literary Award. Negron has also written a brief collection of chronicles, Los tres golpes (2016), and served as the editor of Los otros cuerpos: Antología de temática gay, lésbica, y queer desde Puerto Rico y su diáspora (2007). His film reviews have appeared in periodicals like Boston’s La semana (Boston) and Puerto Rico’s Claridad and El poeta.

Annual Celebración Latina

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The Stone Center started the annual family festival, Celebración Latina in 2004 to inaugurate the Pebbles Center. Since then, it has outgrown the original location at Laurence Square, outside the Pebbles Center to now be hosted by the Audubon Zoo. Fifteen years later, this festival now welcomes thousands of families to the zoo to explore the Jaguar Jungle and all the other creatures at the zoo. The festival is held at the Capital One Stage near the sea lions. Come join us for this year’s festival to celebrate Hispanic Heritage month and enjoy the fall weather.
It will offer a true taste of the Latin American culture with live music, children‘€™s activities, and authentic Latin cuisine prepared and sold by local restaurants.

Guests can visit with Community Partners to receive free wellness and social service information. Young people of all ages can create a special take-home souvenir at the Kids Tent. Celebración Latina is sponsored in part by the Stone Center for Latin American Studies. The event is free with Zoo admission, Audubon Nature Institute membership or a ticket which will be distributed by the Stone Center in late September.