A long-awaited draft UN resolution to formally begin negotiations on establishing a legally-binding UN tax convention has been published, marking the latest milestone in a process that could potentially deliver the biggest shakeup in history to the global tax system.

The motion triggers the final stage of deliberations among countries to determine the process that will be used to negotiate the intricacies of a UN tax convention – negotiations that will begin early next year if the draft resolution is adopted at an upcoming vote at the UN General Assembly this November.

Tax experts argue a UN tax convention is urgently needed to prevent countries from losing nearly US$5 trillion to tax havens over the next decade – the equivalent of losing a year of worldwide spending on public health. A framework tax convention would create the first ever, globally inclusive, democratic process to set tax rules and standards, with the potential to recover much of the US$480 billion a year in estimated tax revenue losses that countries suffer due to cross-border tax abuse.

The draft resolution follows September’s high-level debate over the Secretary-General’s report on tackling rampant global tax abuse. The report laid out three options for UN Member States to consider. An emerging consensus was identified at the high-level debate in favour of the second option, a legally-binding UN convention on tax (broadly equivalent to the UNFCCC on climate change). This could include binding protocols to bolster key aspects of the fight against tax abuse, and the creation of a body to set tax rules in future.

The draft resolution, tabled by Nigeria on behalf of the African Group which also led last year’s resolution that opened the door to this process, signals a direction in favour of the strongest of the three options proposed by the UN Secretary General. The draft resolution:

“Emphasises that a United Nations comprehensive convention on international tax cooperation is needed in order to strengthen international tax cooperation and make it fully inclusive and more effective;

“Recognises that this will also help in accelerating the implementation of the Addis Ababa Action Agenda on Financing for Development and the 2030 Agenda for Sustainable Development;”

The draft resolution, if adopted, would establish an intergovernmental committee tasked with the job of drafting the UN tax convention by June 2025.
The draft resolution also specifies that any possible UN tax convention ought to consider the impact of international tax rules on inequality, gender and the environment.

Some countries have indicated a more cautious view. Finance ministers in the European Union have suggested that their governments should consider the third option put forward by the Secretary-General, which would create a globally inclusive forum to discuss tax matters but without the power to agree legally-binding decisions. Others have argued this would divert resources to a ‘talking shop’, and fail to address the urgent need for enhanced international cooperation. The European Parliament, in contrast, has called on the EU to follow the Africa Group’s leadership and pursue an ambitious UN tax convention.

The exact nature of any new convention will form part of the negotiations. Differences in initial stances are expected, and the process to be agreed will aim to resolve these along with addressing a range of technical and political issues.

Tax Justice Network’s advocacy consultant in New York, Amelia Evans, said: “This is an exciting moment. For the first time, the countries of the world are engaged in discussions about the value of a UN tax convention. The question in New York now is how the negotiations about a UN tax convention will take place, not if.”

Alex Cobham, chief executive of Tax Justice Network, added: “Almost every country in the world stands to gain from agreement on an ambitious UN framework convention on tax, because almost every country suffers significant revenue losses due to international tax abuse. The OECD has taken things as far as it can, and it’s clear now that only globally inclusive, transparent negotiations will deliver. We’re more than halfway through the Sustainable Development Goals period, with nothing to show for the promise of enhanced international cooperation against tax abuse – and that’s why there’s so much momentum now.

“A UN framework convention on tax, recapturing hundreds of billions of dollars a year in lost revenues, could be the SDGs’ greatest legacy. People in countries all around the world should be demanding that their governments push for the most ambitious outcome possible.”

* Read the draft resolution “Promotion of inclusive and effective international tax cooperation at the United Nations” here.

* Read More about the Secretary-General’s report on tackling global tax abuse here.

* Source: Tax Justice Network