UN General Assembly votes to launch historic global tax overhaul
Countries overwhelmingly agreed to start official negotiations on a UN framework convention on international tax cooperation in a historic decision at the UN General Assembly. Delegates will collaborate to establish new guidelines and standards for company and individual taxation throughout the next two and a half years. They will also create a new framework body that will host future “Conferences of the Parties” to handle any new tax issues that may come up in the future. From 2025 until the middle of 2027, Resolution 11 sets a schedule for three annual negotiation sessions in New York and Nairobi. Tax fairness advocates enthusiastically embraced the terms of reference 22 for the discussions, which were agreed upon earlier this year. A structure of governance for international tax cooperation that is “fully inclusive and effective in terms of substance and process” and that can “respond to existing and future tax and tax-related challenges on an ongoing basis” is one of the main goals.
UN approves landmark global tax reform
In addition to addressing “tax evasion and avoidance by high-net-worth individuals, ensuring their effective taxation,” the nations of the globe pledged to provide a “fair allocation of taxing rights, including equitable taxation of multinational enterprises.” All but eight of the blocking nations, the US and the UK, as well as Australia, Canada, Israel, Japan, New Zealand, and South Korea, supported the August 2024 vote on the terms of reference. Despite making up just 8% of the world’s population, these nations are accountable for 43% of the worldwide revenue losses brought on by cross-border tax abuse, according to the newly released State of Tax Justice 2024 report. Argentina, which had previously given its now-customary statement to distance the nation from any terminology referring to internationally accepted measures like Agenda 2030 and the Sustainable Development Goals, was the only nation to join the blockers in the final vote. After proposing and losing two amendments that would have needed broad support, the EU as a whole chose to abstain. In addition, the US summoned a major vote on this matter rather than letting the resolution pass by unanimous vote.
Key objectives of the tax overhaul
The ad hoc committee that established the terms of reference had made it plain that decision-making should take place during the first organizational session of the full discussions, as stated by Nigeria on behalf of the Group of African States. The vast majority of votes in favor of the whole resolution were cast in favor of this viewpoint. The design of global financial institutions and the way tax monies are used for public benefit might be greatly impacted by a UN tax treaty, which would mark a substantial change in the way international taxation is treated. To take a significant step toward creating a valid, equitable, stable, inclusive, and efficient international tax system, the UN’s Ad Hoc Committee to draft terms of reference for a UN Framework Convention on International Tax Cooperation approved a package of guidelines at the end of its second session.
Global support for the initiative
According to the Ad Hoc Committee’s mandate, a UN framework convention should, among other things, create an inclusive, egalitarian, transparent, efficient, and effective system for sustainable development. This would entail employing strategies that will help achieve sustainable development in the three areas of the economy, society, and environment. Furthermore, the framework convention ought to incorporate pledges to accomplish its goals, ranging from fair taxation of multinational corporations to tackling tax evasion and avoidance by wealthy people, as well as guaranteeing their efficient taxation in pertinent Member States. The framework agreement should be accompanied by the development of two legally binding protocols, one of which should deal with the taxation of revenue received from the supply of cross-border services in an increasingly globalized and digitalized economy.
Potential economic impact
The difficulties of bolstering domestic resources to allow all nations to finance and advance policies in line with the 17 Sustainable Development Goals (SDGs) can be effectively addressed by an inclusive tax cooperation framework. At the beginning of the Ad Hoc Committee session, Junhua Li, Undersecretary-General for Economic and Social Development, stated that only a completely inclusive international tax system would be valid and efficient. Large multinational corporations should pay their fair share of taxes regardless of where they operate, according to a worldwide tax convention that is anticipated to significantly increase tax collections for many nations, particularly those in the worldwide South.
“The government’s ability to fund basic infrastructure, education, health care, and climate action is essential to the livelihoods and future of billions of people,”
stated Under-Secretary-General Li.
