The US walked out alone from an overwhelmingly positive kick off to the UN tax negotiations yesterday, after failing to rally any other country to answer its plea to join a walkout.1
Following an opening session in which every delegate who spoke, from every region of the world, had affirmed their country’s commitment to the principles of the UN tax convention, the US delegation took to the floor to declare themselves unwilling even to participate in the conversation about more effective and inclusive international tax rules, then proceeded to ask delegates to join it in walking out of the room.
The miscalculated opening gambit, made just two weeks after the US threatened the world with a tax war2, now puts the US in a weaker position to obstruct a widely backed3 UN tax reform process. The US’s withdrawal effectively opens the way for the rest of the world to negotiate, unimpeded by the US presence, a set of fairer tax rules.
Alex Cobham, chief executive at the Tax Justice Network, said:
“The Trump administration just scored a spectacular own goal on day one of the negotiations, giving the rest of the world an even greater chance of ending global tax abuse. While previous US presidents finessed a double game, promising to cooperate on tax but never doing so, Trump has clumsily given the game away, first pulling the US out of its own sham global tax reforms last month, and now pulling the US out of the most important tax negotiations of our lifetime.
“Two weeks ago he was threatening economic war against any country that implements the US’s own global minimum tax proposal. Now the US is calling on countries to lock arms with it and march out of the UN together singing kumbaya. Either the US has lost the plot, or it thinks the rest of the world is too stupid to notice.
“Trump has made clear that there is no fair negotiating table at which the US will sit, so countries should have no qualms about pressing on together without the US. In time, the US multinational corporations which were so well represented at Trump’s inauguration will realise that the declared goals of the UN tax negotiations will make it a lot harder for them to cheat on tax. That’s when we’ll see the US coming back to the table, but from a weaker position. Trump has basically handed countries a golden window to push ahead with an ambitious UN tax convention that delivers on the negotiation goals agreed last year.
“Every second, we lose a nurse’s salary to multinational corporations and the superrich cheating on tax – nearly half a trillion dollars a year.4 The UN tax negotiations are our first shot in a century to fix this problem. It was African-led Global South countries that kicked down the door to make these negotiations possible. Rich EU and OECD countries, who are among the biggest losers to global tax abuse, must now choose between two futures: one where their tax rules are dictated under duress by an erratic US, or one where rules are democratically and inclusively agreed at the UN. It’s time to work together and make the most of Trump’s own goal.”
While the US has historically enjoyed an effective veto over tax rule-setting at the OECD, as the largest and most powerful member, the UN forum ensures a voice for all member states and hence the ability of the US to set terms is heavily diluted. Previous US presidents ensured the US had control over the outcomes of OECD reforms, even when they had no intention of putting them in place themselves. President Trump has now done away with the façade.
Having blown up the last chance of serious progress at the OECD where it has an effective veto, the US is now running away from the inclusive and transparent negotiations at the UN – but that simply gives the rest of the world an even greater chance of ending the era of international tax abuse.
By taking itself out of the negotiations entirely, the Trump administration has opened the way for the countries of the world to negotiate an ambitious UN tax convention to set the rules for the future, in line with the shared objectives countries agreed in the Terms of Reference5 last year. The Trump administration has made clear that there can be no further progress at the OECD, and by its threats has also positively increased the value to other countries of taking coordinated, multilateral action together to gain collective strength.
Among the agreed objectives is the collective intent of UN member states to ensure that multinational corporations pay tax in the location of their real economic activity. This will have significant implications for the ability of US multinational corporations to engineer unfairly low tax rates around the world, who will likely pressure the US to return the negotiations.
The Global Alliance for Tax Justice highlighted in a statement6 published today that the US has opposed every multilateral process on tax, and called for countries to stay committed to the negotiations.
-ENDS-
Notes to Editor
- A recording is available here of the first session of the Intergovernmental Negotiating Committee on the United Nations Framework Convention on International Tax Cooperation.
- In a presidential memorandum signed hours into taking office, US President Donald Trump signalled plans to question the right of any country to tax American multinational corporations and threatened to take countermeasures against countries that do not, in effect, cede their tax sovereignty over US multinationals operating within their own borders.
- Countries overwhelmingly decided in a UN General Assembly vote in November 2024 to begin the formal negotiation in 2025 of a UN framework convention on international tax cooperation. Only nine countries opposed the negotiations, among which were the US and UK.
- Countries are losing US$492 billion in tax a year to multinational corporations and wealthy individuals using tax havens to underpay tax, our State of Tax Justice 2024
- More information about the Terms of Reference agreed last year is available here.
- Read the Global Alliance for Tax Justice’s statement here.