Today, the European Network on Debt and Development (Eurodad) and the Global Alliance for Tax Justice (GATJ) are launching a civil society proposal for a UN Convention on Tax.
A call to develop a UN Tax Convention was first put forward by the Africa Group at the United Nations in 2019. The following year, it was included in a ‘Menu of Options’ produced as part of a UN process to consider how the international community could respond to the Covid-19 crisis.
Today’s proposal responds to these calls and a number of other strong concerns that have been raised regarding the existing international tax system. It also integrates several ideas for reforms that have been tabled by governments, civil society organisations, international experts and several UN high-level panels, including the High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel).
“Countries around the world are losing hundreds of billions of dollars every year due large-scale international tax dodging. The patchy, archaic, incoherent and highly complex global tax rules and standards are at the heart of this problem. At the same time, the existing rules are strongly biased in favor of the richest countries, reflecting the fact that they have been written in forums where developing countries have not been able to participate on an equal footing,” said Dereje Alemayehu, Executive Coordinator of the Global Alliance for Tax Justice.
Author of the proposal and Tax Coordinator at Eurodad, Tove Maria Ryding, said: “Today we are launching a proposal for a UN Convention on Tax, which would, for the first time, create a truly global framework where all countries can participate on an equal footing. Furthermore, it links international tax governance to other key global commitments and obligations, including human rights, equality, environmental protection and the Sustainable Development Goals. The United Nations is the forum that leads on these issues and, at the same time, it is the only truly universal body that exists. That makes the UN the obvious place to anchor a truly global convention on tax.
“It is high time to kick off the discussion about how we can build a fair and effective global framework to solve the problems and injustices in the global tax system, not least in light of the crisis set off by the Covid-19 pandemic. Repeated efforts to stop international tax dodging have resulted in only sticky plaster solutions; additional complexities; and rules that continue to be biased in favor of the rich. We hope that the proposal we are launching today will help to kickstart a discussion about the fundamental reforms that we really need.”
The proposal is framed as a discussion paper, which aims to spark further conversations about what such a convention could look like.
The proposed Convention on Tax would:
- Create an inclusive global tax body. In the form of a Conference of the Parties, the Convention would create a global tax governance structure where all countries can participate on an equal footing. This is unlike the situation today, where decisions on global tax rules are made in different types of bodies where especially developing countries are not able to participate on an equal footing.
- Strengthen the global fight against illicit financial flows, including tax avoidance and evasion. The Convention would combat illicit financial flows by increasing transparency and cooperation between governments, and by creating more coherent and less complex global tax rules and standards.
- Promote fairness towards developing countries. The proposed Convention seeks replace existing tax standards and rules that are biased in favor of richer and larger countries. Instead, the proposal aims to introduce a system that fully includes the interests, concerns and needs of developing countries.
- Create strong links to development, human rights, equality and environmental protection. The Convention aims to promote progressive tax systems, and link global tax governance and other governmental commitments and obligations, including those relating to human rights, the UN Sustainable Development Goals, equality and environmental protection.
- Create global coherence and reduce complexity. The Convention is designed to gradually replace the incoherent and highly complex network of bilateral and multilateral tax treaties and agreements, which make up the current global tax system. The aim would be to introduce one coherent overall global framework, and thereby increase the effectiveness of the global tax system and remove opportunities for international tax dodging.
- Replace the failed transfer pricing system. The Convention would mandate a process to replace the existing transfer pricing rules with a new system whereby multinational corporations would be on the basis of their global consolidated profits, with taxing rights being allocated between governments based on an agreed formula in a system that is supplemented by a minimum effective corporate tax rate.
- Increase government accountability and public participation. The Convention would ensure that international decision-making on tax is transparent, participatory and allows citizens to hold their governments to account. This is unlike the situation today, where intergovernmental tax negotiations are often highly secretive and the possibilities for public participation are very limited.
- Ensure a high standard of transparency, while incorporating the interests, concerns and needs of developing countries. The Convention includes the “ABC of tax transparency”, namely Automatic Information Exchange, Beneficial Ownership transparency and Public Country by Country reporting. While a number of such systems already exist in some forms today, the Convention would ensure one coherent global system designed to work for all countries, including developing countries.
- Introduce a framework with a stepwise approach towards more detailed intergovernmental agreements. The Convention would be a framework convention, which would introduce the basic structures, commitments and agreements, and then allow for more detailed elements to be developed over time.
- Does not force countries to accept controversial dispute resolution mechanisms. The Convention would not require countries to commit to controversial mechanisms such as binding arbitration. Instead, the Convention would have a strong focus on dispute prevention, which would reduce the need for dispute resolution. New mechanisms for resolving disputes could also be negotiated under the Convention over time, through the inclusive and transparent decision-making processes foreseen under the Convention.
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