Closing remarks by John Versantvoort, Head, ADB Office of Anticorruption and Integrity, at the International Tax Cooperation in Asia: Virtual Workshop, 4 March 2022
Distinguished guests, colleagues, ladies, and gentlemen:
My name is John Versantvoort, and I am the Head of the Office of Anticorruption and Integrity.
First, let me thank the Study Group on Asian Tax Administration and Research (or SGATAR), the National Tax Agency of Japan, the National Tax College of Japan, and the Global Forum on Transparency and Exchange of Information for Tax Purposes. It has been a pleasure to co-host this workshop.
More importantly, let me thank all of you for participating in the workshop. I am delighted to learn that over 160 participants from 23 jurisdictions, including 20 ADB developing member countries attended this event. Let me explain why your participation is so important to me.
Governments in the region are experiencing unprecedented pressure on their financial resources for various reasons. Three are directly related to taxation.
Firstly, tax yields across developing countries in the Asia Pacific region have not kept pace with the strong and steady growth of the last decades. The tax-to-GDP ratio of South-East Asia and South Asia even remains below the 15% benchmark that is widely regarded as the minimum level for sustainable growth. This compares to an OECD average tax-to-GDP ratio of almost 25%.
Secondly, for the past two years countries have been struggling to fight the adverse health, economic and social impacts of the pandemic. Public debt and government expenditures of developing countries across the region have been rising while tax revenue collection has stalled. Many countries will now also need to brace themselves for further economic disruption from the Ukraine crisis. As a result, today we are faced with a situation where many of our developing countries have fallen behind on the road towards achieving the Sustainable Development Goals.
Thirdly, many countries in the region are confronted with the scourge of tax evasion and other illicit financial flows. These corrupted money flows diminish domestic revenues, undermine the ability of government to provide basic services for its citizens, and erode the trust in public institutions that is so essential for achieving the Sustainable Development Goals.
It has been estimated that the Asia-Pacific region needs to spend $1.5 trillion (or 5 percent of GDP) annually to close the gap in implementation of the Sustainable Development Goals. A report released by the UN’s High-Level Panel on Financial Accountability, Transparency and Integrity (FACTI) in February 2021 found that developing countries instead lose trillions of dollars to illicit financial flows every year. As a matter of fact, the UN Economic and Social Commission for Asia and the Pacific estimates that this region accounts for some 40% of global illicit financial flows.
International tax cooperation, specifically tax transparency and exchange of information, have become essential tools to combat tax evasion. It has been shown that this type of cooperation between tax authorities leads to improved tax compliance and tax revenue collection. Effective implementation of the tax transparency standards should therefore be a key component of a country’s domestic resource mobilization strategy. Unfortunately, implementation of these standards in the Asia-Pacific region is lagging. Out of ADB’s 46 developing member countries, 19 are not yet members of the Global Forum, and 22 have not yet signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC).
This brings me back to why it so important that you are here today. By familiarizing yourselves with these standards and taking steps to combat tax evasion by implementing the standards, you help stem the illicit financial flows that constitute such an unconscionable drain on public resources.
Let me know turn to how ADB assists its developing member countries.
To support the Global Forum’s objectives, in December 2017, ADB launched a knowledge and support technical assistance project focused on enhancing the capacity of ADB developing member countries to participate and benefit from the international tax transparency standards.
Through this project, ADB has supported in-country programs and delivered knowledge-sharing seminars in collaboration with the Global Forum, regional organizations such as Pacific Islands Tax Administrators Association (PITAA) and SGATAR, and tax administrations such as Australia, New Zealand, and Japan. As of 31 January 2022, more than 6,000 tax officials from 46 developing members have benefited from these TA activities.
Through its in-country programs, ABD has assisted 11 DMCs implement the Exchange of Information on Request (or EOIR) standard and supported 10 DMCs with the implementation of the Automatic Exchange of Information (or AEOI) standard. This includes 6 DMCs that were not required to commit to this standard by a specific date but have done so or intend to do so voluntarily.
ADB also provides technical assistance to ADB developing member countries who are not yet members of the Global Forum to help them appreciate the benefits and implications of the international standards and develop country-specific action plans for their adoption. With ADB’s support, 2 developing countries joined the Global Forum in 2020.
To further promote domestic resource mobilization and international tax cooperation, ADB President Masatsugu Asakawa launched the Asia Pacific Tax Hub in May 2021. International tax cooperation is one of three strategic priorities that the Asia Pacific Tax Hub will focus on, along with the development of medium term revenue strategies and digitalization of tax administrations. The Tax Hub will provide an open and inclusive platform for strategic policy dialogue, knowledge sharing, and capacity building.
To realize the Tax Hub’s ambitious agenda, ADB recognizes the importance of collaboration with development partners, regional tax communities, and ADB members. We need to maximize regional and international resources of knowledge, expertise, and finance on domestic resource mobilization and international tax cooperation. ADB therefore also very much welcomed the launch of the Asia Initiative by the Global Forum last month.
Let me end by reiterating that ADB is committed to strengthening tax cooperation in the Asia-Pacific region.
ADB, through the Asia Pacific Tax Hub, will continue to coordinate closely with our development partners to organize capacity building trainings and workshops for our members, and to provide customized technical support. ADB will also support broader participation of its members in the Global Forum.
I invite you to visit the Asia Pacific Tax Hub website via the link available on the chat box or contact Renata and Kaelen if you would like more information on the Tax Hub or are interested in receiving technical assistance on DRM or ITC related matters.
Once again, I want to thank all the speakers who shared their valuable time, expertise, and experience. I would also like to thank all of you for helping make this event a success.
We look forward to continuing this important dialogue and working with you.