Asia-Pacific Tax Forum proposed

BANGKOK: The United Nations’ Economic and Social Commission for Asia and the Pacific (ESCAP) has proposed to the regional countries creation of an ‘Asia-Pacific Tax Forum’ to monitor tax legislation and regulations across the region.

This is to help develop regional best practice and address issues such as avoidance of double taxation and tax competition to attract foreign investment.

The key recommendation of the ‘Economic and Social Survey of Asia and the Pacific 2014’ released here on Wednesday is the need for regional cooperation on tax issues, including harmonisation of taxes, elimination of tax competition and combating cross border tax crimes.

Recommending that the tax forum should work under the aegis of ESCAP, the survey further recommended broadening the tax base and rationalising rates; tackling tax evasion and tax fraud, making tax administration efficient and careful sequencing of tax reforms.

Taking into account Pakistan’s economic structure, ESCAP survey suggests that tax revenue could be raised by nearly 20 per cent.

Among others, policies to enhance domestic resource mobilisation include rationalising the tax system to create larger tax base, tackling tax evasion and tax fraud, and strengthening tax administration.

Launching the survey, at a news conference, ESCAP Executive Secretary Dr Shamshad Akhtar said that the Asian and the Pacific region accounts for 60pc of total illicit outflows of $5.9 trillion of developing countries.

Given the high public debt levels and declining international development assistance, the annual survey of ESCAP outlined a blue print for mobilising resources for required productive government spending, focused on strengthening tax revenues which fall far short of potential in most Asia-Pacific countries.

This tax gap is more than 5pc of GDP in some countries, rising as high as 12.5pc of GDP in others.

Closing existing gaps in 16 Asia-Pacific developing economies would increase total revenues in excess of $300 billion, boosting tax revenues by more than 70pc in some countries, estimates in the survey show.

According to the survey, the growing disparity in incomes and access to social opportunities is a dampener on economic dynamism in Asia-Pacific developing countries.

The estimates indicate that the poorest 20pc of people in 40 Asia-Pacific countries account for less than 10pc of national income.

The net wealth of about 49,000 ultra-wealthy individuals in the region — with at least $30 million in assets — is 17 times the combined GDP of Asia-Pacific least developed countries.

ESCAP estimates an annual infrastructure development funding requirement of $800 to $900bn in the region.

At the same time, more than 60pc of Asia-Pacific people lack social protection coverage.

An estimated 63.1pc of women and 56pc of men in the region faced employment vulnerabilities in 2013 and youth unemployment is three times the adult rate, it says.

The survey cautioned that Asia-Pacific developing economies are experiencing yet another year of subdued growth, calling for quick action on the removal of domestic structural constraints and the unlocking of fiscal space to help stimulate growth and support social development.

Developing countries in the region are forecast to grow at an average of 5.8pc in 2014, up from 5.6pc last year.

This marks the third successive year of growth below 6pc.

By comparison, growth averaged 9.5pc in the pre-crisis years of 2005-07 and over 7pc in 2010 and 2011. Asia-Pacific countries are coping with the fallout of monetary and trade policies in the developed world.

The withdrawal of quantitative easing by the United States has jolted regional financing markets.

The survey estimates further financial market volatility, expected from the continued normalisation of monetary policy in the US could cut annual growth by between 0.7 to 0.9pc in some countries.

Trade restrictive measures in advanced economies outside the region may also have deprived Asia-Pacific developing countries of $255bn in goods export opportunities between 2009 and 2013, translating into a cumulative decline of more than 1.6pc of regional economic output, analysis reveals.