THE UN SECRETARY-GENERAL, António Guterres, has announced his readiness to support a UN convention on tax that would overhaul century-old global tax rules.
The backing from the UN’s highest ranking officer opens the door for negotiations among members states to begin, following two years of rapidly growing momentum among governments, international bodies and rights campaigners for a UN tax convention.
Economists and campaigners from around the world have welcomed the news, saying the intervention “couldn’t come at a more urgent time”.
In a report to the General Assembly published on 27 September, the Secretary-General repeated a call from finance ministers of the Economic Commission for Africa, made earlier this year on the UN, to start negotiations on a tax convention to address the threat of global tax abuse. The Secretary-General reiterated the need for “political leadership” to overhaul the “patchwork” of existing treaties and measures to tackle global tax abuse and illicit financial flows with a “legitimate global system of laws…consistent with the principles set out in the United Nations Charter”, pointing to the role of a UN tax convention in meeting this need.
After a decade of failed reform efforts at the Organisation for Economic Co-operation and Development (OECD), a club of rich countries that has set global tax rules for the past 60 years, countries all around the world remain exposed to rampant global tax abuse by multinational corporations (as well as by wealthy individuals), which is estimated to cost countries a total of US $483 billion in lost tax a year. These OECD failures reflect 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 Index, 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 to move to the UN has built for some years and passed a tipping point last year after the UN high level panel for Financial Accountability, Transparency and Integrity (FACTI) called for the establishing of a UN tax convention. And support has continued to swell since:
- 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.
- 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.
- 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.
- 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.
- The world’s first draft for a UN tax convention was proposed in March 2022 by civil society experts at Eurodad (a network of 53 non-governmental organisations and seven statutory allies from 29 European countries).and the Global Alliance for Tax Justice, drawing battle lines for future negotiations at the UN.
- 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.
- 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.
Economists and campaigners from around the world have welcomed the news. Alex Cobham, chief executive at the Tax Justice Network, said: “The OECD has failed – failed to include lower-income countries equally alongside the former colonial powers that are its core membership, and failed to deliver effective tax and transparency rules to protect all of us from tax abuse by multinational companies and wealthy elites. We and the wider tax justice movement have been calling for these reforms, along with the G77 group of countries, for years and we welcome wholeheartedly this support from the UN Secretary- General. It’s time for globally inclusive negotiations at the UN to overhaul this system with new, democratically agreed global tax rules that put weight on human rights – and this couldn’t come at a more urgent time.”
Irene Ovonji-Odida, a panellist on the UN High Level Panel on International Financial Accountability, Transparency and Integrity, and now a board member for Tax Justice Network, said: “This crucial statement from the Secretary-General confirms the importance of African leadership on these important issues. This must be followed immediately by the start of 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.”
Dr Dereje Alemayehu, executive coordinator of the Global Alliance for Tax Justice, said: “We welcome the Secretary-General’s support for a UN tax convention. The OECD has made the world wait for too long without delivering, while its rich members block a UN process that would allow countries to participate on an equal footing. We can’t afford to wait any longer! The countries of the Global South, which lose the greatest share of their tax revenues to tax abuse, are demanding a globally inclusive process to negotiate new standards and a new rule-setting body. It is long past time that the world acted, and the UN must take the lead to bring negotiations for international tax cooperation.”
The State of Tax Justice 2021, published by the Tax Justice Network with the Global Alliance for Tax Justice, Public Services International and FES, found that the world loses $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals.
* Read the UN Secretary General’s report here.
* Read The State of Tax Justice 2021 here.
* Source: Tax Justice Network