Wealth and corporate taxes remain a sticking point between countries at the United Nations negotiating the roadmap for a framework convention on tax, which could herald a radical shake-up of the global tax system.

The first round of talks to establish parameters that will guide the creation of the convention — initially opposed by wealthy countries including the United Kingdom, the United States, and some members of the European Union — concluded on May 8.

Some progress was made amid ongoing tensions between higher-income members of the Organisation for Economic Co-operation and Development, or OECD, and African U.N. member states, now backed by a coalition of developing countries known as the G77.

“Both the developed and developing countries agreed easily on environmental taxes but strongly disagreed on taxes for wealth,” said Abdul Chowdhary, a senior program officer for South Centre Tax Initiative, a Geneva-based think tank representing developing countries from Africa, Asia, Latin America and elsewhere.

“The developed world took the view that the reforms to tax the world’s wealth are being addressed already by the OECD and the developing world believes that the OECD has been inadequately addressing the matter and that the U.N., too, should be able to do so,” said Chowdhary.

In November 2023, the U.N. General Assembly voted overwhelmingly to adopt a resolution tabled by Nigeria calling for an inclusive U.N. forum to tackle international tax dodging, corporate tax reform, wealth taxes, environmental taxes, and more.

Such a move would shift power away from the OECD, which has shaped the global tax agenda for decades but has been described by some observers as a “rich countries’ club” that sets international tax policy behind closed doors.

It has been quite absurd and sad to see their hesitation, because the failure of the global tax system is a problem that has major impacts on people in all regions of the world, and we are in urgent need of solutions.

— Tove Maria Ryding, tax coordinator at the European Network on Debt and Development

The OECD has defended its “proven track record enabling significant changes in the international tax landscape” and argued the U.N. should not undermine ongoing efforts to curb cross-border corporate tax avoidance. Most notably, the OECD brokered the landmark 2021 tax agreement that included a commitment by nearly 140 countries to set a minimum 15% tax rate for multinational corporations.

During the recent negotiations at U.N. headquarters in New York, led by an intergovernmental committee tasked with drafting “terms of reference” to shape the U.N. tax convention next year, two main blocs clashed over procedural issues, alongside substantive ones.

Many countries that voted against a legally binding framework convention — a sort of “global constitution” under which rules, known as protocols, are set —  argued for looser terms of reference that experts noted may ultimately weaken the convention.

Disagreements also emerged over the committee’s decision-making mechanism: the developing countries’ bloc favored voting by a simple majority if no consensus emerges, whereas the wealthy countries’ bloc argued for consensus-only decision-making, which could allow a minority of states to wield veto power.

“The second and biggest flashpoint is on the issue of voting,” Chowdhary said.

“The developed countries are insisting on decision-making via consensus but the developing world says that consensus will only lead to watered-down resolutions and leave the convention as inconsequential as the OECD.”

The second session of negotiations is scheduled to run from July 29 to Aug. 16. Then, the committee’s goal will be to finalize the draft terms of reference in August to be voted on by the U.N. General Assembly before the end of the year.

Irene Ovonji Odida, a Ugandan lawyer and member of the Independent Commission for Reform of International Corporate Tax and South Center Tax Initiative, has offered technical support to the African member states working on the convention. She said that although wealthy countries have attempted to exert pressure on developing countries to abandon their most far-reaching and radical goals, momentum is with the Global South.

“Currently, on substantive issues, the majority — over 60 countries — want corporate taxation included in the [terms of reference] as a substantive issue to ensure equitable taxation of [multinational corporations],” Odida said, adding that some “Western countries see this as a duplication of the OECD” process toward a global minimum tax rate.

The extent to which countries wanted the terms of reference to include high-level commitments to address corporate taxation, clamp down on profit-shifting, and tax ultrawealthy individuals’ incomes and assets varied within the two blocs. Brazil again floated its proposal for a global minimum tax rate for billionaires, which the U.S., the U.K. and South Korea dismissed as a domestic policy issue, according to the Tax Justice Network advocacy group.

All countries broadly agreed on the need to leverage taxation to address climate and environmental crises, though with different emphases on the preferred mechanisms.

Similarly, several countries referred to the issue of “domestic resource mobilization,” but some used it to emphasize the importance of capacity building while others took a broader view, calling instead for the committee to consider the fair allocation of taxing rights and wider sustainable development goals, TJN reported.

Odida, who served on the Mbeki panel, a U.N. task force to curb global illicit financial flows, noted that while some European tax havens continued to push back against the proposed framework convention other European nations, such as Norway, had engaged in negotiations in good faith.

Tove Maria Ryding, tax coordinator at the European Network on Debt and Development, who attended the talks, said in a statement that some wealthy countries who opposed the original resolution were now “reluctantly engaging in the process.”

“It has been quite absurd and sad to see their hesitation, because the failure of the global tax system is a problem that has major impacts on people in all regions of the world, and we are in urgent need of solutions,” she said.