G20 Global South Members: Uphold G77 Tax Interests – Not Those of the G7







By Adrián Falco, Alvin Mosioma, Dereje Alemayehu, Lidy Nacpil, Luis Moreno and Pooja Rangaprasad 

The G7 tax deal of the rich, recently agreed by the OECD Inclusive Framework, was approved by the G20 Finance Ministers and Central Bank Governors and will now go to the G20 summit for final endorsement

This is a deal that promotes only the G7 interests and will be damaging to the short- and long-term interests of the Global South. It transfers the share of tax revenue on global profits and additional taxing rights from developing countries to a few rich countries. Instead of addressing an inequitable tax system that has denied Global South countries their fair share of revenue for decades, it further enables the continued wealth transfers from the Global South to the North

The G20 was designed as an instrument to give legitimacy to decisions the G7 wants to make outside the UN on issues that affect the entire world. The non-OECD members of the G20 are not mandated to represent the other non-OECD members in their respective regions. This modus operandi and the structural set up of the G20 does not allow the non-OECD members of the G20 to champion any issue or agenda that is not pushed or willed by the G7. However, they have the possibility and the power to say no to decisions and measures that are harmful to their respective regions. 

The G20 has no mandate and legitimacy to make or reform binding international tax rules, compelling countries which are not part of the decision-making process. Besides, even if we ignore the coercive and manipulative circumstances under which members of the Inclusive Framework agreed to this deal, it defies all democratic principles when only G20 leaders get together to approve it. 

The OECD virtually ignored important inputs and proposals publicly submitted to it by countries from the Global South. For example, the proposal from the G24 at the early stages of the Inclusive Framework “negotiations” on fractional apportionment as well as criticising the design and parameters of the two-pillar approach (for example the absurd split of multinational corporations’ global profit into “routine” and “residual”), was ignored.  

On the other hand, whereas the reservations and proposals from developing countries were routinely ignored, the agreement gives wide-ranging concessions and leaves several loopholes that benefit tax havens and conduit jurisdictions. The proposal in Pillar Two, sets the minimum tax rate at 15% – much lower than the statutory corporate tax rates of many countries of the Global South (ATAF has noted that most African countries have rates between 25%-35%), thus giving impetus to a “race to the minimum”. What is more, it would give the great majority of new revenues from this measure to the (OECD) headquarters countries of multinationals – instead of the lower-income countries that lose the highest share of their tax revenues due to the failures of the current rules

Whereas the agreement related to Pillar One would apply to only around 100 multinational enterprises (MNEs) and only to a small share of their profits, the binding provision to prohibit unilateral measures to raise domestic tax revenue would apply to all MNEs. For a reform process that set out to deliver a solution that is ‘as simple as possible’, has ended up adding more complexity, keeping largely intact the broken transfer pricing system from the 1920s and will only lead to more disputes locking developing countries into a problematic mandatory and binding dispute resolution system

The purpose of this letter is not to give a detailed analysis of the disadvantages this agreement entails for developing countries. The few examples we gave above are enough to show that this deal risks locking developing countries into an agreement that will harm their future interests, without any short-term advantages. 

G20 members from the Global South should not be accomplice of the G7 governments’ design to trample on the taxing right of developing countries, and to forcefully expropriate tax revenue due to be paid in the Global South. The agreement is especially unconscionable as it comes during the crisis of the century that has further magnified inequalities within and between countries. While the Global North has been able to deploy large stimulus packages and vaccines to recover, the Global South is faced with limited fiscal and policy space due to an inequitable international tax system, unfair trade and investment regimes and sovereign debt crises. 

We stand by Kenya, Nigeria, Sri Lanka and Pakistan who have rejected the deal and call on other countries to join them. We find it unacceptable, when Global South countries agree to such an unfair international tax deal to be left with the alternative of pursuing national policies of raising revenue through indirect taxes that is devastating for women and other marginalised groups. We hope G24 or other Southern groupings and countries will have learnt that diluting their proposals to appease a biased OECD process will not lead to a fair compromise. We also hope that the utter failure of the OECD to accommodate even timid reform proposals from the South and push on unabashedly with promoting the interests of its powerful members, will convince Southern participants that this is not a venue to negotiate a viable and fair outcome. 

Instead of upholding G7 tax interests, it is time for G20 Global South countries to show leadership in taking forward the long-standing proposal by G77 calling for an inclusive, transparent tax negotiation process at the UN. Just last week, G77 and China tabled a proposal at the UN General Assembly once again calling for an intergovernmental UN tax body. G20 Southern countries should support this strongly, including the option of voting this through in the General Assembly where G77 countries are in the majority. It is time to begin a principled negotiation process in a forum where all countries are represented. As we had previously noted, the Inclusive Framework excludes several developing countries, including most Least Developed Countries (LDCs). In addition, UK Overseas Territories and Crown Dependencies are separate jurisdictions in the OECD negotiations, unlike in the UN where the UK gets one seat/vote. 

Crucially, in the UN, developing countries are organised in negotiating groups such as G77 and China (grouping of over 130 developing countries), Africa Group, Arab Group, Asia Pacific Group, Group of Latin America and the Caribbean (GRULAC), Caribbean Community (CARICOM), Least Developed Countries (LDC Group), Landlocked Developing Countries (LLDCs), Small Island Developing States (SIDS), etc. These groups have been built over decades of cooperation and investing limited resources in prioritising international cooperation within the UN. Such negotiation groupings allow Global South countries to pool in their negotiation capacity and try to avoid the geopolitical difficulties of sticking their necks out as individual countries during negotiations fraught with power asymmetries. In contrast, in the OECD Inclusive Framework, countries are not allowed to negotiate in groups. This is particularly problematic for Global South countries in a process led by a biased OECD Secretariat and the OECD governance body sitting on top of the Inclusive Framework.  

Most importantly, we need a negotiation process that is transparent so citizens can hold their respective governments accountable in ensuring that we have an international tax system that effectively taxes the rich and wealthy. 

It is imperative that the G20 Global South countries do not endorse this deal, which will pave the way for the signing of the binding OECD multilateral convention. We call them to uphold G77’s tax interests, not G7’s. 

Adrián Falco is chair of Red de Justicia Fiscal de América Latina y el Caribe (RJFALC) 
Alvin Mosioma is executive director of Tax Justice Network Africa (TJNA) and Africa representative on the Coordination Committee of the Global Alliance for Tax Justice 
Dereje Alemayehu is executive coordinator of the Global Alliance for Tax Justice (GATJ)
Lidy Nacpil is coordinator of the Asian Peoples’ Movement on Debt and Development (APMDD) and Asia representative on the Coordination Committee of the Global Alliance for Tax Justice 
Luis Moreno is coordinator of tax justice at Latindadd and chair of the Coordination Committee of the Global Alliance for Tax Justice
Pooja Rangaprasad is director of policy and advocacy on financing for development at Society for International Development (SID)


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