The countries of the world have begun discussions at the United Nations over whether to establish a UN tax convention – which could slash the scope for tax abuse by multinational companies and wealthy individuals, in the biggest shakeup in international tax rules for a century.
A draft resolution1 has been tabled this week at the UN General Assembly’s Economic and Financial Committee. Depending on discussions over the coming month, the resolution will be voted on by the entire General Assembly in early December, and negotiations on the content of the convention could begin almost immediately.
The draft resolution on a ‘United Nations Convention on International tax cooperation’ would see agreement that:
The General Assembly, […]
Noting the corrosive effect that tax avoidance and tax evasion have on trust, the social compact, financial integrity, the rule of law and sustainable development, […]
Recognizing the need for all countries to work together to eliminate tax evasion, tax base erosion and profit shifting and to ensure that all taxpayers, including multinational companies, pay taxes to the Governments of countries where economic activity occurs and value is created, in accordance with national and international laws and policies, […]
1. Recognizes that an effective and inclusive international convention on international tax cooperation is needed and timely,
2. Decides to begin the elaboration of such an instrument in New York at the headquarters of the United Nations […]
Historically, proposals to set rules at the globally inclusive UN have been blocked by the richest countries and former imperial powers, which prefer to maintain decision-making at their own body, the Organisation for Economic Cooperation and Development (OECD), that has held this role for decades. But the OECD is stuck in a process to reform corporate tax rules that began in 2013 and looks increasingly unlikely to deliver a sustainable, global solution. This has left countries around the world exposed to rampant global tax abuse by multinational corporations as well as by wealthy individuals, which is estimated to cost countries a total of USD $483 billion in lost tax a year.2 At the same time, a combination of rising global inflation and extreme inequality is putting government budgets under severe pressure.
The OECD’s reform process has been hamstrung by a combination of entrenched private sector lobbying, opposition from OECD members that rank among the world’s biggest enablers of abuse on the Corporate Tax Haven Index and Financial Secrecy Index3, and the organisation’s inability to offer a meaningful voice to lower income countries. A UN tax convention would move rule-making on global tax from the OECD to the UN, lifting the grip that former colonial powers have continued to exert over global tax rules since the dissolution of their empires and finally offering a chance of legitimate, inclusive rule-setting.
Momentum for a UN tax convention to make the international tax architecture more inclusive has been growing for some time. Last month, UN Secretary General António Guterres announced4 his readiness to support negotiations on a convention. Economists and campaigners from around the world welcomed the announcement, saying the intervention “couldn’t come at a more urgent time”.
In a report5 to the General Assembly, the Secretary General recited a call from finance ministers of the Economic Commission for Africa6 for negotiations to start, and referred also to the final report of the UN high level panel for Financial Accountability, Transparency and Integrity (FACTI) published last year, which also called for the establishing of a UN tax convention7 and followed longstanding support form the African Group of countries and the G77. Support has developed powerfully over the last few years:
- A call to develop a UN Tax Convention was first put forward by the Africa Group at the United Nations in 2019.
- The UN Secretary-General’s initiative in 2020 to explore responses to the Covid-19 pandemic identified a UN tax convention among the options for heads of state.8
- In February 2021, The UN high level panel for Financial Accountability, Transparency and Integrity (FACTI) including former heads of state called for the establishing of a UN tax convention to implement a package of tax justice policies.9
- The World Economic Forum in June 2021 published a white paper identifying the UN tax convention among key policy pathways for an ambitious economic recovery post-pandemic.10
- Also in 2021, the South Centre – the intergovernmental organisation of lower-income countries – published a briefing detailing a proposal for a framework UN convention on tax.11
- The world’s first draft for a UN tax convention was proposed in March 2022 by civil society experts at Eurodad and the Global Alliance for Tax Justice, drawing battle lines for future negotiations at the UN.10
- Finance ministers of the Economic Commission for Africa , representing around one in six of the world’s population and over a quarter of the membership of the United Nations, called on the UN in May 2022 to start negotiations on a tax convention to address comprehensively the threat of cross-border tax abuse, including by wealthy individuals and multinational companies.12
- The new finance minister of Colombia, itself an OECD member, used the platform of a Tax Justice Network/Global Alliance for Tax Justice event on 6 September to announce the country’s support for a UN tax convention, and their plans to encourage Latin American consensus.13
Economists and campaigners from around the world have welcomed the news:
Alex Cobham, chief executive at the Tax Justice Network, said:
“The tax justice movement have been calling for these reforms, along with the G77 group of countries, for years. Now there is a resolution on the table, with support from the UN Secretary General, and the world will see if OECD countries are willing to accept globally inclusive, democratic decision-making on tax. Effective taxation on international profits and capital is vital for people and societies to achieve progress on human rights, in the face of extreme inequalities and the climate crisis. The OECD’s flawed dominance of international tax puts shackles on effective taxation all around the world – but the UN tax convention represents an urgent opportunity to throw these off.”
Hon. Irene Ovonji-Odida, a panellist on the UN High Level Panel on International Financial Accountability, Transparency and Integrity, a member of African Union/Economic Commission for Africa High Level Panel on Illicit Financial Flows out of Africa (the ‘Mbeki panel’), and now a board member for Tax Justice Network, said:
“This vital resolution, and the support of the Secretary-General, confirms the importance of the UN on critical global development issues, and of the vital role of African and indeed, global south leadership in reforming the global taxation system for the benefit of the world’s majorities. It is a historic moment and opportunity for General Assembly to confirm support and move immediately to start negotiations, just as the Mbeki panel led to the global adoption of the Sustainable Development Goals target to curb illicit financial flows. Engagement from the entire Global South, to support the G77’s long-standing call for a UN tax convention is critical too. All developing countries are impacted unfairly by current global tax rules, and the majority will make insignificant or no gains in taxing rights and revenue from the recent OECD proposals.”
Notes to editor
- The draft resolution tabled this week at the UN General Assembly’s Economic and Financial Committee for a UN tax convention is available here.
- The State of Tax Justice 2021, published by the Tax Justice Network with the Global Alliance for Tax Justice, Public Services International and FES, finds that the world loses $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals.
- The Financial Secrecy Index is a ranking of countries most complicit in helping individuals to hide their finances from the rule of law. The Corporate Tax Haven Index is a ranking of countries most complicit in enabling corporations to underpay tax elsewhere in the world.
- Read the UN Secretary General’s report here, which was published today (Tuesday 27 September 2022).
- See note 4 above.
- More information on the May 2022 statement from the finance ministers of the the Economic Commission for Africa is available here.
- Read more about the UN High Level FACTI panel’s report here.
- The UN Secretary-General’s “Financing for Development in the Era of COVID-19” initiative is available here.
- See note 7 above.
- The WEF’s white paper is available here.
- The South Centre briefing is available here.
- More information about the world’s first UN tax convention draft proposed by civil society experts at Eurodad and the Global Alliance for Tax Justice is available here.
- See note 6 above.
- Watch the Colombian Finance Minister’s announcement at the Tax Justice Network’s and Global Alliance for Tax Justice’s event of Colombia’s support for a UN tax convention, and their plans to encourage Latin American consensus.
About the Tax Justice Network
The Tax Justice Network believes our tax and financial systems are our most powerful tools for creating a just society that gives equal weight to the needs of everyone. But under pressure from corporate giants and the super-rich, our governments have programmed these systems to prioritise the wealthiest over everybody else, wiring financial secrecy and tax havens into the core of our global economy. This fuels inequality, fosters corruption and undermines democracy. We work to repair these injustices by inspiring and equipping people and governments to reprogramme their tax and financial systems.