A GROUP OF HEADS OF STATE from around the world have launched a blueprint for a UN tax convention and a new intergovernmental tax body to radically tackle global tax abuse.
The report from a high-level UN panel, published on 25 February 2021, provides a comprehensive set of recommendations that reflect the policy platform created by the Tax Justice Network. The panel identifies tax abuse and other illicit financial flows as a systemic problem that “robs billions of a better future” and that can only be addressed by “nothing less than a transformation of the global financial system” led at the United Nations.
Tax Justice Network chief executive Alex Cobham celebrated the UN proposal, saying “This is a tide-turning moment in the fight against international tax abuse. The recommendations of the tax justice movement have been comprehensively adopted as the policy package needed, and the heat is now on to move rule-making out of the hands of a few rich countries at the OECD and to a globally inclusive forum at the UN.”
Polling data published last summer from seven countries – the USA, France, Germany, Italy, Poland, the Netherlands and the UK – showed overwhelming support from the public, ranging from 87 per cent to 95 per cent, for governments to crackdown on corporations using tax havens.
The UN report draws scathing conclusions on the current patchwork of international tax rules and structures that have been largely set by the OECD, a membership organisation made up of high-income countries, and the G20. Calls to shift tax rule-setting to the UN gained unprecedented momentum last year, after the OECD received wide criticism for its failure to deliver meaningful change in its long-awaited tax reform proposals.
Nobel Prize winning Economist Joseph Stiglitz, said: “The proposals at the OECD are simply not adequate, they really represent the capture of this agenda by the multinational corporations and the countries that are closely allied with those multinational corporations.” The Tax Justice Network criticised the OECD reform proposal as a “tax haven lite” plan. The legitimacy of OECD member countries to set global tax rules has also been questioned by tax justice campaigners, as numerous studies have found OECD countries to be among the greatest enablers of global tax abuse.
The policy package which the high-level UN panel has prepared comprehensively backs the policy platform initiated by the Tax Justice Network. Key recommendations include:
- Universal implementation of automatic exchange of information for tax purposes among all countries by ending asymmetries in sharing. This would most significantly address the US’ refusal to reciprocally share information with other countries.
- Require all countries to establish beneficial ownership registers to hold information on all legal vehicles. Just over 80 countries have to date established beneficial ownership registers but even these registers do not cover all legal vehicles, leaving room for beneficial owners to avoid detection.
- Require all multinational corporations to publish their country by country reports, a transparency accounting standard designed to expose profit shifting. In comparison, the OECD has only required to multinationals to disclose their country by country reports privately to tax authorities, enabling multinationals to continue to escape accountability.
- Shift from the century-old ‘arm’s-length principle’ for taxing multinational corporations to the unitary tax approach. By taxing a multinational corporation as a group of all its subsidiaries, rather than taxing each subsidiary separately, unitary tax makes the majority of profit shifting techniques used by multinationals corporations to abuse tax redundant in one swoop.
- Establish a global minimum corporate tax rate. This would put much needed brakes the race to the bottom on corporate tax among state legislatures captured by global finance.
Alex Cobham, chief executive at the Tax Justice Network, said: “A global tax system that loses over $427 billion a year is not a broken system, it’s a system programmed to fail. Our tax systems are our most powerful tools for creating a just society that gives equal weight to the needs of all members of society. But under pressure from corporate giants and powerful tax havens like the Netherlands and the UK, the OECD has programmed the global tax system to prioritise the desires of the wealthiest corporations and individuals over the needs of everybody else. The resulting human cost we pay for that has been made painfully clear by the pandemic. Now more than ever we must reprogramme our global tax system to prioritise people’s health and livelihoods over the desires of those bent on not paying tax.
“This is a tide-turning moment in the fight against international tax abuse. The recommendations of the tax justice movement have been comprehensively adopted as the policy package needed, and the heat is now on to move rule-making out of the hands of a few rich countries at the OECD and to a globally inclusive forum at the UN. The launch of this UN blueprint gives us a century-defining shot to put an end to the plague of illicit finance – and empower countries to raise the revenues they need to deliver on the promise of human rights for all.”
* Source: Tax Justice Network