Remarks by John Versantvoort, Head, ADB Office of Anticorruption and Integrity, at the Partners' Corner: Challenges and Solutions to Promoting Tax Transparency Reforms, Global Forum Plenary Meeting 2022, 10 November 2022
Firstly, let me thank Spain and the Global Forum for inviting ADB to this plenary meeting and their heart-warming hospitality, and my fellow panelists for their insights.
As in other global challenges like the fight against climate change, the causes and effects of tax evasion and harmful tax planning do not stop at national borders. As a matter of fact, they have been allowed to flourish with impunity for too long as a result of national borders. I am therefore delighted to speak today on the importance of international partnership generally, and our partnership with the Global Forum specifically.
Countries in the Asia-Pacific region have been experiencing unanticipated increases in public debt and shrinking tax revenues during the years of the pandemic. Added to this are the external shocks that they must now contend with, such as the steep rise of energy prices and other inflationary pressures. All these have hit the poor and vulnerable populations in Asia and the Pacific region disproportionately hard, exacerbating income inequality along the way. Now more than ever, developing countries need substantial and predictable revenue streams – so that they can get back on a path to strong, sustainable and inclusive growth; address challenges like climate change; and prepare for future crises.
As evident from the report of the fledgling Asia Initiative, the region is making good progress on adoption of international tax transparency standards. At the same time, we see that the Asia-Pacific region is lagging in the adoption of international standards. Eighteen of our developing members – almost half – have not yet joined the Global Forum and committed to automatic exchange of information. This is due to three main challenges.
The biggest challenge is often a political one. Obtaining political buy-in is difficult because the benefits from the substantial reforms required to increase tax transparency are not always considered self-explanatory. With many competing priorities, reforms considered more pressing end up higher on the agenda.
Second, many of our developing members lack sufficient technical and human resources to adopt, implement and benefit from tax transparency reforms. At the opening plenary yesterday and the session earlier today, we heard success stories from Georgia, Samoa, Armenia and Thailand – all countries that ADB had the privilege of assisting in their journey towards adoption of international tax standards. But for each country with a success story, there are still as many countries struggling to keep up with the proliferation of international standards in the increasingly complex global financial architecture – such as those from the Financial Action Task Force, the Inclusive Framework on Base Erosion and Profit Shifting or – indeed – the standards from Global Forum.
Thirdly, the Asia-Pacific region is vast and diverse in all respects – culturally, economically, politically, developmentally. Moreover, a host of bilateral and multilateral efforts are underway to assist countries in achieving their sustainable development goals, including the goal to strengthen domestic resource mobilization. These efforts can lead to fragmentation, duplication or gaps in development assistance.
ADB feels that partnerships are key in addressing these challenges. In November 2021, President Masatsugu Asakawa launched the Asia Pacific Tax Hub. The Tax Hub serves as an open and inclusive platform for strategic policy dialogue, knowledge sharing, and development coordination on tax matters. One of the three strategic building blocks of the Asia-Pacific Tax Hub is promoting international tax cooperation. This includes supporting the efforts of the Pacific Initiative that we launched in October 2020, together with the Global Forum, Australia, New Zealand, World Bank and other development partners; and the Asia Initiative, launched by Indonesia and the Global Forum in November 2021. The Tax Hub and these other regional initiatives play three critical roles.
First, by promoting policy dialogue, they increase policymakers’ awareness of the tax transparency standards and facilitate the process of getting political buy-in from all relevant stakeholders.
Second, through the development of knowledge products and organization of training events, they help disseminate knowledge and build the governments’ capacity and technical skills to promote and implement tax transparency reforms.
Third, by strengthening multilateralism, these regional initiatives create the necessary momentum and coordination in each region to achieve meaningful results.
Under the Tax Hub, ADB remains firmly committed to supporting our developing members’ efforts to promote tax transparency reforms.
We look forward to continue enhancing our partnership under the Asia and the Pacific Initiatives in many years to come.