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United Nations urged to set up monitoring mechanism for multi-national corporations

Published:Wednesday | July 15, 2015 | 12:00 AMJenni Campbell

Addis Ababa, Ethiopia:

The urgent need for a global code of conduct to instruct and monitor multi-national corporations seeking to set up business in foreign countries was put on the table yesterday during a meeting of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).

The need was further emphasised in a side event sponsored by the Organisation for Economic Cooperation and Development (OECD).

Both events saw top-level representatives from developing countries across the world engage in animated discussions about the troubling issue that some say is at the heart of inadequate revenue inflows.

In some cases, taxes from foreign investors make up more than 20 per cent of budgets.

The current loose arrangements for foreign investors in many cases put small and least-developed nations at risk.

It was repeatedly pointed out that some multi-national corporations use their size and promises of benefits to evade taxes and bend rules for their own advantage.

It was widely agreed that as governments try to collect taxes from multi-nationals, by the very nature of their business, corporations will often do their best to avoid them.

ECLAC reported that Africa loses some US$50 billion in illicit inflows born of companies fudging and evading tax returns.

The current disorder, says Jamaican finance minister, Dr Peter Phillips, is like  "a race to the bottom, where multi-nationals sometimes are bidding receiving countries down to nothing in order to invest."

The call from yesterday's talks was for the United Nations to move swiftly to set up a global code of conduct as the small nations have neither the human resources nor the administrative capabilities to do this on their own.

"We in the Caribbean support the initiative to have a global regime emerging to protect and limit the possibility of corporations, in the era of globalisation, playing one country off against another. There needs to be special account taken of the limited human resources and administrative capabilities of small states to supervise and manage their tax arrangements in the era of globalisation so that there needs to be a programme of technical assistance developed at the United Nations level," Phillips said.

Dr Attiya Waris, senior lecturer from the university of Nairobi, said the various deficiencies within the framework of developing societies demand special assistance with engaging with multi-national corporations.

"The lack of understanding, the lack of awareness and the lack of adequate tax collection capability create an incredible need for capacity building in developing countries," Waris said.

At the side event hosted by the OECD, Secretary-General Angel Gurria pointed out that developing countries need to invest in infrastrucure and human resources and tax avoidance by corporations makes this difficult.

"Developing countries depend on corporation revenue more than other countries," Gurria said.

He lauded the new initiative, Tax Inspectors Without Borders, an agency set up by the  OECD and the United Nations Development Programme to work with developing countries to make tax audits more effective.

The agency will facilitate international tax experts working alongside local officials of developing nations' tax administrators to help to strengthen capacities.