From the TUC

World Bank told to change tune on workers’ rights & tax

26 Jun 2013, by in International

On Monday, South African Minister of Planning and ANC stalwart Trevor Manuel was in London to launch the report of a panel set up to review the World Bank’s flagship publication, the Doing Business report. Over the years, unions and NGOs have slammed the report and the way it has been used to encourage deregulation of workers’ rights and tax cuts. The panel recommended wholesale reform of the report, accepting union demands to scrap the ranking of countries by how lax their employment protections are, and how low business taxes have gone.

According to Bloomberg, the review cited Georgia as a country that saw a ‘substantial’ improvement in the rankings in 2007 partly as a result of scrapping worker protections. “They went to the point of abolishing their health and safety agency,” said Peter Bakvis, Washington director of the International Trade Union Confederation (ITUC), one of the advisers to Manuel’s panel.

The panel was established by World Bank President Jim Yong Kim, but he is now under pressure from US Republicans who are threatening to block funding for World Bank programmes if Doing Business is reformed as the panel suggests. Global unions are therefore intensifying their lobbying to get the country-nominated Executive Directors of the World Bank to back the reforms, although they are not likely to be implemented until next year’s report is issued.

In particular, unions are backing three key recommendations in the report:

  • elimination of the ‘Total Tax Rate Indicator’, through which the Bank has encouraged governments to reduce to a minimum all taxes and contributions paid by business, including pension premiums, workmen’s compensation and other health and safety fees, including those for maternity protection. Tax havens and oil states have usually been given the best scores;
  • permanent removal of the ‘Employing Workers Indicator’, which had been used to encourage countries to reduce labour regulations to a very low level. The Bank suspended this indicator in 2009 but Doing Business has continued to collect the data for this indicator and promote a one-sided view of labour regulations in an appendix to the annual report; and
  • ending the overall ‘Ease of Doing Business Indicator’ and country rankings, which have encouraged a race to the bottom of eliminating a wide range of government regulations without an adequate evaluation of their benefits and costs. The impact has been particularly damaging on countries dependent on World Bank financial assistance because of its use in loan conditionality.

The review found that, as well as being repugnant, many of the indicators were actually a poor guide to better economic performance, and of limited relevance to the majority of businesses in many countries. The panel also recommended that Doing Business should be renamed, and produced by the Bank’s research department rather than its private sector arm.

ITUC General Secretary Sharan Burrow said:

“The World Bank is a development institution and should encourage countries to adopt and enforce adequate regulations, not act as a lobby for the most retrograde business interests. We very much support the panel’s recommendation that the Bank should develop a new and balanced approach on labour market policy outside of the Doing Business project and work more closely with the ILO.”

And she added:

“It is high time that the World Bank stopped inciting countries to become tax havens, now that even the G8 is addressing the issue of tax avoidance. The Bank should encourage governments to design a tax system that allows states to generate the revenue they need for financing quality public services and providing needed infrastructure.”

Catholic aid agency CAFOD also welcomed the review panel’s recommendations, and countries like India and China were also reported to have opposed the ranking system used.

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