FTC Report: COVID-19 bailout funds failing to support the poor

A recent report from the Financial Transparency Coalition and its partners has shed light on the distribution of COVID-19 recovery funds in developing countries. The report highlights that the majority of these funds have been allocated to large corporations, rather than being directed towards social protections, small and medium-sized businesses, and individuals in the informal sector who have been hardest hit by the pandemic. Chenai Mukumba, Policy Research and Advocacy Manager at Tax Justice Network Africa, discussed the findings of the report in an interview with CNBC Africa. Mukumba explained that the primary objective of the report was to assess the extent to which governments in developing countries were targeting their COVID-19 support funds to those most negatively impacted by the pandemic. The report examined nine countries and revealed that 63% of the financial resources released by these governments were channeled towards formal private sector institutions, while only 25% went towards social protection schemes and vulnerable populations, including women. One of the key challenges identified in distributing the funds to the most vulnerable groups was the lack of organization in the informal sector compared to the more coordinated efforts of the private sector in lobbying for support. Mukumba emphasized the need for greater efforts to ensure that resources reach the 'last mile' and benefit those who are most in need. In terms of transparency and accountability in fund distribution, Mukumba stressed the importance of tracking how the bailout funds are being delivered and ensuring that they reach their intended recipients. She highlighted the need for governments in developing countries to prioritize targeted support for those most affected by the pandemic, rather than focusing on mitigating the impacts for those who may be better equipped to withstand the crisis. The discussion also touched on the proposal put forth by the FACT Panel for a minimum 25% corporate tax, which aims to close loopholes that allow corporations to reduce their tax contributions. Mukumba expressed support for this proposal, noting that it would have a significant impact on ensuring fair tax practices and preventing tax evasion. By implementing a minimum tax rate across all countries, she explained, the loophole exploitation and 'race to the bottom' in corporate taxation could be eliminated, leading to more resources for governments to support their populations in crucial sectors. Overall, the report has underscored the importance of directed and transparent distribution of COVID-19 recovery funds in developing countries. By prioritizing support for vulnerable groups and closing tax loopholes, governments can ensure that the impact of the pandemic is mitigated for those who need it most.