A new draft resolution introduced at the United Nations this month could mark a key shift in momentum on international tax cooperation, after years of stalled efforts and disagreements between some of the world’s richest countries.
The proposal, submitted by Nigeria on behalf of the African group of member states, calls for the U.N. to consider a wide-ranging proposal to create a new international tax system that would combat criminals moving cash and help stamp out corporate tax cheats around the world.
Asserting that there is no “inclusive forum for international tax cooperation” among national governments, the proposal seeks to create a global tax body that could set standards across countries, including the potential to enact a global minimum tax.
The draft resolution is the latest indicator that some momentum for implementing global tax reform appears to be shifting away from a group of wealthy nations — the Organization for Economic Co-operation and Development — that has stumbled in recent years in attempts to set global taxation standards.
“This has been building for a long time but never been so close,” Alex Cobham, chief executive at the Tax Justice Network told the International Consortium of Investigative Journalists of the U.N. proposal. Pointing to efforts to tackle corporate tax abuse, Cobham said that the “OECD has now had ten years to solve the problem, and really hasn’t yet made much in the way of concrete progress.”
ICIJ investigations like the Paradise Papers and Lux Leaks exposed the extensive measures companies take to shift profits to tax havens in an effort to dodge taxes in the jurisdictions where they operate.
In 2017, ICIJ’s Paradise Papers project shed light on tax maneuvers of more than 100 corporations, including Nike and Apple, which shifted profits around the world to accumulate $252 billion offshore. A study published last year showed that, in one year alone, corporations shifted $1 trillion offshore, depriving governments of hundreds of billions in revenue.
Despite the staggering scale of corporate tax dodging, the OECD’s long-running efforts to reform the global tax system have been bogged down for years by bureaucratic snarls and policy disagreements between national governments. This has been epitomized most recently by the stalling of the group’s high-profile attempt to set an effective minimum global corporate tax rate of 15% for corporations.
The OECD plan aimed to stamp out an array of harmful tax practices, by removing policy incentives that drive major corporations to continuously shift wealth to the lowest-tax jurisdictions around the world. But discord among member nations — many of which must legislate the changes domestically for the overall plan to work — has delayed the plan’s progress and cast doubt on its future.
Earlier this year, Hungary objected to the OECD’s method for implementing the tax plan, stalling the European Union’s adoption of the plan, while the U.S. Congress’s lack of action in approving the plan has sidelined one of the world’s largest economies.
The U.N.’s proposed tax convention contains few specific policy wishes, but the broad move appears to have the support of U.N. Secretary General António Guterres, who issued a report in August that called for greater tax cooperation and increased transparency in tax and finance. The report also recommended strengthening collections of company ownership information, a key step toward stamping our secretive shell companies often used by tax cheats.
The tax convention proposed this month was first requested in 2019 by the U.N.’s delegation of African countries, according to the Tax Justice Network, and has gained momentum in recent years. A 2021 paper from the World Economic Forum said that a U.N. tax convention “could potentially mark the end of the international race to the bottom.”
According to the Tax Justice Network, the U.N.’s general assembly could vote on the proposed tax convention by this December.