The 13th Asia Europe Finance Ministers’ Meeting convenes anew on 26 April in Bulgaria to discuss, among others, the all too real possibility of another global financial crisis. This time, it is feared, developing countries will experience greater difficulties than before, with their increasing integration in the global economy and greater vulnerability to economic crisis and downturns.
But there are more fundamental factors. The crisis will find peoples in Asia caught in ever-deepening poverty, deprivation and inequality, and facing intensifying climate events. As a tiny handful of elites and multinational corporations continue to amass immense wealth, around 1.2 billion people remain without the most basic necessities for a decent life. From food, water and electricity to shelter, health and education, significant gaps persist and widen as they remain largely unmet.
Developing countries’ increased risk to external shocks also comes from the huge loss of domestic financial resources in proportion to their GDP. More dependable than debt or aid, taxation ought to provide a predictable, sustained source of revenues for public, affordable, adequate provision of basic social services, which help strengthen peoples’ capacities to survive. Yet billions of dollars are relinquished and/or spirited away through various means, and with the impunity that can only come from the power to influence the highest levels of decision-making, circumvent the law or emplace loophole-ridden regulations, and evade public inquiry and accountability.
The UN Conference on Trade and Development estimated tax abusive behavior by multinational companies costs developing countries $100 billion a year in lost corporate income tax. IMF research pegged estimates even higher, at $213 billion/year lost to tax avoidance. Studies further indicate that what developing countries receive in foreign aid, they lose three to ten-fold in tax evasion. These are more than enough to bridge UNESCO’s calculation of $39 billion/year total domestic financing gap to ensure universal pre-primary to secondary education in low and lower-middle income countries and the $32 billion needed for basic health care to save the lives of 6 million children worldwide each year. Read More