As the global pandemic ravaged countries in Asia, the region lost at least 81 million jobs and US$1.7 trillion in household incomes.1
In the face of these intersecting crises, several governments of developing countries hastily chose to bail out corporations as a priority before people in their so-called “economic recovery” programs. Tax breaks, among many pro-business stimulus programs that disenfranchised peoples of urgently needed social safety nets and public services, became governments’ policy instruments of choice.
This was revealed in the report Towards a People’s Recovery: Tracking Fiscal and Social Protection Responses to Covid-19 in the Global South published by the Financial Transparency Coalition.2
The People’s Recovery Tracker examined stimulus measures of nine countries in the Global South – with Nepal, Bangladesh and India in Asia – and found them grossly inadequate, unresponsive and ineffective to address peoples’ demands to curb hunger and extreme poverty during the pandemic.
Of the COVID-19 recovery measures announced by the countries examined, 63% or at least US$51.4 billion of budgets for economic recovery went to large corporations. Meanwhile, the poor and the vulnerable were left to fend for themselves.
Below are three ways corporations enjoyed a privileged status from bailout packages:
1) Corporations were allowed to launder money, reduce contributions to social protection programs.
Of the nine countries examined by the People’s Recovery Tracker, none may compare to Bangladesh and the measures it took to provide economic stimulus for corporations. To help fuel its economy during the pandemic, legislators in Dhaka allowed funds from undisclosed sources to be used for the purchase of properties. Funds of a similar nature
could also be used to invest in real estate development and the stock market, based on the country’s latest budget provisions.
Transparency International Bangladesh described that funding specific provisions of the national budget by money laundering as an “unconstitutional” act.3 Meanwhile, in India, companies were allowed to reduce their contributions to social protection programs that were meant to benefit workers.
The measure couldn’t have come at the worst possible time — during a life-threatening pandemic when laborers need any and all aid that they can get.
2) Corporations were able to borrow low-interest loans intended for smaller businesses.
India’s Covid-19 relief package came attached with a new policy that expanded the definition of micro, small, and medium-scale enterprises (MSMEs), the People’s Recovery Tracker said.
As a result, the new policy covered larger businesses and companies. These larger entities, in turn, were able to access low-interest loans primarily meant for smaller and women-owned enterprises that experienced abrupt business closures. This would only defeat the purpose of supporting MSMEs to survive the crises amidst a fiercely competitive business environment where larger companies have historically enjoyed greater access to credit and other resources.
MSMEs in Nepal encountered similar experiences. Medium and large businesses, including those in the tourism sector, enjoyed tax exemptions of anywhere from 20 to 75 percent. However, smaller enterprises and vendors in the informal sector who nonetheless pay indirect taxes and informal taxes were unable to enjoy them because the tax cuts were restricted only to entities formally registered with the government.
3) Corporations received government funds even though some failed to pay their workers on time.
Between March and April 2020, some garment factory owners in Bangladesh did not pay their workers on time, according to the People’s Recovery Tracker.
This followed a government announcement in March of the same year that entitles garment factories of a US$590 million stimulus package. How the beneficiaries were identified and how the funds were distributed revealed a massive discrepancy as these globally-integrated garments factories enjoyed the lion’s share of stimulus packages at the expense
of their workers.
Similarly, in Nepal, 76 percent of the workforce had not received their salaries ever since the lockdown started last year. Owing to the lack of government support, “A survey of workers indicated that 20 percent of females and seven percent of males had already been skipping meals shortly after the pandemic began, owing to the lack of government support.”
More ways people/social services suffered because their interests were not prioritized in government bailout packages:
1) Vulnerable groups — especially women — suffered because stimulus packages were not designed to address inequalities.
Even before the pandemic hit, governments remained unresponsive to women’s demands to implement fiscal measures to achieve gender justice amidst widespread unpaid care work and lack of access to essential public services.
Despite the implementation of economic recovery programs in developing countries, deep-seated gender inequalities remained unaddressed and were even aggravated by gender-blind fiscal stimulus.
Women around the world carried the brunt of families’ healthcare as public health systems were bled dry by inadequate funding. Even before the pandemic, women in India and Bangladesh spend at least 10 more times on unpaid care work than men4 – all while bearing burdens of indirect taxes that were expanded to prop up corporate recovery in these countries’ stimulus packages.
2) Vulnerable groups suffered because more money went to infrastructure projects intended for corporations’ gains.
Sixty-three percent of all the COVID-19 stimulus funds of countries examined by the People’s Recovery Tracker went to infrastructure projects that benefitted corporations and not the people. On average, only 22.4 percent went to social protection.
In Nepal, the country’s flag carrier enjoyed parking and infrastructure fee exemptions. Domestic carriers also shared a similar privilege as taxes on aviation fuel were waived. To complete Nepal’s airline industry relief package, some 19 billion Nepalese rupees (US$162 million) was set aside for the development of airports.
Unfortunately, these facilities are not immediately useful to Nepalese workers.
About a third of the workforce have already been laid off because of the pandemic.
The situation in Nepal reflects a disturbing global trend. By December 2021, up to 163 million people — including those inside and outside Nepal — could fall into extreme economic poverty, according to the People’s Recovery Tracker.
To alleviate hunger, suffering, and dislocation, “governments should implement adequate universal social protection systems without delay,” the Tracker said.
3) Vulnerable groups who suffered the most during the pandemic will pay for COVID-19 loans that did not benefit them.
Responding to intensified demands for economic relief, external borrowing has been reinforced as the dominant policy tool used by governments to fund stimulus programs. This raises concerns on financial transparency and heavier debt burdens that will negatively impact the urgent financing of public services.
When the pandemic struck, the World Bank provided US$50 million in immediate funding to support Kenya’s COVID-19 emergency response. However, loan use was marked by a lack of transparency and perhaps may even be involved in a procurement scandal at a medical supplies agency. Since very little information is available regarding how the funds were spent, Kenyan activists have already issued calls to refuse additional borrowing.
Unfortunately, whether or not the loans were used for Kenya’s pandemic response, these will nevertheless be paid for by Kenyans, most of whom are poor and continue to suffer from the effects of this continuing crisis.
A somewhat similar experience has been reported in many other Asian countries.
4) Vulnerable groups will bear the brunt and absorb the impact of revenue-eroding policies such as reductions in corporate income tax.
The deep recession in these countries opened another opportunity for multinational and domestic corporations to justify perpetuating the ‘race to the bottom’ in corporate income tax rates, gravely diminishing tax bases of countries with the strongest urgency in funding peoples’ needs. For the Asian countries covered in the Report, the impacts of tax losses on public health spending are staggering: a share of 44.7% in India and 61.89% in Bangladesh is lost to corporate tax abuses.5
In Kenya, corporate income taxes have been cut from 30 to 25 percent and three to one percent for small businesses, including MSMEs. Similar measures were also taken in Bangladesh, wherein seven new sectors enjoyed tax holidays.
Apart from the countries in the study, other Asian nations such as Indonesia6 and the Philippines7 passed laws to reduce corporate income tax rates in the middle of the pandemic. Corporations are being taxed less while taxes on essential goods remained high despite job and income losses of peoples in these countries.
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The People’s Recovery Tracker revealed that far from a “great reset” of the global economy, corporations in developing countries continued to enjoy VIP access to fiscal stimulus programs amidst the unprecedented losses in livelihood experienced by the vast majority of peoples in Asia. What ensued was a bailout of massive proportions in order to finance economic recovery of corporations. Hence, we need to go beyond recovering unjust systems and towards economic rebuilding by first dismantling tax and fiscal instruments historically tilted in favor of corporations and then constructing long-term development agenda centered on peoples’ needs.
Ahead of the UN High-Level Political Forum (HLPF) on Sustainable Development, APMDD reiterates our call to the United Nations and to governments in the world for “more decisive action from governments at a national level and as an international community most especially at this time when we can ill-afford the continuation of undermining public revenues. We emphasize that tax justice must be accompanied by government budgets and spending programs that give primacy to the immediate needs of people and communities in the face of the multiple crises, providing essential services, fulfilling human rights and social justice, and addressing inequality.”8
References:
1) International Labor Organization (2020). “81 million jobs lost as COVID-19 creates turmoil in Asia- Pacific labour markets.” Press Release. Accessed 28 June 2021. Retrieved from: https://www.ilo.org/asia/media-centre/news/WCMS_763819/lang–en/index.htm
2) Financial Transparency Coalition (2021). “Towards a People’s Recovery: Tracking Fiscal and Social Protection Responses to Covid-19 in the Global South.” Research Report. Accessed 18 May 2021. Retrieved from: https://financialtransparency.org/wp-content/uploads/2021/04/FTC-Tracker-Report-FINAL.pdf
3) Transparency International Bangladesh (2020). “Whitening black money unconstitutional, immoral, discriminatory & corruption-friendly.” Press Release. Accessed 29 June 2021. Retrieved from: https://www.ti-bangladesh.org/beta3/index.php/en/media-release/3213-whitening-black-money-unconstitutional-immoral-discriminatory-corruption-friendly
4) Mercado, Lan; Naciri, M.; and Mishra, Y. (2020). “Women’s Unpaid and Underpaid Work in the Times of COVID-19”. UN Women Asia-Pacific. Blog Post. Accessed 28 June 2021. Retrieved from:
5) Global Alliance for Tax Justice (2020). “The State of Tax Justice 2020”. Research Report. Accessed 18 May 2021. Retrieved from: https://www.globaltaxjustice.org/sites/default/files/The_State_of_Tax_Justice_2020_ENGLISH.pdf
6) Adrian Wail Akhlas (2020). “Indonesia accelerates tax reforms, cuts corporate income tax in COVID-19 playbook.” The Jakarta Post. Accessed 30 June 2021. Retrieved from: https://www.thejakartapost.com/news/2020/04/02/indonesia-accelerates-tax-reforms-cuts-corporate- income-tax-in-covid-19-playbook.html
7) Pia Ranada (2020). “Duterte signs bill lowering corporate income tax, vetoes some items” Rappler. Accessed 30 June 2021. Retrieved from: https://www.thejakartapost.com/news/2020/04/02/indonesia-accelerates-tax-reforms-cuts-corporate-income-tax-in-covid-19-playbook.html
8) Asian Peoples Movement on Debt and Development (2020). “Urgent Letter from Asian Movements to UN GA and Member States.” Official Statement. Accessed 28 June 2021. Retrieved from: https://www.apmdd.org/programs/urgent-letter-from-asian-movements-to-un-ga-and-member-states