Development requires not just a stronger global economy, but also strengthened global economic governance and a clean business environment. This section of the report examines three interconnected issues: taxation, anti-corruption, and illicit financial flows.

Taxation is key to promoting sustainable growth and poverty reduction. It provides developing countries with a stable and predictable fiscal environment to promote growth and to finance their development needs. Combined with economic growth, it reduces long-term reliance on aid. Its key role in mobilising domestic resources was re-affirmed at the Seoul G20 Summit. It is closely linked to other areas of economic governance covered in this report: tax havens and lack of transparency in reporting of profits and tax payments paid in resource-rich developing countries are linked to corruption, financial crime, money laundering, and illicit financial flows. These issues are in turn linked to illicit trade in arms, conflict and fragility. Taxation also plays a key role in ensuring good governance by promoting the accountability of government to citizens.

Corruption undermines efforts to achieve economic development. It takes place at all levels of society and business – in international business in sectors such as natural resources (energy, minerals), defence, construction, and infrastructure, as well as the health and pharmaceutical industries. It is a devastating problem at the grassroots level, where it has a profound effect on the daily lives of poor people. But in today’s interconnected world, the effects of corruption also spread far beyond where corrupt acts are committed and throughout the global economy.

Illicit financial flows from developing countries make up a significant part of the larger problem of capital flight, reducing the resources available for investment, growth, and poverty reduction and resulting in significant losses in government revenue.