The German Ministry of Development Cooperation (BMZ) has launched an initiative to enable developing countries to retain tax revenues that they can then spend on services and investments for their citizens at a three-day meeting in Berlin this week.

The International Tax Compact (ITC) promoted by the German government is part of efforts to implement the increased cooperation on tax matters and technical assistance for tax collection that was agreed at the International Conference on Financing for Development in Doha last December. In the most recent concept paper of the “international initiative to strengthen international cooperation with developing countries to combat tax evasion and avoidance”, to give the ITC its full name, however, the ITC has become primarily a technical assistance project focused on strengthening developing country tax systems. It does not amount to an initiative on international tax cooperation, probably as key finance ministries have not given their support.

This initiative is likely to:

1. Analyze existing initiatives for tax reform in developing countries.

2. Promote international exchanges on tax reform to refine best practice experiences on fighting tax evasion and avoidance for implementation in national policies.

3. Support partner countries to enhance their participation in international tax cooperation processes.

4. Draw up a joint study on the forms, extent and significance of tax evasion and avoidance.

John Christensen from the Tax Justice Network addressed the devastating effects of donor conditionalities in his keynote speech at the launch of the Compact. He said these conditionalities led to an enabling environment for tax evasion and avoidance by wealthy people and transnational corporations. In consequence, taxation became ever more unfair, it increasingly relies on consumption taxes paid primarily by poor people rather than on income, wealth or profit taxes. He demanded, above all, automatic exchange of tax-related information between countries, a stricter legislation that treats tax evasion as crime, minimum tax rates set by the UN and globally applied to stop the race-to-the-bottom of countries competing for investment and, last but not least, to close tax havens.

And as we now know Gordon Brown is on board, at least with the last of these.