Countries concluded two weeks of negotiations on the world’s first United Nations tax convention in New York, passing the midway point in the scheduled process and remaining on course to bring a full text to the UN General Assembly next year. The session also brought into sharper focus a fundamental divide that remains unresolved: how far the Convention should go in changing the international tax system.
Across negotiations on the Framework Convention and its first two protocols, many OECD countries sought to dilute the extent to which the new UN framework would depart from current international tax rules, including through weaker obligations, greater optionality and protections for current tax agreements. G77 and Global South countries, led prominently by the African Group, highlighted that the purpose of negotiating new rules at the United Nations, as agreed by the General Assembly in setting the terms of reference for the negotiations, is precisely to address the exclusionary and ineffective nature of the current international tax architecture.
Florencia Lorenzo, the Tax Justice Network’s senior researcher, was present at the negotiations and made a number of interventions. She said:
“Ahead of the session, the Tax Justice Network published new research confirming that OECD countries stand to secure by far the largest revenue gains if serious reforms are agreed. It is frustrating to see these countries seeking to hold back the level of ambition, especially when so many of them face serious fiscal pressures at home. The lack of scrutiny of these positions is striking when billions in additional public revenue are at stake. But that reluctance becomes morally appalling when we consider the consequences for developing countries, whose ability to secure a fairer share of taxing rights and raise much-needed public revenue could be constrained at the same time as several OECD countries are making serious cuts to official development assistance.
“There seems to be a wariness about cooperating to strengthen tax sovereignty, perhaps driven by a fear that moving beyond the confines of the OECD may leave countries in a weaker position at the UN. Yet the failures of the OECD have themselves contributed to weakening these countries’ tax sovereignty—including through the dramatic surrender of revenues when several countries, some reluctantly, accepted the ‘side-by-side’ deal at the start of this year, exempting US multinationals from multiple measures in order to appease Donald Trump.
“It’s time these countries recognised that cooperation is the only path to stronger tax sovereignty—and to raising more revenue themselves.”
The divide was apparent from the opening day. Ireland, speaking for the European Union, argued that the Convention should complement the current international tax architecture rather than replace it, while France, which hosts the OECD, added its support. Kenya challenged that position, arguing that countries had come to the United Nations because the system had failed to deliver inclusive and fair international tax rules.
What followed over the next two weeks repeatedly returned to that central disagreement: whether the Convention will reshape the international tax system, or leave governments enough flexibility to preserve much of the status quo.
The political contradiction is that many of the countries seeking to limit change stand to gain substantially from ambitious reform themselves. New research by the Tax Justice Network and Public Services International estimates that allocating multinational profits for tax purposes according to where corporations undertake their real economic activity could generate around US$500 billion in additional corporate tax revenues every year—equivalent to a 24 per cent increase in the corporate tax currently collected from multinational companies. The gains would come without raising tax rates, simply by allocating taxing rights more accurately according to where real economic activity takes place.
Almost every country would gain. Higher-income countries would receive the largest gains in absolute terms, while lower-income countries would experience the largest proportional increases. France, for example, would collect an additional US$25.5 billion in corporate tax each year and Poland US$5.7 billion, while Kenya would collect more than five times as much corporate tax as it currently collects and Nigeria’s revenues from multinationals would increase more than sevenfold. The figures show how widely the benefits of reform would be shared—and expose the contradiction at the heart of the negotiations: many of the countries seeking to limit the Convention’s ambition stand to gain substantially from the very reforms they are resisting.
Alex Cobham, chief executive at the Tax Justice Network, was present at the negotiations and made interventions as part of the global civil society group. He said:
“The choice emerging from these negotiations is increasingly clear. Will the UN tax convention deliver the change countries came here to achieve, or will governments that favour the status quo succeed in reducing its obligations to the minimum?
“Many OECD countries have spent these negotiations pushing to preserve as much of the current system as possible, seeking to minimise the obligations they must accept while remaining part of the new global tax architecture. But the extraordinary thing is that their own countries stand to be among the biggest beneficiaries of ambitious reform.
“Their own publics should be asking why their governments are fighting to preserve rules that cost them revenue and tax sovereignty. Fairer international rules do not require one country to surrender its tax sovereignty for another to gain it. Countries can strengthen their tax sovereignty together by agreeing rules that give everyone a fairer basis on which to tax.
“They have already chosen to stay in this process, just as they accepted the terms of reference and stayed at the table. The question now is how much meaningful change they are prepared to accept as the price of participating in the genuinely global tax system that the Convention can create.”
That question first took concrete form in Article 5 on the fair allocation of taxing rights. Discussions focused on whether countries’ taxing rights should better reflect real economic activity, including where markets, revenues, users and data are located, and crucially, whether the Convention should require countries to act on that commitment.
The African Group said the current draft had been weakened by removing earlier language requiring countries to take action, including renegotiating tax agreements where necessary. The disagreement therefore went beyond how fair allocation should be defined: it concerned whether a commitment to fairer taxing rights agreed at the United Nations will actually change how those rights are distributed in practice.
That led directly into one of the session’s wider questions: what happens when commitments under the new Convention encounter tax agreements negotiated under the current system? Brazil, India and the African Group maintained that countries must make genuine efforts towards the progressive alignment of tax agreements with the Convention if its commitments are to have practical effect. Brazil stressed that this would be a best-efforts obligation to pursue alignment, rather than a guarantee that renegotiation would succeed. Several OECD countries raised concerns over sovereignty, legal certainty and the relationship with bilateral and multilateral treaties.
The same tension carried into negotiations over reservations and optionality. A number of countries maintained that reservations may be necessary where Convention obligations conflict with domestic constraints or treaty networks. The African Group opposed allowing reservations to the Framework Convention, while Zambia and Kenya warned they could water down its impact. Tanzania cautioned that making the protocols optional, allowing countries to opt out of provisions within them and then permitting reservations to the Convention itself risked reducing international tax cooperation to a collection of voluntary choices rather than an effective global framework.
Those disagreements became more concrete when negotiations moved from the Framework Convention to the first protocol on cross-border services. Several European countries sought broad optionality over how its rules would interact with existing treaties. The African Group and India resisted making substantive provisions optional, warning that doing so could undermine the protocol’s core. Ghana argued that fundamental rules governing nexus, taxing rights and anti-abuse should not simply be available for countries to opt out of.
Behind that dispute lay the same underlying question over who gets to tax cross-border economic activity. Several OECD countries opposed or raised concerns over gross-basis taxation of cross-border services, citing risks of double taxation, excessive taxation and impacts on investment. The African Group defended withholding taxation as a practical means for capital-importing countries to exercise source-country taxing rights, particularly where tax administrations lack the information and capacity needed to enforce net-basis taxation effectively.
The struggle over the strength of the Convention’s obligations was not confined to corporate taxation. On high-net-worth individuals (HNWIs), the African Group, India, Brazil, Mexico and others said the latest draft had weakened earlier commitments and called for stronger obligations, more robust exchange of information and clearer commitments to tax HNWIs effectively. Several OECD countries instead sought stronger safeguards for national tax policy, which Brazil and the African Group said would unnecessarily dilute the Convention’s international cooperation commitments.
A similar divide surfaced over illicit financial flows, where countries disagreed over whether the Convention should encompass tax avoidance practices that might stop short of criminality. A number of OECD countries sought a narrower approach, while the African Group, Nigeria, Senegal, Tanzania, India and others defended the broader UN approach and maintained that tax avoidance remains a major driver of illicit financial flows.
Whether countries can implement whatever is ultimately agreed added another dimension to the question of ambition. Capacity building emerged as central to translating Convention commitments into practice, with the African Group calling for support to extend to implementation of the protocols and for the future UN tax secretariat to play a substantive role in supporting developing countries. Several OECD countries favoured a narrower technical and administrative role for the secretariat.
By the final days, negotiations on the second early protocol, covering tax dispute prevention and resolution, brought the argument full circle: if the United Nations establishes new rules, to what extent should they displace mechanisms inherited from the current international tax architecture?
The African Group opposed making dispute-prevention mechanisms mandatory while backing the mutual agreement procedure as the protocol’s core dispute-resolution mechanism. Arbitration remained sharply contested, with the African Group opposing mandatory arbitration and several countries raising concerns over sovereignty, cost and the authority of domestic legal systems.
The underlying disagreement became clearest on the final day, when countries considered what should happen where new UN dispute mechanisms overlap with provisions in existing tax treaties. Many OECD countries, alongside the UAE and China, supported an approach under which existing mechanisms would be replaced only where countries jointly opt in. The African Group supported the opposite default.
Its argument went directly to the purpose of the UN process: many treaty provisions reflect historical imbalances in negotiating power, the African Group said, and a new multilateral protocol should be capable of correcting those imbalances without requiring countries to renegotiate the change bilaterally.
The New York session therefore ended where it began: with governments confronting how much of the current international tax architecture the new Convention should actually change. Countries that resisted moving international tax rule-making to the United Nations remain at the negotiating table, but the question now is how much substantive reform they are prepared to accept as the process advances towards a final Convention and a future Conference of the Parties.
The stakes extend far beyond the negotiating room. Who gets to tax the profits generated by the global economy determines whether governments can tax those profits where real economic activity takes place—or whether they are shifted beyond their effective reach. At a time of mounting debt pressures, strained public finances, rising living costs and escalating climate impacts, governments’ ability to raise revenue from their own economies is increasingly consequential. The outcome will shape countries’ ability to finance public services, respond to crises and invest for the future. It will also determine something more fundamental: whether governments can effectively tax the economic activity taking place within their economies. A stronger UN framework could expand that tax sovereignty across countries, rather than forcing governments to compete for taxing rights under rules that leave almost everyone worse off.
The next negotiating session will take place in Nairobi, Kenya, with the central disagreements exposed in New York still unresolved. Governments will return to questions over how taxing rights are allocated, how the Convention will interact with other international tax arrangements and how much flexibility countries will have to avoid its obligations.
The Nairobi round will therefore be a critical test of whether the world’s first global tax convention will deliver the change countries committed to pursue—or preserve the century-old international tax system it was created to reform.
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Notes to editors
- For updates, summaries and analysis of the UN tax convention negotiations, see our dedicated webpage here. You can see more detailed information on specific elements being negotiated in this section of the webpage.
- Recent research by the Tax Justice Network and Public Services International estimates that countries could collect around US$500 billion more in corporate tax every year—equivalent to a 24 per cent increase in the corporate tax currently collected from multinational companies—without increasing tax rates, by allocating multinational profits for tax purposes according to where corporations undertake their real economic activity. Almost every country would gain under the study’s headline model, with higher-income countries receiving the largest gains in absolute terms and lower-income countries experiencing the largest proportional increases. The research is available here.
- Article 5 of the draft Framework Convention addresses the fair allocation of taxing rights. Negotiations in New York considered, among other issues, whether taxing rights should reflect factors including markets, revenues, users and data, and the extent to which countries should be required to act to give effect to the Convention’s commitments. Discussions also addressed the progressive alignment of tax agreements with the Convention.
- The Convention is being negotiated alongside two early protocols. The first protocol concerns the taxation of income derived from the provision of cross-border services, while the second concerns the prevention and resolution of tax disputes. Both were negotiated during the New York session, including discussions over source-country taxing rights, optionality, the relationship with other tax agreements, mutual agreement procedures and arbitration. More detailed summaries are available through our UN tax convention tracker here.
- The United Nations already has a statistical framework for measuring illicit financial flows, developed by UNCTAD and UNODC under Sustainable Development Goal indicator 16.4.1 and endorsed by the UN Statistical Commission. The framework recognises that illicit financial flows can arise from aggressive tax avoidance as well as illegal activity. During earlier UN tax convention negotiations in Nairobi, India argued that this established UN framework should provide the starting point for the Convention’s treatment of illicit financial flows. For more on the definition, its development and its implications for the negotiations, see “‘Illicit financial flows as a definition is the elephant in the room’ — India at the UN tax negotiations” by Alex Cobham and Bemnet Agata here.