African nations have won a battle to pave the path for global tax reforms
Tax fairness proponents hailed the resolution as a "historic victory" in the effort to wrest control of global tax policymaking from the small group of wealthy nations that have historically dominated the space.
In a political victory for African nations, the United Nations has agreed to set the framework for a new worldwide tax cooperation system.
Today, the U.N. approved a resolution to begin discussions on developing a new global tax system that may combat corporate tax evasion and money laundering worldwide.
Nigeria presented the proposal for consideration on behalf of the 54-member African group of states, who hope to have a stronger say in global tax policy, which has generally been the domain of a small group of wealthy nations through the Organization for Economic Co-operation and Development.
“This is a historic win for the tax justice and the broader economic justice movement and a big step forward to combat illicit financial flows and tax abuses,” Global Alliance for Tax Justice’s executive coordinator Dereje Alemayehu said in a statement.
“Shifting power from the OECD is paramount to end the exploitation and plunder of developing countries.”
Investigations conducted by the International Consortium of Investigative Journalists, including as the Pandora Papers and the Paradise Papers, have revealed the complex and sophisticated strategies firms employ to shift earnings to low-tax nations. The Paradise Papers investigation uncovered the efforts of major multinational corporations, including Nike and Apple, to offshore their revenues on a huge scale.
The U.N. resolution could theoretically pave the way for combating tax evasion by establishing an international tax authority that could set tax standards across nations and spearhead the implementation of a long-sought global minimum tax.
The OECD, a club of 38 of the world's wealthiest nations that has positioned itself as a pioneer in establishing worldwide tax norms, has sponsored discussions regarding a global minimum tax for years.
The objective of the OECD's minimum tax plan was to prevent tax avoidance by deterring firms from relocating money to low-tax nations. However, differences among members and bureaucratic obstacles have severely slowed progress, which rests on some nations, particularly the United States, approving significant tax reforms by their national legislatures.
The ratification of the U.N. tax resolution is an indication of rising dissatisfaction with the OECD's delayed taxation initiatives, and it could shift power from the OECD to the U.N., where developing nations have more influence.
Bruce Zagaris, an attorney specialising in global tax policy at Berliner Corcoran & Rowe, told ICIJ that the United Nations' efforts on taxation appear to have prompted the OECD to become more inclusive in its own tax initiatives.
Zagaris says that a shift in tax policy power toward the U.N. is possible but would take years. “The OECD will continue to dominate and make most of the decisions around tax in the near term,” Zagaris said.
The effectiveness of a new global tax system administered by the United Nations would depend, among other things, on the participation of wealthy nations that have historically resisted numerous international community initiatives.
In a demonstration of divergent perspectives on tax policy among U.N. members, the United States today proposed an amendment that would have dramatically narrowed the scope of the global tax resolution by removing language expressing the desired framework in general terms. The American amendment failed by a significant margin.
Alex Cobham, the executive director of the Tax Justice Network, stated that the amendment "attempted to make the intergovernmental conversations agreed to by the resolution so ambiguous as to be essentially worthless," but observed that the United States ultimately voted in favour of the resolution.
“We must hope that the country will play a more constructive role in the discussions to come,” Cobham said.
By fLEXI tEAM