How Tax Inspectors Without Borders are tackling lost tax revenues

Gail Hurley  - Policy Specialist on Development Finance, United Nations Development Programme, New York

One commitment made in Addis Ababa was to boost aid for fiscal administrations and to build skills for revenue collection at the country level.  The United Nations Development Programme (UNDP) and the OECD also joined forces to scale-up the ‘Tax Inspectors Without Borders’ (TIWB) initiative, a programme that aims to support developing countries to build their capacities to audit multinational enterprises and to – ultimately – claim their fair share in tax revenues.

Under TIWB, an initiative I am managing for UNDP, tax experts from around the world are deployed to work alongside officials in tax administrations in developing countries on real, but anonymised, audit cases.  The aim is to transfer tax audit skills and knowledge to local tax officials.  Assistance can include pre-audit risk assessment and case selection, investigatory techniques, audit cases involving transfer pricing issues, anti-avoidance rules, or sector-specific issues relating, for example, to natural resources, e-commerce, financial services or telecommunications.

Does this type of project work?  And are there challenges?  The answer is yes on both fronts.  Expert deployments in Albania, Ghana and Senegal have been successfully completed and results so far have identified over US$ 245 million of additional tax revenues.  Programmes are also underway in Jamaica, Lesotho, Liberia, Nigeria and Rwanda.  Ten other countries have requested assistance and there is high demand for this kind of technical assistance.

But there are also challenges.  It’s critical to ensure that experts do not substitute for local audit staff or carry out audit work where no local audit personnel are involved.  The programme must always be about sharing expertise by working side-by-side and building skills through practical, case-based cooperation.  It can also be a challenge to secure the ‘right expert at the right time’ and to ensure that high quality advice is delivered every single time; tax auditors are prized possessions with many tax administrations reluctant to allow staff time-off to work in another country.  Gradually however we are building a network of both retired and serving tax audit professionals – from both developed and developing countries alike – keen to work with us on this project and make it a success.  Developing countries such as Brazil, India, Kenya and South Africa also have incredible tax audit expertise and are coming on board to share knowledge and best practices with other countries.

Some may ask whether this kind of programme addresses the symptoms rather than the causes of widespread and blatant tax abuses.  And to a large extent they would be right.  We have been very clear that international efforts to crack down on tax avoidance and tax evasion must continue, and it is positive that this issue now features so prominently in the media and international policy discussions.  Just 10 years ago, the tax avoidance practices of large companies and the wealthy largely escaped public scrutiny and were not necessarily viewed as ‘bad’ or ‘immoral’.  Today the public mood has shifted.  Treasuries, desperate for cash in the wake of the 2008 financial crisis, have started to go after the tax ‘dodgers’.  The brilliant grilling by Margaret Hodge MP of Amazon, Google and Starbucks bosses on their tax affairs  – ‘We are not accusing you of being illegal, we are accusing you of being immoral’ – is one recent case in point and helped give the issue far greater prominence.  More can be done of course; former British Chancellor, George Osborne, was perceived to have let Google off the hook when he secured just £130 million from them in a recent tax deal.

As development practitioners, we recognise that actions are required on multiple fronts simultaneously and that projects like TIWB can build tax capacity and help countries to ‘level the playing field’ between them and large corporations.  Over the longer-term, efforts like these may also encourage a culture of tax compliance which is positive.

One year on from the UN’s Addis Ababa Financing for Development conference, the search for more resources to fund sustainable development is well underway.  Tax Inspectors Without Borders is helping to achieve change but there is still more to do.