Making the argument for Public Service Delivery and protecting and promoting human rights through tax justice … in a hostile policy environment: regressive taxation & PPPs African Trade Union Tax Justice Campaign: Providing alternatives for financing Effective Public Social Services Delivery and the implementation of Social Protection Floors Abuja, Nigeria January, 2014

Increasing regressivity of taxation Between , the average corporate tax rate across OECD dropped 7.4% from 33.6% to 26.2% Top personal income tax has been falling across OECD. While a 70% rate was not uncommon in the 1970s, it is now well below 50% with the exception of Sweden, Belgium, Denmark, Netherlands and Austria. Taxation of dividends has decreased from 50% to 41.7% between 2000 and 2010 During that very same period income inequality has risen sharply throughout the OECD

Top statutory personal income tax rates on wage income 1981, 1994 and 20091

The OECD “Taxing consumption and property appears to have significantly less adverse effects on GDP than taxing income” it is argued. On the other hand, corporate income taxes “have a particularly negative impact on GDP per capita” and on the “growth of the most dynamic and innovative firms”. The negative impact on inequality and on financing social security can be addressed “by other means” (social safety nets)

Unions resistance to privatisation Privatisation continues – Less intensive than in the 90ies, governments are more cautious – IMF/WB/OECD lessons from past failures (IPOs, cronyism, re- creation of private monopolies) – But still widespread: energy in Nigeria, water in Brazil, rail and education in Korea, – Revival in crisis-hit Southern Europe (Portugal, Greece, Spain) – “New frontiers”: prison, security forces, … Resistance too – re-municipalisation of water utilities and the trend is catching on in energy, including renewables. – Re-nationalisation of pension schemes in Eastern Europe & Argentina

From pure to ‘rampant’ privatisation Instead of full one-time privatisation, a gradual process – « Corporatisation » of public administration – State-owned enterprises (incl. Minority ownership) – Public-Private-Partnerships – Successful cases of micro-projects – New motto is: « leverage » private investment Public services appears nowhere in the global agenda, despite – Failures to meet MDGs & basic needs – country ownership, a core principle of aid effectiveness – « Public governance » recognised as a development priority

The case of ODA & « private sector for development » uncritical stance on “blending” of public and private moneys – public grants to private businesses & “risk sharing agreements” austerity-related public cuts – “the public purse is empty”, fiscal consolidation can only happen via public cuts – private sector recognised “as an equal” partner instrument for tied aid – public subsidies to OECD businesses Ideological bias – « Business does it better » (than civil servants), – best way to iliminate corruption in the public sector – The “inclusive business” model

Trends in ODA Sector distribution of ODA Distribution of ODA in the top 3 sectors (base 100 = 2006)

Tied aid “putting Dutch interest first, more so than in the past”; “it is in Sweden’s as well as Sida’s interest that Swedish businesses are suppliers in development assistance- financed calls for tender” “it is a strategic priority in Danish development cooperation to work for a stronger private sector” Italian stimulus package (Decreto Fare ) of June 2013 broadens the list of eligible countries for which Italian companies can benefit of ODA support Source: incl. ECDPM

PPPs Massive infrastructure needs in the next 30 years – PPPs is an ideal financial assets for investors – Public bond market is marginal in developing countries G20 process, an open call for PPPs – Align public procurement rules to match PPP arrangements – Support creation of “PPP units” & “PPP practitioner networks” – Change the « business model » of multilateral development banks The experience with PPPs, proven to be a flawed model – over-priced public services – many hidden costs – excessively complex contracts to handle – Not adapted to civil law countries (francophone Africa & Latin America)

Comparing PPPs with public sector procurement FactorComparingEvidence indicates Cost of capitalDebt interest + dividendsPPP more expensive Cost of constructionComparative costs and completionPPP more expensive/neutral Cost of operationComparative efficiencyNeutral Transaction costsProcurement + monitoring, management PPP more expensive UncertaintyIncomplete contracts, contingent liabilities, impact on service PPP riskier Research & literature review by PSI-RU

Thoughts Bring quality public service delivery back in the global policy agenda Evidence-based approach to PPPs – Expose the failures, – Require mandatory “public sector comparator” – Yet there still is a market for PPPs Revenue-side approach to fiscal consolidation through – Progressive tax reform – Alternative financing – Curb tax evasion and avoidance Governance and transparency of public sector – Show case independent unions and civil society as a force against corruption in the public sector – Expose corruption in the private sector

Tax Justice 2014 Union engagement in the tax justice campaigns – regional planning meetings (Africa, Asia Pacific and Latin America) to identify national priority issues – Materials –trade union tool kit, trade union guide to MNE tax avoidance and what unions can do to influence the OECD/ G20 BEPS process. Advocacy within the OECD/ G20 BEPS process – TUAC – BEPS monitoring group and civil society. Worker’s rights – case studies to highlight the social consequence of aggressive tax planning (another form of corporate short termism). SDG’s/ SPF – Research that outlines just tax options for financing the SDG’s and SPF’s and post 2015-development agenda. – FTT Coalition building – continue working with civil society at global, regional and national level.