G77 takes the initiative as G20 papers over the cracks of weak OECD tax deal

PRESS OFFICE

G77 takes the initiative as G20 papers over the cracks of weak OECD tax deal

Reacting to the G20 statement supporting the OECD tax deal, Alex Cobham, chief executive at the Tax Justice Network, said:

“The G20 was between a rock and a hard place. Member countries including Argentina have led criticism of the deal as both unfair and ineffectual against corporate tax abuse.[1] But it was the G20 that gave the OECD the mandate to host negotiations, despite widespread concerns that the OECD – a club of rich countries – would be unable to reflect the views of non-members.

“Pillar 1 of the OECD deal promised to go ‘beyond’ the arm’s length principle, but the ambition has collapsed entirely. Instead of applying to all profits of all multinationals, the proposal now only addresses a small sliver of the profits of just 100 multinationals. This is a largely tokenistic measure that leaves the century-old arm’s length principle, widely recognised as unfit for purpose, in place for almost all multinational profits. Pillar 2 takes the welcome step of setting a global minimum rate, but so low at 15% that the incentives to shift profit will remain substantial; and with the great majority of revenues captured by the US and just a few others. And on top of these weaknesses, the OECD ‘deal’ is far from done. Two multilateral instruments are still to be designed, signed and ratified before binding changes come into effect.

“You can see why the G20 felt obliged to back the OECD, but this is really just papering over the cracks. That’s why the much bigger G77 group of countries has taken the initiative, and brought forward a proposal for a globally inclusive, intergovernmental body at the United Nations.[2] It seems that this is being opposed by the OECD members that benefit most from corporate tax abuse, like Luxembourg and the UK, and by the countries like the US that stand to capture most of the new revenues from the OECD deal.

“The G77’s leadership is most welcome, and exceptionally well timed. The G20 should lend their weight to the G77 proposal, to show that they are serious about ending corporate tax abuse that costs at least US$245 billion a year in lost revenues.[3] At a minimum, the G20 should commit to reconstitute their own initiative within an inclusive, UN setting.”

-ENDS-

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Notes to editor

  • Read the OECD’s announcement on its tax deal here. A G20 statement including support for the OECD deal is expected to be released later today, here.
  1. Statement from Argentina’s minister of finance, Martin Guzman (video)

Statement from G24 intergovernmental group
Statement from South Centre.

Statement from African Tax Administrator’s Forum.

  1. G77 proposed text for UN General Assembly, Second Committee resolution:

Promotion of international cooperation to combat illicit financial flows and strengthen good practices on assets return to foster sustainable development

The General Assembly,

[…] 19. Calls for the Committee of Experts on International Cooperation in Tax Matters to be accorded the status of a United Nations intergovernmental body with experts representing their respective Governments, and would invite the Committee to consider proposals to further international tax cooperation at the United Nations, identify gaps and challenges in international tax cooperation, including in existing instruments, and present its concrete recommendations to the Economic and Social Council.

Available as document A/C.2/76/L.28 from the UN online document system.

  1. Analysis from State of Tax Justice 2020, available here.