UN report calls for enhanced UN role in tax cooperation

The Secretary General, António Guterres’, made his comments in a new report, ‘Promotion of inclusive and effective international tax cooperation at the United Nations’, which was published in August. The report analyses current international tax cooperation arrangements and lays out the Secretary-General’s vision of new rules to better serve the needs of developing countries.

The report was commissioned following a resolution adopted by the UN General Assembly in December, on the initiative of African nations who felt that the OECD’s global tax framework was biased in favour of developed countries’ interests. A debate on developing a new global framework for tax policy will take place at the next General Assembly, which begins on 18 September.

The UN report

The UN’s report has been published at a time when there have been suggestions that the global financial framework, along with the international tax system, has ‘failed’ to sufficiently facilitate the post-pandemic economic recovery, the funding of Sustainable Development Goals (SDGs), and efforts to tackle climate change.

The report argues that there is a need for strengthen international tax cooperation to combat tax avoidance and build more ‘fair, inclusive, and effective’ tax systems, which it says are crucial for establishing trust in the global sustainable development agenda.

In the report Guterres argues that analysis of existing international arrangements indicates “that they do not satisfy the main elements for fully inclusive and more effective international tax cooperation. With regard to the Organisation for Economic Co-operation and Development’s (OECD’s) efforts to engage non-members, he says that “many of those countries find that there are significant barriers to meaningful engagement in agenda-setting and decision-making.” He adds that: “As a result, the substantive rules developed through these OECD initiatives often do not adequately address the needs and priorities of developing countries and/or are beyond their capacities to implement.”

“Enhancing the UN’s role in tax-norm shaping and rule setting, fully taking into account existing multilateral and international arrangements, appears the most viable path for making international tax cooperation fully inclusive and more effective”, he concludes.

The report examines existing arrangements in international tax cooperation and offers three options for debate at the September session:

1. a multilateral convention on tax which would set out specific rules creating obligations, including rules that potentially place limits on exercising taxing rights;
2. a framework convention on international tax cooperation which would establish an overall system of international tax governance;
3. a framework for international tax cooperation which would entail the development of a non-binding multilateral agenda for coordinated actions, at the international, national, regional, and bilateral levels, and aims at improving tax norms and capacity.

The third option is voluntary in nature, however the two first options would impose legally binding commitments for governments.

Reaction to the report

In response to the criticism, the director of the OECD’s Centre for Tax Policy and Administration, Manal Corwin, said that “the organisation is proud of its proven track record enabling significant changes in the international tax landscape.” Corwin gave the OECD’s facilitation of automatic exchange of information between countries, which she said had brought in nearly €126bn in additional tax since 2009 — including €41bn for developing countries — as one of these.

She expressed disappointment that the UN report “had chosen to ignore favourable assessments of the current state of OECD collaboration submitted by UN member states for the analysis, resulting in a number of inaccuracies and misleading statements”.

However Corwin told the Financial Times that said she did not want to “fuel rhetoric” of a rivalry between the two organisations. A UN spokesperson said that the report was “not about criticism of any organisation or competition between them”.

Business has responded cautiously to the report. The International Chamber of Commerce said that, for the business community, certainty and stability of the international tax system is ultimately key. They encouraged UN member states “to examine carefully how each of the option can usefully fit into the broader global tax ecosystem — and ideally enhance better co-ordination among multilateral institutions working on tax policy issues”. Will Morris, global tax policy leader at PwC, said: “The possibility of a larger role in international tax for the UN must be taken seriously.”

Tax campaigners welcomed the report. Tove Maria Ryding, Tax Coordinator at the European Network on Debt and Development (Eurodad), said: “International tax dodging is costing public budgets hundreds of billions of Euros in lost tax income every year, and we need an urgent, ambitious and truly global response to stop this devastating problem. We believe the right instrument for the job is a UN Framework Convention on International Tax Cooperation and we call on all governments to support this option.”

Next steps

It is anticipated that the UN will host an event on Financing for Development on 20 September in New York, where the issue of strengthening international tax cooperation is expected to take a central position on the agenda.

The three options in the report will be voted on at a General Assembly session later in the year.

The report states that, if governments at the General Assembly opt for option 1 following their negotiations, the next step would be the “establishment of a Member State-led, intergovernmental ad hoc advisory expert group to prepare draft terms of reference for the negotiation of such an instrument”. Likewise, if they select option 2, the next step would be similar.