21/08/24

AFRICA: UN tax convention moves closer but African diplomats fail to win new support

As published on: africa-confidential.com, Wednesday 21 August, 2024. 

The African Group has been the driving force behind the agreement but it is a fragile triumph.

African diplomats have moved closer to setting up a new United Nations tax authority focused on illicit financial flows and tax evasion. But the triumph is far more fragile than expected.

At the UN on Friday, 110 countries endorsed the terms of reference for a UN convention that will develop policies to address tax evasion and avoidance by high-net-worth individuals, environmental levies, and increase transparency and the exchange of information.

The terms will now be presented to the UN General Assembly in late November for final approval.

Its mandate will also cover tax-related illicit financial flows, tax avoidance, tax evasion and harmful tax practices, including the tax paid by multinationals. The convention will have until the end of 2027 to finalise a raft of new policies.

However, a group of eight countries, including the United States, United Kingdom and Japan, voted against the proposal while 44 countries, dominated by the European Union’s 27 states, abstained.

The African Group at the UN has been the driving force behind the convention (AC Vol 65 No 13, Running the tax show in New York). Last November, Nigeria tabled the resolution demanding the UN convention and then blindsided the US and EU in securing a block vote from Asian, African and South American states.

However, the failure to get a bigger majority in favour of the terms of reference is a major setback. In fact, the 110-8-44 margin is weaker than the 125 vote to 48 majority secured last year (AC Vol 64 No 24, The global south wins a big money battle).

Although the convention is almost certain to be endorsed by a simple majority at the UN General Assembly in late November, its final policies will need a two-thirds majority. With a handful of European states supporting wealth and environmental taxes, there had been hopes that a group led by Germany and Spain would vote in favour of the mandate (AC Vol 65 No 3, The next stage in the battle over global tax rules).

The US opposes wealth taxes and France – despite supporting the mandate on environmental levies – is concerned that the UN convention will dilute or supersede the work on tax policy by the Paris-based Organisation for Economic Co-operation and Development.

Tags

Africa UN Tax Convention African Group United Nations