Reflections by Dr. Dereje Alemayehu on the third session of negotiations for the new global tax rules.
Overview of the Nairobi session
The negotiations for a UN Framework Convention on International Tax Cooperation (UN Tax Convention) held in Nairobi from November 10th to 19th marked another step in implementing the 2024 Terms of Reference (ToR). During this third session of the Intergovernmental Negotiating Committee (INC), delegates engaged in informal discussions on a draft Convention template and a concept note for Protocol 2 on dispute prevention and resolution.
While the Convention template carries forward the principles and objectives agreed in the ToR, it remains provisional and, in several areas, falls short of the ToR’s ambition and mandate. The debate it sparked brought no clarity on the structure, scope, or capacity to overhaul the global tax system. Article 4 on taxing rights, for instance, consisted of only one sentence, far too short for that of a Framework Convention. Although no decisions were planned for this session, the discussions surfaced ambiguities and uncertainties around the Convention’s central issues. How these issues are taken up in drafting a consolidated text will determine the trajectory of the Convention process in the subsequent negotiations.
Protocol 1 (on the taxation of income derived from the provision of cross-border services in an increasingly digitalized and globalized economy) saw no substantive movement; delegates received a brief oral update indicating limited progress. It was announced that a paper on key economic terms is expected ahead of the February 2026 session, with further analytical outputs anticipated before August 2026.
This review discusses four key thematic areas that arise when assessing the Nairobi session: fair allocation of taxing rights, the relationship of the Convention with standards, regulations and institutions created by the OECD, its alignment with sustainable development and other UN commitments, and the work on protocol 2.
A fair allocation of taxing rights: The Convention’s core
For the Convention to become a genuinely transformative and binding legal instrument—rather than yet another aspirational text—it must provide unequivocal clarity on the fair allocation of taxing rights. This is the core of global tax injustice. For decades, international tax rules have overwhelmingly favoured residence jurisdictions, systematically undermining the ability of source countries—where real economic activity occur—to properly tax the profits and wealth generated within their economies.
The discussions in Nairobi, particularly around Article 4, exposed the persistent uncertainty and political hesitation that continue to obstruct efforts to reinforce the legal basis for source taxing rights on multinational profits. Only clear draft language affirming taxing rights where business activity occurs can constitute a decisive break from the obsolete “physical presence” requirement—an anachronism rooted in a pre-digital, colonial-era economy. Recognizing economic presence as a basis for taxation is not a technical adjustment; it is a structural correction to a system that has long siphoned taxing rights away from the Global South.
Advancing this principle is indispensable. If the Convention truly aims to overhaul a century-old global tax order that continues to constrain domestic resource mobilization in developing countries, then the fair allocation of taxing rights must stand as its foundational pillar. Everything else the Convention can deliver—cooperation, transparency, dispute resolution, capacity-building—ultimately flows from getting this principle right.
Relationship of the Convention with standards and institutions set up by the OECD
Several OECD members again stressed the need to “avoid duplication,” often implying that the Convention should not revisit areas already covered by OECD standards. This framing risks constraining countries and the Convention’s ambition by treating OECD norms as fixed baselines—even though many were developed with limited participation, fail to reflect most countries’ priorities, and have proven ineffective in resolving the very problems the Convention is meant to address. In effect, it positions the problem itself as the solution. This is the first truly universal process to negotiate global tax rules.
A UN-led process offers a long-overdue opportunity to reassess fundamental elements of the international tax architecture—the structural drivers of profit shifting, nexus rules, profit-allocation methods, and harmful tax practices—within a genuinely universal and more representative forum. Re-examining these areas is not duplication because it simply has never been done in an inclusive open forum; it is necessary correction. By enabling all countries to reshape standards long set by a privileged few, the Convention can strengthen global legitimacy, improve coherence within the overall system, and produce norms aligned with sustainable development goals and suited to contemporary economic realities.
The relationship with Convention with sustainable development other UN commitments
Discussions on the Convention template revealed a marked reluctance—and in some cases an evident unpreparedness—to explicitly align the Convention with sustainable development, gender equality commitments, climate action, and UN human rights frameworks. Framing these linkages as outside the “technical scope” of tax fundamentally misreads the nature of international tax cooperation. This is not an isolated technical exercise; it is the financial foundation for sustainable development, gender-responsive public services, and the realisation of human rights obligations. This was made even more evident in the discussions on finance taking place in parallel at the COP30 climate negotiations.
Explicitly embedding these connections would deliver, and not expand the Convention’s mandate: “to establish an international tax system for sustainable development.” Rather, it would ensure coherence with existing UN instruments and align global tax cooperation with commitments that Member States have already endorsed at the UN. Clarifying these linkages would also strengthen policy integration at the national level, ensuring that tax norms support sustainable development, social protection priorities, and equality objectives. Conversely, a narrowly technical approach would leave the Convention disconnected from the broader policy frameworks that shape economic, social, and climate action. The Convention must support — and be integrated with — sustainable development objectives, for all of which revenue generation is a key component.
The challenge of advancing Protocol 2 before the Framework Convention
Discussion of the Co-Leads’ Concept Note on Protocol 2 raised concerns that it may drift from the Convention’s substantive foundation. Because most cross-border tax disputes arise from flaws in the current system, Protocol 2 should reinforce a reformed framework—not replicate existing deficiencies.
The present corporate tax system is broken and results in countless, costly disputes. This transfer-pricing system based on the arm’s length principle, is at the core of the countless and costly tax disputes. Dispute prevention must be the priority through a commitment in the Convention to move towards a more effective corporate tax system of unitary taxation with formulary apportionment.
Its scope must flow from the Convention’s shared legal basis, with dispute prevention prioritized through transparency measures that reduce information asymmetries, such as public country-by-country reporting.
Proposals for “optionality” also warrant caution, as multiple pathways risk fragmentation and may pressure countries—particularly developing ones—to accept mechanisms like arbitration that lack broad support. A forward-looking Protocol 2 should embed equitable, state-to-state mechanisms that support a coherent, development-oriented tax architecture—preventing disputes by design and resolving them fairly when they arise.
Looking to the next session in February
Governments, civil society, and other stakeholders have now made submissions on December 5th. The Global Alliance for Tax Justice made a submission on behalf of over 190 civil society organizations and trade unions intended as input to the ongoing iteration of the evolving negotiations text. It remains to be seen to what extent it will be taken into consideration to address the shortcomings discussed above in drafting the text for the negotiations in February 2026.