Governments in Africa are pushing for more international oversight of tax policies. In contrast, the Northern Hemisphere stands in solidarity in its opposition.
 |
| Infamous Ireland for shell companies from worldwide |
Following the unanimous approval of a United Nations tax convention, champagne corks were popped in New York. This decisive outcome cleared the way for the UN to play a more active role in defining international tax cooperation that is both inclusive and effective. The G77 and worldwide civic society have been pressing for this for decades, and it finally happened. Public Services International (PSI), the global union of public service providers, is a strong advocate for equitable global tax policies. “Tax rules that affect us all must also include everyone,” said PSI General Secretary Daniel Bertossa, who saw the UN decision as a vindication of the trade union movement's and its allies' dogged advocacy.
Questions of national sovereignty are impacted by international tax policy, which is essentially a policy of global distribution. The British Crown had previously mimicked the phrase "No taxation without representation" during the American War of Independence.
Unfortunately, the historic vote devolved into a fight between Northerners and Southerners. This was the most blatant north-south vote that Kenya's UN Permanent Representative has seen recently, he said of the X platform's results. Many have voiced their desire for more equitable relationships and the establishment of global alliances in response to the escalating tensions and crises in international relations.
Trust in the dependability of such alliances has been eroded for some time due to industrialised nations' refusal to release vaccine patents during the COVID-19 pandemic and their apathy towards the existential danger posed by the international debt crisis to numerous middle- and low-income nations.
The next major hurdle is now the UN tax convention vote. In the end, the motion put forward by the African group of nations in the General Assembly's Second Committee received 125 yes votes and 48 no votes. Votes against came from Switzerland, all member states of the European Union and their applicants for membership, all of Australia and Canada, and every country in the EU. All members of the Northern Hemisphere voted against the plan, with the exception of Norway, which chose not to participate.
on an open letter sent just before the vote, the ICRCT pleaded on the United States and the European Union to reform their approaches to international corporate taxes. A "blockage of the resolution to promote inclusive and effective international tax cooperation at the United Nations" would send a "dangerous signal," according to the commission's members, who include prominent economists from both the North and the South. "Those who most loudly praised the advantages of a rules-based international order did not really believe in one," the experts claim.
Public goods and services are mostly funded by taxes. Discussions on the worldwide tax system's potential overhaul have gained momentum in the last decade.
In spite of this, multinational corporations are still able to evade taxes to a considerable extent. It is clear who should shoulder the primary financial load: workers and average citizens, not billionaires, considering the growing inequality in wealth distribution and the meagre contribution of wealth-related taxes to global tax income (only 4%). Taxes are levied on labour and not on riches and money.
Efforts to reshape the worldwide tax system have long included calls for the UN to play a more prominent role in facilitating such collaboration. International tax reform has so far been spearheaded by the Club of Industrialised Countries, formally known as the Organisation for Economic Cooperation and Development (OECD).
To combat base erosion and profit shifting (BEPS), the OECD is drafting recommendations on behalf of the G20. A more robust role for the UN in formulating a global tax system that promotes greater international tax justice and is in line with the sustainable development agenda has long been advocated for by civil society groups like the Global Alliance for Tax Justice and the G77. Their motto is "If you are not at the table, you are on the menu," and they use it to criticise the OECD for not giving poor nations an equal say in negotiating policies.
Supporters of the United Nations Tax Convention hope that it would lead to a more open and equitable international tax policy and encourage more participation from civil society, which will increase transparency. Sceptics are worried that the OECD's current reform achievements may be watered down in a similar manner.
José Antonio Ocampo, a former Colombian minister of finance, took a conciliatory stance in a press statement issued by the ICRICT Commission after the voting. A "strengthening of institutions, democracy and international stability," he says, and "a step towards global social justice" are his words to describe the resolution. He urges that we should "learn from all the efforts of the past and seeing this process not as antagonism, but as the beginning of real cooperation between countries and between global institutions."
We must swiftly, without getting bogged down in the institutional argument, discover consensus solutions for fairer international taxation of multinational firms in light of the great funding issues of our day.
The OECD's successful negotiations could be universally legitimised through a UN tax convention, which would also build on the UN Committee of Experts' crucial preliminary work on international tax issues, like the UN framework on double taxation. The agreement on a global minimum tax is undeniably a major negotiating win for the OECD's Inclusive Framework on BEPS. The goal of establishing a minimum rate is to discourage countries from competing with one another to reduce their tax rates.
If the intended beneficial income impacts are to materialise, the 15% rate is obviously too low, according to the Global South. Countries with higher tax rates may be tempted to lower them, which is a source of worry. Therefore, a rate between 22 and 25 percent has been advocated for by the ICRICT Commission for quite some time.
In its two-pronged strategy, the OECD pays little attention to structural inequalities such the unequal allocation of taxing rights. The nations where value is really created along production networks are seen by critics as losing out when taxes rights are linked to the parent company's headquarters. Thus, it is said that the Southern nations are left out of the OECD-led reform process, which hinders their ability to act independently, such as when it comes to digital economy taxes.
It is believed that the UN may facilitate a better mending of fences by putting taxation concerns in the broader framework of funding the shift to a sustainable global development model. Accordingly, in 2024, work will start on the logistics for the fourth international development funding conference (FfD4), which is scheduled to be held in Madrid in 2025. Taxes, debt, and investments are three areas where the many reform agendas could use some cohesion, and the FfD4 conference offers that framework. It's been ten years since the last big meeting in Addis Ababa.
Even though it was already on the table at Addis Ababa, the industrialised nations rejected the idea of a UN-sponsored universal and intergovernmental tax agency.
More than 600 NGOs from all around the globe voiced their dismay at the chance that was lost in the concluding statement of the related civil society meeting. The South has considerably improved its bargaining position going into the FfD4 in Madrid 2025 thanks to the recent decision on the UN Tax Convention.
The author Sarah Ganter is a political scientist and heads the globalization project of the Global and European Politics Department of the Friedrich Ebert Foundation.
Source: IPG