Reiterating what economic justice activists have been saying for long, the United Nations (UN) Secretary General António Guterres stated, during the opening of the Financing for Development (FfD) Forum last Monday (17 April), that “we won’t solve today’s problems by relying on the same financial system that caused them”. A delegation of the Global Alliance for Tax Justice (GATJ) joined other members of the Civil Society Financing for Development (CS FfD) Mechanism to do conduct advocacy for the the next steps that should be taken in the discussions and decision-making processes related to tax to the recent UN resolution, which was a major breakthrough to bring the reform of international tax rules back to the UN for a more inclusive, transparent and effective global tax governance.
The approval of a proposal by the Africa Group to begin tax cooperation at the UN, in November 2022, “was a historic win for all of us who have been campaigning to bring tax negotiations into the UN. This is not only a civil society demand: it was already on the agenda of the G77 and the Africa Group, who put this resolution forward. We, civil society, are here today as supporters of the UN Member States,” said Dereje Alemayehu, executive coordinator of GATJ and lead of tax matters in the CS FfD Mechanism, during the side event The road to a UN tax convention, organised by the CS FfD Mechanism, of which the GATJ is a co-lead of the tax and domestic resource mobilisation (DRM) workstream
Chenai Mukumba, acting executive director of the Tax Justice Network Africa (TJNA) and member of GATJ’s coordination committee, highlighted the need for tax reforms not only at the national level, but also at the international level. “We live in a global ecosystem where resources continue to leave global South countries [in the form of illicit financial flows] towards global North ones. Unfortunately, at present, the countries responsible for the rule-making of the global tax system are the destination of many of these resources,” she explained during her intervention in the side event. “Currently, with global tax rules being made at the Organisation for Economic Cooperation and Development (OECD), we lack inclusivity, participation and legitimacy. As such, we have been advocating for the UN to take centre stage in regards to these conversations.”
“While we agree with the OECD about the need to reform taxation rules, we vehemently disagree with their Two-Pillar solution, as it doesn’t address meaningfully the asymmetries of our tax architecture that has been excluding developing countries,” reiterated Antonio Salvador, representative of the Third World Network in the side event.
Why should UN Member States agree on a tax convention at the UN?
In order to achieve the systemic changes that the tax justice movement has been advocating for, a UN tax convention is a first step. In contribution to the side event, Tove Maria Ryding, tax justice policy and advocacy manager at Eurodad and member of GATJ’s coordination committee, took the audience through some of the possible outcomes of a UN tax convention. Ryding is also the author of the civil society proposal for such a convention, launched by both organisations in March 2022.
A UN tax convention can:
1. Establish an international framework on tax
Ryding said that there has never been an international framework on tax, which also explains the difficulty to tackle tax abuse across the world. “We currently lack the very basic structures: we lack objectives, institutions, and principles for international tax. These are key elements of any area regulated by international law,” she explained.
She also underlined that setting a baseline does not mean that all rules need to be decided at this initial stage. “As we’ve seen with the digital economy, the situation is going to keep changing. What you can do with a framework convention is set up the basic framework, and then you add protocols as you go along, so you make more specific agreements later on the negotiations.”
2. Promote fairness towards developing countries
The OECD has taken the role of reforming international tax rules for the last 50 years, and their proposal not only falls short but is also harmful to developing countries. Over one-third of the world’s countries did not participate in the OECD’s so-called “Inclusive Framework”, set to collaborate on the implementation of their proposal. Besides, many of the inputs submitted by developing countries during the process were disregarded, and there was no level playing field for non-OECD/G20 members in the decision making process.
“We need to have a global tax system that also works for developing countries,” highlighted Ryding. Taking the discussions and decision-making on tax to the UN would allow all countries to participate on an equal footing. Based on the example of international environmental law, the GATJ and Eurodad’s proposal for a UN tax convention takes into account a principle that every country has the right to use its natural resources but also has the obligation to make sure they do not undermine other countries’ rights. “If we were to introduce this principle for tax, you can say that every country has the right to decide its own tax system but it also has the obligation to make sure that its tax rules do not destroy the tax systems of other countries,” she said.
3. Create links to human rights and sustainable development goals (SDGs)
While the urgency of realising the SDGs and human rights is clear, the world has still not figured out how to pay for it. The convention could link global tax governance to other governmental commitments and obligations, making it easier to implement them, explained Ryding. “Our idea is to reintroduce the governments’ ability to have effective tax systems, which would be an upgrade in government budgets all around the world,” she said.
4. Ensure a high standard of transparency, while incorporating the interests, concerns and needs of developing countries
The proposal for a UN tax convention also includes effective information exchange between countries. “This is one of the areas where we see that the OECD has on some points developed good templates for how governments could exchange information, what type of data and how to do it. The problem is that, politically, there is no commitment to make sure developing countries also get this information, so we currently see them shut out when it comes to access information that they need to have an effective tax system,” she explained. In this sense, the proposal builds on some of the existing elements, adding the political commitment to ensure inclusiveness.
5. Increase government accountability and public participation
Ryding also explained that, with a convention, it would be possible to establish institutions. “When you have a convention, countries that sign become parties – that means you can have a Conference of the Parties, as there is for climate change, for example. This would mean that we would have a decision-making body on tax for all countries to participate on an equal footing, and also that we would have transparency and participation of observers at the UN,” she said.
Watch the video recording of the side event The road to a UN tax convention: https://media.un.org/en/asset/k1f/k1ftqe3tqh