UN Secretary-General sets out highly anticipated UN tax convention plans, rebukes OECD’s “limited effectiveness”

UN Secretary-General Antonio Guterres speaking at the UN General Assembly

UN Secretary-General sets out highly anticipated UN tax convention plans, rebukes OECD’s “limited effectiveness”

The UN Secretary-General Antonio Guterres has set out his highly anticipated proposals for a UN framework convention on tax, putting the global tax system on course for the biggest shake-up in history. The Secretary-General’s proposals unequivocally call for global tax rules to be decided at the UN instead of the OECD, which has overseen global tax rules for the past six decades and which receives unusually blunt and comprehensive criticism from the Secretary-General in his new report.1

The Secretary-General’s proposals set the stage for what The Tax Justice Network described as “a democratic revolution in tax” in its State of Tax Justice 2023 report last month, which projected that countries will lose nearly US$5 trillion to tax havens over the next decade unless a UN tax convention is adopted.2

In the advance version of the Secretary-General’s report published today, which was mandated by the UN General Assembly last year and is due next month, the Secretary-General concludes that only UN leadership on tax can effectively bring an end to global tax abuse – something the OECD has failed to deliver after 10 years of effort.3 The Secretary-General writes, “enhancing the UN role in tax-norm shaping and rule setting, fully taking into account existing multilateral and international arrangements, appears the most viable path for making international tax cooperation fully inclusive and more effective.” (para 49) The Tax Justice Network reports countries lose just under half a trillion US dollars a year to global tax abuse by multinational corporations and wealthy individuals.4

Publication of the advanced, unedited version of the Secretary-General’s report ahead of its formal release next month is not a common step. It is thought likely to be intended to reduce the scope for lobbying to weaken the report, by those OECD member countries that oppose its findings.

Countries are expected to vote this year-end at the UN General Assembly on whether to formally begin the negotiation process on establishing a UN tax convention under the proposal laid out today by the Secretary-General. This will follow a UN General Assembly debate on the Secretary-General’s report scheduled for September. The Secretary-General’s report makes a powerful case for a UN framework convention on tax in order to reform the global tax system. In doing so, the Secretary-General reaffirms the leadership of the Africa Group which brought forward last year’s historic, unanimously supported UN General Assembly resolution to open the door to a UN tax convention.5

Tax Justice Network chief executive Alex Cobham said:

“We are delighted to see the UN Secretary-General’s report. Mr Guterres has confirmed beyond any doubt the unsuitability of the OECD to lead international tax rule-setting, and put his weight behind the tax justice movement’s campaign for a UN framework convention on tax. The Africa Group at the UN deserve huge credit for their General Assembly resolution which called for this report. We look forward now to a new resolution to put in place the Secretary-General’s concrete next steps for formal negotiations.

“Mr Guterres’s proposals today bring us one step closer to a global democratic revolution in tax that could reclaim literally trillions of dollars in public money. For sixty years, global tax rules have been decided behind closed doors at the OECD where a handful of countries and lobbyists treated tax policy as something to cater to the interests of the wealthiest corporations and billionaires. We now have a real shot at bringing this process into the daylight of democracy at the UN, where all countries will finally get a real say, and where governments will finally have to answer to each other, and to their own people, on tax policy.”

Key points from the Secretary-General’s report

The UN Secretary-General delivers a stinging criticism of the OECD’s claim to inclusivity, of the OECD’s attempt to reform global tax rules and of the OECD’s undemocratic decision-making process. The Secretary-General states: “the substantive rules developed through these OECD initiatives often do not adequately address the needs and priorities of developing countries and/or are beyond their capacities to implement.” (para 47)

The UN Secretary-General in particular addresses the OECD’s Inclusive Framework (IF) and also the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, calling out the “limited effectiveness of the substantive rules produced by the Global Forum and the IF”. (para 42)

The report finds “significant evidence that the substantive guidance produced through these processes… often is not implemented by developing countries because it is not seen by them as responding to their more immediate needs and priorities (rather, it draws resources away from such issues) and/or is not capable of being implemented by them. Thus, the substantive aspect of inclusive and effective international tax cooperation does not appear to be adequately met.” (para 41)

Countries are also required to accept existing standards before being able to participate in discussions on reforms and are made to pay annual fees. The Secretary-General is explicit: this runs “counter to the principle of universal participation, by right, without pre-conditions”. (para 42)

The Secretary-General is excoriating on the OECD’s undemocratic decision-making processes: “Publications produced by the Global Forum and the IF consistently state that all members participate on ‘an equal footing’ in decision-making processes ‘by consensus’ [but] a country is considered to agree to a proposal unless it raises an objection; it is not required to affirmatively ‘opt-in’ to be included in the ‘consensus.’ Therefore, a country that cannot keep up with the pace of work, and never expresses a view on a proposal, is viewed as agreeing to it.” (para 44) The absence of any voting mechanism or transparency about decisions has been repeatedly highlighted by non-OECD members.

On the OECD’s proposed BEPS 2.0 reforms, which has been widely criticised by non-OECD member countries6, leading economists7, several studies8 and by over 250 civil society organisations9 from around the world, the Secretary-General asserts that the reforms will make little to no progress: “[Several] shortcomings have contributed to the perception among developing countries that ‘the expected benefit from the proposed [BEPS] reforms will be minimal, especially when compared to the cost of implementation.’ This perception, supported by extensive data, is consistent with the inputs received from many country groups and civil society, in written form and at the ECOSOC Special Meeting.” (para 34)

Moreover, “the changes being developed through that [BEPS] process would not address fully a broader discontent rooted in the long-standing conviction held by many countries and stakeholders that the existing tax treaty rules do not reserve sufficient taxing rights to countries hosting multinational enterprises and constituting markets for their products.” (para 5)

The three proposals from the UN Secretary General

The Secretary-General identifies three options for the General Assembly to consider in its 78th session, which begins in September with high-level sessions on financing for development and a debate on this report. In practice, however, the options are simply variations on a single theme.

This is the proposal for a UN framework convention on tax, which is the longstanding aim of tax justice campaigners. Presented as the second option, this is defined by the Secretary-General as:

‘a legally binding multilateral instrument, but one that is “constitutive” in nature, in that it would establish an overall system of international tax governance. A framework convention therefore would outline the core tenets of future international tax cooperation, including the objectives of international tax cooperation, key principles governing the cooperation, and the governance structure of the cooperation framework. Framework conventions may also include institutional provisions creating a plenary forum for discussion among States that is endowed with the authority to adopt further normative instruments that States could then become a party to.’ (para 55)

The other options are presented as a multilateral convention on tax (also a legally binding instrument, but possibly narrower in scope); and a framework for international tax cooperation, which would retain the framework convention’s full breadth in its agenda, but without necessarily creating a legally binding instrument.

The report lays out next steps. For each option, the Secretary-General recommends “the establishment of a Member State-led, intergovernmental ad hoc advisory expert group”. (para 63) This group would either prepare draft terms of reference for the negotiation of a legally binding instrument, or prepare for a framework conference “including negotiating input papers and a draft outcome document on the most pressing international tax cooperation issues”. (para 65) Last, “the establishment of a Member State-led, open-ended ad hoc intergovernmental committee to recommend actions on the options for strengthening the inclusiveness and effectiveness of international tax cooperation […] would be appropriate if the General Assembly is not able, at its seventy-eighth session, to reach agreement on a way forward.” (para 67)


Notes to editor

  1. Read the advanced edition of the UN Secretary General’s report here.
  2. Read about the State of Tax Justice 2023’s findings here.
  3. See note 2.
  4. See note 2.
  5. Read more about the historic UN resolution passed last year here.
  6. Read Nigeria’s criticism of the OECD’s proposal here.
  7. Read the criticism of the OECD’s proposals made by renowned economists Joseph Stiglitz, Jayati Ghosh and other commissioners of the Independent Commission for the Reform of International Corporate Taxation here.
  8. IMF research on the revenue returns to the OECD proposals can be found here (see Figure 1 and Figure 5 on Pillar 1 and broader revenue impact), and here (a comparison of Pillar 1 with digital sales taxes for Asian countries). Research by the BEPS Monitoring Group, published earlier this summer, finds the OECD’s proposals to be “fundamentally flawed”. A study by the South Centre and the Coalition for Dialogue with similar conclusions can be found here. A EU Tax Observatory report, which finds lower income countries would lose tax revenue under OECD proposals, can be found here.
  9. A statement signed by over 250 civil society organisations from around the world criticised the OECD’s reform deepening inequalities within and between countries.

Image source: @UN Photo/Manuel Elias via Flickr