Macroscope | How a crackdown on illicit funds can revive the UN’s faltering 2030 agenda on sustainable development
- Progress on the Sustainable Development Goals depends on cash-strapped governments finding an untapped source of financial resources
- This must provide the impetus for countries to create a robust and coordinated regime to crack down on financial crimes and tax evasion
On September 25, 2015, the world’s heads of state and government unanimously adopted the 2030 Agenda for Sustainable Development – a sweeping global blueprint for building a more equitable and sustainable world. But, more than five years later, progress towards the agenda’s 17 Sustainable Development Goals leaves much to be desired.
Among the biggest constraints for countries striving to achieve the goals is the lack of financial resources. Even before the Covid-19 pandemic, many low- and middle-income countries were showing signs of debt distress. As they struggle to cope with simultaneous public health and economic crises, mobilising financial resources for sustainable development is an even more difficult proposition.
Of course, there are ways to raise funds. Countries can increase domestic savings, court foreign investment, and seek development assistance from rich countries, international organisations, and multilateral development banks. But doing so is never easy – especially in a world where illicit financial flows flourish.
In 2015, Gabriel Zucman estimated that at least US$7.6 trillion of the world’s private wealth was held in tax havens, equivalent to 8 per cent of global household financial assets. That figure had grown by a staggering 25 per cent in the previous five years, which suggests that it is likely to be significantly higher today. In 2017, the National Bureau of Economic Research reported that about 10 per cent of the world’s gross domestic product was held in offshore tax havens.
Illicit financial outflows not only drain low-income countries’ financial resources for development, but may also undermine the willingness of donor countries to provide more development assistance.
Governments have three main lines of defence against illicit financial flows. The first is to reduce how much illicit money there is, by clamping down on corruption.
Beyond blatant crime – for example, tax evasion, bribery and embezzlement of public assets – such an effort would have to address more subtle manoeuvres, such as multinational companies’ exploitation of loopholes in the tax code. Tax avoidance by multinationals undermines countries’ ability to finance development at least as much – if not more – than outright corruption.
