‘Illicit financial flows as a definition is the elephant in the room’ — India at the UN tax negotiations

During negotiations in Nairobi this week on a future UN tax convention, India delivered one of the sharpest interventions of the process so far. Addressing the long-contested issue of illicit financial flows, the delegation said:

“Illicit financial flows as a definition is the elephant in the room. The United Nations already has a formal statistical definition, which includes a specific category of illicit financial flows related to tax. This definition recognises tax avoidance as an illicit financial flow. Under the SDG framework, the UN and member states have broadly accepted that illicit flows can also arise from legal economic activities through aggressive tax avoidance — including manipulation of transfer pricing, strategic placement of debt and intellectual property, tax treaty shopping and the use of hybrid instruments and entities. India would like to emphasise that a good starting point for defining illicit financial flows is the UN’s conceptual framework for measuring them.”

This is a pivotal moment. For years, a number of OECD countries have insisted that illicit financial flows cannot be defined, or that tax-related illicit financial flows do not fall within the scope of the term. This follows a period in which OECD members consistently sought to prevent the UN’s adoption of a definition that followed from the crucial work of the African Union/Economic Commission for Africa High Level Panel on Illicit Financial Flows out of Africa, chaired by former South African president Thabo Mbeki – in which the tax abuse of multinational companies is consistently identified as the gravest threat. India’s intervention publicly confirms what has already been agreed at the technical level within the UN system. The concept is defined. Tax-related illicit financial flows are a major element and include the aggressive tax avoidance of multinationals. And the statistical framework is already in place.

A debate the Tax Justice Network raised years ago

The Tax Justice Network has warned for years that some states have sought to strip multinational tax abuse out of the definition of illicit financial flows. In 2017, our chief executive Alex Cobham addressed the UN Financing for Development Forum and sounded the alarm about a coordinated effort to narrow the scope of the Sustainable Development Goal target on illicit financial flows. He documented a clear political attempt to remove multinational tax avoidance from the definition, despite the overwhelming evidence that these flows account for some of the largest and most damaging revenue losses in lower-income countries. Allowing multinational tax abuse to slip out of the definition would have weakened accountability, undermined the purpose of SDG 16.4 and erased one of the central drivers of illicit financial flows.

That warning has now been vindicated. India’s intervention this week directly echoes the concerns the Tax Justice Network raised in 2017 and reaffirms what the global evidence base has long shown. There is a globally agreed statistical definition. It explicitly covers tax-related illicit financial flows. The UN Statistical Commission has endorsed it. The conceptual framework developed under Indicator 16.4.1 already recognises aggressive tax avoidance as a form of illicit financial flow. And yet some OECD countries are still resisting what has been agreed by UN member states and embedded in the Sustainable Development Goals. India’s statement makes clear that the debate should have moved on long ago. Under the UN framework, illicit financial flows are defined by the harm they cause to societies and public finances, not simply by whether they break the law. This is why the UN recognises aggressive tax avoidance, even when it is technically legal, as an illicit financial flow.

A definition rooted in global statistical standards

India’s intervention restates the facts. The United Nations has already adopted a formal statistical definition of illicit financial flows through the Sustainable Development Goal framework. Indicator 16.4.1 mandates the measurement of illicit financial flows, and two UN bodies, UNODC and UNCTAD, were tasked with developing the conceptual measurement framework after extensive technical consultations. That framework, later adopted by the UN Statistical Commission, recognises that illicit financial flows can arise from aggressive forms of tax avoidance, including profit shifting through transfer pricing manipulation, tax treaty shopping and the strategic placement of debt and intellectual property. These are not marginal practices. They are some of the most common tools used by multinational companies to shift profits out of the countries where they operate and into jurisdictions offering secrecy or ultra-low tax rates.

India’s confirmation should close the door on repeated attempts to suggest that tax-related illicit financial flows are somehow optional, disputed or outside the scope of the UN framework. The global standard already exists. It has been negotiated, endorsed and agreed by all UN member states. The measurement framework is publicly available, technically robust and explicitly recognises tax abuse as a form of illicit financial flow. Continuing to deny this reality is not a technical position. It is a political one, and it runs counter to the commitments countries have made under the Sustainable Development Goals.

Why tax abuse is central to illicit financial flows

The research base behind the definition is extensive and long established. As the open access chapter by Alex Cobham and Petr Janský shows, multinational profit shifting and corporate tax abuse represent not just one element of illicit financial flows, but one of the largest and most systematically harmful components. The academic and policy literature is unequivocal. Tax-motivated illicit financial flows drain government budgets, weaken the ability of states to provide essential services, and erode governance by breaking the link between taxation and political accountability. When multinationals can shift profits out of countries without consequence, it becomes harder for governments to respond to their citizens, and easier for powerful actors to shape policy behind closed doors. The resulting inequalities are not incidental. They are baked into the architecture of a global tax system that allows a small number of jurisdictions to profit from secrecy and artificially low tax rates.

A globally inclusive understanding of illicit financial flows therefore requires recognising the central role played by multinational enterprises, the opacity of corporate accounts and the financial secrecy offered by high-income jurisdictions. These factors enable profit shifting, conceal the true location of economic activity and allow harmful tax practices to persist across borders. Without confronting these structural drivers, efforts to tackle illicit financial flows will fall short. Recognising tax abuse as a core component of illicit financial flows is not only consistent with the evidence. It is essential to building a fair, transparent and effective international tax system.

What India’s intervention means for the UN tax process

India’s contribution marks the clearest public statement so far that the definition already approved by the UN Statistical Commission should guide negotiations on a UN tax convention. It also exposes a widening gap between the globally inclusive UN framework and the resistance from some OECD members to acknowledge and address multinational tax abuse as a core part of illicit financial flows.

As negotiations continue in Nairobi, governments now face a clear choice. They can continue to promote ambiguity for political convenience, or they can follow the evidence and uphold the commitments already embedded in the Sustainable Development Goals and agreed by all UN member states. A key element to track tax-related illicit financial flows is the analysis of country by country reporting from multinational companies – and the convention negotiations have already seen repeated calls for the adoption of a global, public database of this reporting. Given the evidence showing how this transparency leads multinationals to curb their tax abuse, the recent State of Tax Justice 2025 report shows that such a measure could have generated an additional US$495 billion in revenues worldwide since 2016.

India’s statement should mark the end of manufactured uncertainty. Illicit financial flows include tax abuse. The UN definition exists. The measurement framework exists. The evidence exists. The scope for major revenue gains is abundantly clear. What remains is political will.