Ecuador’s President Rafael Correa recently announced a national referendum that would bar any politician from having assets in tax havens.
This is part of a concerted effort by the Ecuadorean government against their use. This has seen President Correa become the only world leader to sign Oxfam’s recent petition calling for a ban on tax havens. Ecuador will also be taking a proposal to the UN in September to launch a global initiative against tax havens.
teleSUR English spoke with Ecuador’s Foreign minister Guillaume Long on the Latin American nation’s battle against tax havens
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teleSUR English: It’s estimated that more than US $3 billion has left Ecuador for tax havens over the past 2 years. This seems a huge figure to the average person, but what does US $3 billion mean for a country like Ecuador?
Guillaume Long: The money stashed away in tax havens in just the last two years is enough to pay for the full reconstruction of the areas so severely damaged during the recent earthquake. Hundreds died and today there are still over 20,000 people living in shelters. The taxes on these resources could help us rebuild the earthquake proof, resilient homes and schools that are so badly needed along our coast.
But the total impact of money lost to tax havens is much greater than even this figure. It is estimated that one third of all Ecuador’s economy — that is US $30 billion — is held in tax havens.
In recent years, Ecuador has been transformed. We have slashed poverty, drastically reduced inequality and modernised our infrastructure such as the road network and renewable energy through a huge program of state investment. But there’s a huge amount still to do and the tens of billions stored in tax havens could play a very important role in the further development of this country. If this money was to return to Ecuador, it would stimulate growth and jobs, boost investment levels and the greater taxes paid on this could help us build more schools and hospitals.
We believe that to truly break the cycle of poverty and underdevelopment Ecuador needs to move the country to a more high-value, knowledge and high tech economy and away from being a primary goods producer, reliant on vulnerable exports such as oil. The resources in tax havens would be much more usefully employed in helping transform Ecuador and the lives of millions of Ecuadorians, rather than further enriching a tiny few.
To what extent will addressing tax havens also be a means of addressing other problems that plague the continent, such as money laundering, drug trafficking and government corruption?
It is true that tax havens in some instances are linked to criminal activity and so by clamping down on them we will be making all those activities much more difficult. That can only be good for Latin America and the wider world.
But tax havens are also used for activity that is deemed legal, but which is clearly immoral. So as well as having a debate about what is — or what should be legal — this is a debate about ethics: what are the values at the the heart of the society we are trying to build in Latin America today?
Over 30 million people could be brought out of poverty across the region if the wealth currently stashed in tax havens was subjected to proper levels of taxation. That’s the ethical choice we face: a battle against poverty, or the right of a wealthy elite to find ways of further enriching itself.
It’s a badge of shame that Latin America remains the most unequal continent on earth. So how are we going to address that? It’s clear from our experiences in the lost decades of the 1980s and 1990s that neo-liberalism offers nothing to this continent. All of our achievements have shown that you need rules that regulate the market and ensure that the economy works for the majority of people.
But tax havens reflect the very opposite of this regulated approach. It’s free-market capitalism in its most rampant form, benefiting a tiny wealthy elite.
President Correa recently told teleSUR that he is proposing a referendum to ban those who have assets in tax havens from holding office or even being public servants. How would this work, and how many people could this potentially affect?
The proposal is really very simple: we will have a referendum next year at the same time as our national legislative and presidential elections. If the population agrees, they will prohibit politicians and public servants from holding their wealth in tax havens. People who hold public office will have a year to bring that wealth back into the country, from the date of the referendum.
Anybody will be able to run in the elections in February 2017, so it’s not about excluding anybody as any candidate that currently has their money in a so-called haven will have a whole year to bring it back.
We will have to see how many politicians will be affected by this. What is clear is that since the exposure of the Panama Papers a number of powerful right-wing politicians in Ecuador have been explicitly linked to tax havens, so perhaps that explains the real hostility to this measure that we have seen from some parties on the right.
But this campaign should be seen in the wider context too. It is an attempt by Ecuador to kickstart a global debate about how we will end tax havens. The Panama Papers brought the issue to public consciousness and many politicians expressed outrage at their findings. But now we need politicians to take a lead with actions and not just words.
So this is one proposal that we believe places Ecuador at the heart of the global leadership on this issue. We hope it will inspire others to do likewise or come forward with their own proposals.
The United States recently released one of its many lists of good and bad countries on an issue. This time, its fiscal transparency. Ecuador was among a number of Latin American countries who apparently didn’t make the grade. Given initiatives like this one concerning tax havens, do you think the US assessment is fair?
No it’s completely unfair and a clear intervention into our politics. Long gone are the days where the United States can act as judge and jury and label other nations as violators of a set of arbitrary rules that it has come up with.
No government in the history of Ecuador has done more than ours to increase fiscal transparency and to create a properly regulated fiscal policy. We have tripled tax take in recent years by creating a proper fully functioning fiscal system, not by increasing tax rates which stayed broadly the same, but by ensuring that those people who should be paying taxes do so.
I would hope that the inclusion of Ecuador in this latest report — we have been included for the first time — is not a response to our recently launched campaign against tax havens, especially as many of them are based in US territory. And we have invited the United States to join us in this campaign if it is serious about tackling fiscal transparency across the world.
We hope this isn’t an example of the threats and bullying we have seen so often in the past in Latin America. But if it is, then that would not deter us. Ecuador is a small country but it has a visionary foreign policy and we’ve taken many brave decisions in recent years.
We have closed down the largest US military base in the continent, we have renegotiated oil contracts and international debt so that more of our resources stay within this country; we’ve proposed international ideas such as an International Court of Environmental Justice and we’re currently pushing in the UN a new piece of legislation that will hold transnational corporations to account for human rights violations.
Of course some of this has a cost in terms of our relations with global elites. However if we are to build a more just world then brave measures are needed.
We will continue to put forward the ideas that we believe move us toward the world we wish to see. And we know, that by working with other nations and with social movements worldwide, we can not only dream of another world but can deliver real change. Our fight against tax havens is just the latest front in this battle.