NAM expresses concerns at illicit financial flows

Illicit financial flows connected with corruption, crime, and tax evasion has become an issue of increasing concern. According to Global Financial Integrity Initiative, illicit financial flows can be defined as the illegal movements of money or capital from one country to another.

The term illicit financial flow emerged in the 1990s and was initially associated with capital flight. It now generally refers to cross-border movement of capital associated with illegal activity or more explicitly, money that is illegally earned, transferred or used that crosses borders. As per the World Bank, illegal financial flows fall into three main areas: 1) Illegal acts such as corruption and tax evasion; 2) Funds resulting from illegal acts such as smuggling and trafficking; and 3) Funds used for illegal purpose such as financing of organized crime. Illicit financial flows pose a grave challenge to political as well as economic stability around the world and this problem is most severe in developing countries.

Non-Aligned Movement being the most effective voice of the Global South, has expressed concern over illicit financial flows and related thereto tax avoidance and evasion, corruption and money laundering, by using certain jurisdictions and practices, with negative impacts for the world economy and, in particular for developing countries. However, NAM is of the opinion that while there is increasing recognition of the importance of international cooperation on tax matters, there is still no single global inclusive forum for international tax cooperation at the intergovernmental level. The Movement further believes that there is also not enough focus on the development dimension of these issues.

In this context, NAM has reiterated the need to fully upgrade the United Nations Committee of Experts on International Cooperation in Tax Matters into an intergovernmental body and to provide adequate resources to the Committee to fulfil its mandate as well as increase the participation of experts from developing countries at its meetings.

Presently, Committee of Experts on International Cooperation in Tax Matters is a subsidiary body of the Economic and Social Council which provides a framework for dialogue with a view to enhancing and promoting international tax cooperation among national tax authorities and assesses how new and emerging issues could affect this cooperation and is also responsible for making recommendations on capacity-building and the provision of technical assistance to developing countries and countries with economies in transition. NAM has called for an increasing role and responsibilities of the Committee.

NAM Member States have also called for enhanced international cooperation to address illicit cross border financial flows. At an informal workshop on International Taxation held in May 2017, India’s Permanent Representative to the UN Ambassador Syed Akbaruddin remarked that “there is a need for enhanced international cooperation to address illicit cross-border flows, tax evasion, trade mis-invoicing, and money transfer without money movement colloquially known as ‘hawala’ transactions”. India has also called for the reform of UN Tax Committee. India has contributed $ 100,000 to UN Trust Fund for International Cooperation in Tax Matters (the UN Tax Fund) with the aim to help developing countries actively participate in the discussion of tax issues, becoming the first country to make the contribution. The UN Tax Trust Fund aims to support the work of the Committee of Experts on International Cooperation in Tax Matters.

NAM’s long-standing position on combating illegal financial flow that every country, rich or poor, big or small does have a right to an inclusive place at the table to decide on an issue as important as international cooperation on tax matters has also been reiterated by India at UN and other multilateral forums. NAM’s position is that restrictive surrogates are no substitutes for increasing representation. Hence, India has called for increasing the membership of the United Nations Committee of Experts on International Cooperation in Tax Matters and increase the representation of developing countries.

By Dr. Ankit Srivastava, Editor

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