Reaching an appropriate global taxation framework

Making all pay taxes

The fifth session of the Intergovernmental Negotiating Committee is to be held in New York during August 11-15, where the first session was held last August, the overall purpose of the United Nations (UN) formulated INC being ‘to draft a United Nations Framework Convention on International Tax Cooperation and two early protocols.’ This effort is in consequence of the draft resolution titled ‘Promotion of inclusive and effective international tax cooperation at the United Nations’ adopted by the UN on 15 November 2023.

Moreover, the draft resolution adopted by the UN pointed out, for instance, with regard to developing such a framework as follows: ‘Taking note of the report of the Secretary-General on the promotion of inclusive and effective international tax cooperation at the United Nations, 1. Emphasizes that developing a United Nations framework convention on international tax cooperation is needed in order to strengthen international tax cooperation and make it fully inclusive and more effective; 2. Recognizes that developing a framework convention will also help in accelerating the implementation of the Addis Ababa Action Agenda on Financing for Development and the 2030 Agenda for Sustainable Development; 3. Decides to establish a Member State-led, open-ended ad hoc intergovernmental committee for the purpose of drafting terms of reference for a United Nations framework convention on international tax cooperation…’ Here, it needs to be pointed out that as per UN’s department of economic and social affairs (DESA) ‘This Member State-led process will run from 2025 to 2027, with the aim of developing a framework convention that leads to fully inclusive and more effective international tax cooperation.’

The importance of much-needed coordination for bringing greater effectiveness for taxation globally, for example, may be gauged from an April 2, Guardian published article ‘Global super-rich may have hidden $3.55tn from tax officials, says Oxfam’ that highlighted Oxfam’s research in this regard as follows: ‘The global super-rich may have as much as $3.55tn hidden away from tax authorities, according to estimates by Oxfam. The charity renewed its call for a wealth levy and urged governments to close tax loopholes as it published its latest analysis of the scale of offshore holdings. Building on the work of academics including the French economist Gabriel Zucman and the EU Tax Observatory, Oxfam said total wealth held offshore had increased significantly, to $13.25 trillion (£10 trillion) in 2023 – the latest year for which estimates were available.’

Highlighting the importance of the work being done by INC, a July 21, Project Syndicate (PS) published article ‘The good, the bad, and the ugly in global tax negotiations’ indicated ‘On August 3, negotiators at the United Nations will resume work on a Framework Convention on International Tax Cooperation. This is the first attempt to write the rules of international taxation in a forum where all countries have an equal say, so what happens in New York will determine whether the world finally gets a taxation framework capable of reaching multinational corporations and the ultra-rich.’

The world is going through a situation of polycrisis, including facing the existential threat of climate change crisis, with ever so high needs of making resilience-related spending, which has been made all the more difficult in the wake of elevated level of conflict for a number of years now overall, where commodity shocks, especially of oil, has all the more shrunk the fiscal envelope of especially developing, and in particular, net-oil importing, countries. This places all the more urgency with regard to reaching a much-fairer economic system in terms of inclusivity, and with regard to fair share of taxation according to ability to pay.

Furthermore, the article indicating a highly sub-optimal situation with regard to the effectiveness of application of taxation globally, pointed out ‘The current global tax rules are wide open to abuse. Multinationals can and do design their legal structures to minimize the taxes they pay in the jurisdictions where they generate revenues. That is why the Independent Commission for the Reform of International Corporate Taxation (ICRICT), of which I am a member, has long championed the idea of unitary taxation. By assessing a multinational’s profits at the global level, this approach would ensure that each country in which it operates can tax its profits proportionately. A forthcoming study from the Tax Justice Network will show that lower- and higher-income countries alike would gain from such a change, with tax revenues worldwide increasing by an estimated $700 billion to $1 trillion per year.’

The world is going through a situation of polycrisis, including facing the existential threat of climate change crisis, with ever so high needs of making resilience-related spending, which has been made all the more difficult in the wake of elevated level of conflict for a number of years now overall, where commodity shocks, especially of oil, has all the more shrunk the fiscal envelope of especially developing, and in particular, net-oil importing, countries. This places all the more urgency with regard to reaching a much-fairer economic system in terms of inclusivity, and with regard to fair share of taxation according to ability to pay. 

Highlighting the worsening situation with regard to inequality, the same PS published article pointed out ‘The latest negotiations come at a time when, in the World Inequality Lab’s estimation, the richest 0.001%—some 56,000 people—own three times more wealth than the poorer half of humanity. According to a committee of experts convened by South Africa’s G20 presidency and chaired by the Nobel laureate economist Joseph E. Stiglitz, the richest 1% have captured 41% of all new wealth created since 2000, while the poorest half received just 1%.’