Policy research conference: How a UN Tax Convention can address inequality in Europe and beyond

Preparations are well underway for this March’s international policy research conference focusing on how a UN tax convention can help to address inequality in Europe and beyond. 

Held at the Paris School of Economics, the two-day conference is a collaborative event convened by some of the organisations leading the advocacy efforts to garner support for a UN tax convention in Europe: the European Network on Debt and Development (Eurodad), EU Tax Observatory (EUTO), Global Alliance for Tax Justice (GATJ), ICRICT (Independent Commission for the Reform of International Corporate Taxation), the Tax Justice Network, and World Inequality Lab.

The conference brings together researchers from across Europe and beyond, and includes a line-up of fantastic papers, speakers and discussions: on rich-world privilege, power dynamics in global governance, the relationship between monopoly power and tax abuse, the impact of reforming low tax jurisdictions, addressing capital concentration and wealth flight, tax justice considerations in addressing climate financing, and exploring the core tenets of international tax cooperation. In short, all of the reasons why we need to to support a UN tax convention.

The conference marks a timely and important milestone: there is not yet an extensive body of literature on which policymakers and negotiators can readily draw to develop a comprehensive agenda, either on specific issues or on the eventual governance structure. The conference will bring together and host contributions towards addressing that need.

Systemic inequalities and the move to a more inclusive UN framework

The conference – and the broader move towards a more inclusive tax policy development framework – comes against the backdrop of people across Europe facing dramatic income and wealth inequalities. A major component of these uncontrolled inequalities lies in the failure of governments to tackle tax abuse by elites and major corporations. As a result, tax systems across the continent fail to deliver direct redistribution to damp down extreme wealth and incomes, and also fail to generate the revenues needed to tackle poverty.

The failures in international rules on tax and financial transparency represent a major obstacle to progressive taxation in countries at all levels of per capita income, and contribute to needlessly high levels of within-country inequality. In addition, the failures are responsible for deeper inequalities in taxing rights between countries, resulting in systematically higher tax losses for lower income countries as a share of current tax revenues. 

Establishing an international basis for more effective national taxation is a crucial step to curbing inequalities around the globe. 

Despite a decade of purported global tax reform, the current tax rules fail to address inequality both within and between countries.

At the end of 2022, the member states of the United Nations unanimously passed a resolution to begin intergovernmental discussions on proposals for a new international framework for tax cooperation under UN auspices that could open the door to major reforms addressing the shortcoming of the international tax system.

European countries not engaging in the process

European countries now have a major opportunity to take part in the negotiation of a UN tax convention that could make powerful strides against the scourge of tax abuse, which contributes to harmful inequalities across the continent and beyond. But despite public demands for progress against tax abuse, there are serious questions over whether European governments will engage fully in the process – many of whom opposed the 2022 vote at the UN. Part of the explanation for their opposition may lie in the important role some European countries play in facilitating cross-border tax abuse (even though citizens of these countries demonstrably stand to gain from change.)

Some OECD members have been particularly vocal in opposing the move to more inclusive tax policy development (in particular the US, Japan and South Korea). In Europe, which dominates the OECD’s membership, there has by contrast been an almost complete absence of engagement.

Of the 38 OECD member countries, 22 are EU members, and 3 more are in the process of accession – making their voice an important one. Unfortunately, they have been almost silent, despite being among the largest losers from cross-border tax abuse – and despite often presenting themselves as drivers of change.

The European Parliament has called for the EU and its member states to engage fully in the process to negotiate a UN tax convention – so far to no avail.

Reform options 

There are three key questions to resolve over the coming period, which also form the backbone of the conference: 

• What modalities should be adopted for the negotiations? 

It seems likely that an ad hoc intergovernmental working group will be established this year to make decisions on issues like the modalities to be adopted for the negotiations. The UN Secretary-General’s report points in this direction, while some independent analysis indicates a range of possible paths to agreement.

• The substance of the convention 

A second question revolves around what the appropriate governance structure would be for future rule-setting, and which specific areas should be addressed within the convention or its protocols. 

Some tentative work is beginning to shape the discourse, like earlier work by Vito Tanzi, outlining the broad scope of potential responsibilities; Ryding’s work which provides a draft text for the convention; and Chowdhary and Picciotto’s exploration of the opportunities offered by a framework convention.

• How will OECD member countries respond to the shift to an alternative framework?

With the OECD having largely led the way in setting international tax rules since the 1960s, the third question relates to how its member countries – including notably those from the EU – will accept the shift to a globally inclusive alternative framework.

If they oppose it, what are the likely outcomes? Given the central role European countries and their dependent territories play in cross-border tax abuse, what are the likely outcomes of an agreement that includes most European countries, as opposed to one that goes ahead without them?

Improving the prospects for European engagement in a UN process

The underlying emphasis of the conference is on improving the prospects for European engagement in a UN process that can support meaningful progress against tax abuse in and by European countries and to curb inequalities within and between countries. 

The conference itself marks one of many milestones on the road to a more inclusive, representative tax policy development space – but an important one. It is part of broader advocacy efforts aimed at securing broader support within the EU in particular for a UN tax convention, and for fairer, more equitable global tax policies. The Paris conference brings with it one of the most important tax conversations we should all be having right now!