Ecuador Fights for Global Rules to Clamp Down on Tax Evasion

Ecuador ramped up its fight against tax dodging Wednesday as the South American country proposed a plan on the sidelines of the U.N. General Assembly in New York aimed at tackling offshore tax havens with stiffer regulation.

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In the wake of the Panama Papers leaks that exposed just the tip of the proverbial iceberg of global tax evasion and its impact on the global south, the proposal, championed by Ecuadorean Foreign Minister Guillaume Long, calls for a specialized U.N.-led body to tighten the reins on fiscal issues by cracking down on multinational corporations and economic elites skirting their tax obligations through offshore schemes and other tax evasion tricks.

"We need economics that put human beings first," said Long during the discussion on tax justice in New York. “If money hidden in tax havens return to Ecuador, just imagine how much growth we may have in economic activities. It would increase investment levels and give us more resources to build more homes and hospitals.”

Long was joined at the event Wednesday, titled “Tax Havens and a Global Agenda for Tax Justice: A Fair Approach,” by influential economists such as Jeffrey Sachs and representatives from Oxfam, a leader in the global campaign against tax evasion and inequality.

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“When tax havens help wealthy individuals and big business to dodge taxes it’s the poorest in society who pay the price,” said Oxfam Executive Director Winnie Byanyima in a statement. “Shutting down tax havens is critical if governments are to end the inequality crisis and finance the sustainable development goals.”

Financial leaks and other research have shown widespread illicit financial activities siphon billions of dollars in evaded taxes away from public coffers and into the pockets of the world's super-rich. In developing countries, this carries an annual price tag of an estimated US$200 billion in lost tax dollars. A clampdown on offshore havens and tax dodging could lift 32 million people out of poverty in Latin America alone, equivalent to the total population of people in poverty in Ecuador, Bolivia, Colombia, El Salvador, and Peru. In Ecuador, US$3.4 billion was lost to tax havens between 2014 and 2015.

That’s why in countries like Ecuador, which has championed the fight against poverty under President Rafael Correa for nearly a decade, pursuing economic justice and wealth redistribution is a key motivation behind the fight to hold wealthy elites and corporations accountable to their fiscal responsibilities.

Tax justice advocates pushed for urgent reform to democratize the global tax system during U.N. negotiations on financing for development negotiations in Ethiopia’s capital Addis Ababa last year, but member countries ultimately struck down the proposals for more stringent tax regulation. Global justice organizations argue that reforms must shift the burden to ensure that world’s richest 1 percent pay higher taxes for the developmental benefit of all.

Ahead of the event, Long was optimistic that the U.N. may change its ways in favor of heightened tax rules and a dedicated regulatory body to tackle the multi-billion dollar problem as more countries have put the issue on their agendas.

“There is a growing consensus that tax havens need to be tackled,” he told the Guardian. “It’s been an ongoing battle, but I think the time is right.”