COP26: Experts call for review of global tax system to achieve net-zero by 2050

As the global climate conference (COP 26) draws to a close in Glasgow, the Independent Commission for the Reform of International Corporate Taxation (ICRICT) has released a statement that securing a worldwide commitment to net-zero greenhouse gas emissions by 2050 will not be possible without putting the entire tax system to work to support the climate transition.

In a statement sent to PREMIUM TIMES, on Thursday, the commission said there is a need for an ambitious and comprehensive tax action plan to be designed to curb carbon emissions, but the burden should not be borne by average citizens whilst multinationals and the richest in the society do not pay their fair share.

According to the statement, the richest 10 per cent of the global population emits nearly 48 per cent of global emissions, with the top 1 per cent producing 17 per cent of the total, whereas the poorest half of the global population emits 12 per cent of global emissions. The global map of carbon pollution merges perfectly with the map of economic inequality, both within and between countries.

Léonce Ndikumana, a professor at the University of Massachusetts, Amherst, said that with only 4 per cent of global emissions coming from Africa, the continent has contributed very little to global warming but is already suffering the most from its consequences.

“Beyond Africa, developing countries are the first victims of the climate change consequences. Rich countries must honour their climate debt, financing developing countries to adapt to climate disasters and to make the transition to less-polluting energy sources”.

Experts said even though the decision to tax multinationals is a step in the right direction but the global minimum corporate tax of 15 per cent is very insufficient especially as the world needs to pay attention to redistributing the revenue among rich and less rich countries.

Thomas Piketty, Professor at the Paris School of Economics and a member of ICRICT, said “at least a part of the revenues of the most prosperous economic actors on the planet – the multinationals and the billionaires must be shared with the countries of the South, not as aid, but on a rights basis. This is the only way to face the climate challenge”.

The commission declared that financing decarbonization in rich countries and helping developing countries to do the same requires funding commitments.

“The global tax deal signed in early October by 136 countries could have made an important contribution towards this goal. But by opting for a minimum global corporate tax rate of only 15% and by making rich countries the main beneficiaries of the additional tax resources that will be generated, the world has deprived itself of a valuable source of funding for the ecological transition.”

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The reform could have delivered more than $250 billion in increased fiscal revenues worldwide with a 21 per cent global minimum tax rate – and these revenues could jump to $500 billion with a 25 per cent rate but will deliver only $150 billion with a 15 per cent tax rate, with the lion’s share of this additional revenue expected to be received by a small group of rich countries in the Global North.

12 years and the $100 billion a year is still a farce

The commission questions the sincerity of developed economies on the broken promise to mobilise funds for developing countries to adapt to the effect of climate change.

Twelve years ago, at a United Nations climate summit in Copenhagen, rich nations promised to channel $100 billion a year to less wealthy nations by 2020, to help them adapt to climate change and mitigate further rises in temperature. That promise was broken.

“Even in 2020, this target was out of reach. A more ambitious global tax deal could have provided resources to meet and even double this pledge. But it would have required the richest countries in the world to side not with multinationals and tax havens but with citizens both in the Global North and in the Global South.”

For José Antonio Ocampo, a professor at Columbia University, while responding to the G20’s agreement to set a global minimum tax rate, the deal will do little to help poorer nations.

“By setting the rate at a low rate, 15 per cent, the agreement is akin to throwing a glass of water at a house that is on fire. It is crucial to launch a more inclusive round of negotiations to deliver a new global tax deal for the world, so it has the resources to deal with the climate emergency”.

There is still an opportunity

A former member of the European Parliament and a member of ICRICT, Eva Joly, said there is still a window of opportunity to avoid the worst, but this window is closing.

“We must urgently and radically decarbonize our economies, reduce our energy consumption and massively develop renewable energies. However, implementing revolution has a cost. The money exists, so we must go and find it where it is: in the accounts of multi-millionaires hidden in tax havens, and especially of those of multinationals which, for decades, have not paid their fair share of taxes.”