2008-12-02 06:59:00 Poor nations warned on incentives By The Citizen Reporter, Doha Poor countries have been warned against giving too many incentives in their bid to lure international companies to invest in their economies. Speakers at a roundtable on domestic resources mobilisation said excessive incentives would be detrimental to raising tax revenues in the poor countries. The speakers said there was "no logic" in allowing undue tax concessions and then going around the world begging for aid. Some called for the rationalisation of current packages and revisiting of regulatory regimes and policies backing them. "There is need for caution regarding incentives for foreign companies to invest, as that would reduce the tax base, but income from capital should not escape tax regulations," former UN economy under-secretary Vito Tanzi said. The gathering, which included government leaders, financial and development experts, NGOs and UN officials appealed for assistance to help LDCs retain and tax the profits attributable to them from multinational corporations (MNCs). The International Trade Union Confederation (ITUC) said governments should establish or strengthen regimes that place the highest tax requirements on capital gains. They should also tax the rich accordingly and provide tax relief for low-income families and the poor. According to it, governments should cooperate to fight tax evasion, as well as malpractices such as mis-pricing and transfer pricing that MNCs use to avoid taxes in the countries where they operate. It said the world should put in place measures to help recover the loot obtained through tax and capital flights. "The UN Committee of Experts on International Cooperation on Tax Matters needs to be strengthened by being turned into an intergovernmental body that can deal adequately with this range of contentious and complex issues," it noted in a statement. Organisation for Economic Cooperation and Development (OECD) secretary-general, Angel Curria, said taxation matters should now be put towards the top of the global governance agenda. He said a fair and transparent tax regime was critical to good governance, established a platform for poverty alleviation, and helped tackle corruption. According to him, it is only an effective tax system that can allow developing nations to end depending on donors to finance budgets and development projects. He told the gathering that the world should work hard to strengthen anti-corruption efforts to minimise tax evasion. "Enlightened policies on investment, taxation, fighting corruption, aid effectiveness, including aid for trade, are key in the pursuit of growth for developing countries," he said. In addition, he said tax havens, with assets of trillion dollars, and most of them from developing countries, deprived governments of revenue and undermined tax bases of both advanced and poor economies. Echoing that, World Bank chief economist Justin Lin said taxation was the most important source of domestic finance but to be effective, it should be done through a simple and transparent system. "Many developing countries lack tax systems that encourages investment and their tax collections are not sufficient," he said, stressing the importance of transparency and good governance in using revenues from natural resources, such as gold.